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Chapter 3 – Collecting Information and Forecasting Demand
I..................................... Chapter Overview/Objectives/Outline
A. Overview
Knowledge of various forms of marketing information and the marketing environment are
critical elements in effective marketing management and strategy. The transition from a
marketing focus on buyer needs to buyer wants, and the transition from price to non-price
competition are important aspects of this process. Most successful firms operate with some
form of marketing information system and evaluation of the marketing environment, but the
system varies greatly with the size and level of sophistication. In many cases, information is
not readily available, comes too late, or cannot be trusted. Many companies are learning in the
challenging environment of the 21st century that they lack an appropriate information system,
lack access to appropriate information, or they do not know what information they lack or need
to know to compete effectively.
A well-designed market information and marketing environment assessment system consists of
four sub-systems. The first is the internal records system, which provides current data on sales,
costs, inventories, cash flows, and accounts receivable and payable. Many companies have
developed advanced computer-based internal report systems to allow for speedier and more
comprehensive information.
The second market information subsystem is the marketing intelligence system, supplying
marketing managers with everyday information about developments in the external marketing
environment. Here a well-trained sales force, detailed awareness of activities in the distribution
channel, competitive intelligence, purchased data from syndicated sources, and development of
a corporate marketing intelligence office to provide information throughout the firm will
enhance the firm’s marketing efforts.
The third subsystem, marketing research, involves collecting information that is relevant to
specific marketing problems facing the company. The scientific method, creativity, multiple
methodologies, model building, and cost/benefit measures of the value of effective
decision-making information characterize good marketing research. The marketing research
process generally consists of six steps: defining the problem and research objectives;
developing the research plan; collecting information; analyzing the information; presenting the
findings; and making a decision based on the research.
The fourth system in the research process is the marketing decision support system (MDSS).
The MDSS consists of statistical and decision tools to assist marketing managers in making
better decisions. MDSS is a coordinated collection of data, systems, tools, and techniques with
supporting software and hardware. Using MDSS software and decision models, the
organization gathers and interprets relevant information from the business and the environment
and turns it into a basis for marketing action. MDSS experts use descriptive or decision
models, and verbal, graphical, or mathematical models, to perform analysis on a wide variety
of marketing problems.
To carry out their responsibilities, marketing managers need estimates of current and future
demand. Quantitative measurements are essential for market opportunity, planning marketing
programs, and controlling the marketing effort. The firm prepares several types of demand
dimension.
A market consists of the set of actual and potential consumers and the market offer. The size of
the market depends on how many people have interest, income, and access to the market offer.
Marketers also must know how to distinguish between the potential market, available market,
qualified available market, served market, and the penetrated market. Marketers must also
markets) and the multiple-factor index method (for consumer markets). In the latter case,
geodemographic coding systems are proving a boon to marketers. Estimating industry sales
requires identifying the relevant competitors and estimating their individual sales, in order to
judge their relative performance.
data.
Change in the macro environment is a primary basis for market opportunity. Organizations and
firms must start the search for opportunities and possible threats with their macro environment.
The macro environment consists of all the actors and forces that affect the organization’s
operations and performance. They need to understand the trends and mega trends
needs and trends in the marketplace.
The macro environment consists of six major forces: demographic, economic, natural,
technological, political/legal, and social/cultural. The demographic environment shows a
worldwide explosive population growth; a changing age, ethnic, and educational mix; new
types of households; geographical shifts in population; and the splintering of a mass market
protection.
The technological environment exhibits accelerating technological change, unlimited
opportunities for innovation, varying R&D budgets, and increased regulation of technological
change. The political/legal environment shows substantial business regulation and the growth
of special interest groups. The social/cultural environment shows individuals are changing their
rapidly changing secondary cultural values.
B. Learning Objectives
Understand demand measurement terminology.
Know the methods of estimating current demand.
Know the methods of estimating future demand.
environment.
Know the major trends influencing marketing decisions in the macro environment.
C. Outline
I Introduction
A Considerable expansion of detailed buyer wants, preferences, and behavior, in
real-time mode, but still many gaps
with technology, forcing many changes
C Information needs changing rapidly and requires equally rapid knowledge of
what works and does not work with consumers
II Marketing Information, Intelligence, and Research - The more information the firm has
available, the better the opportunity to gain and hold competitive advantage. This
requires an MIS (Marketing Information System)
A Internal Records and Database Systems
customer and prospect insights.
a Data-warehouse usually contains all customer and prospect data,
all marketing mix information by time periods, competitive
information, macro environment data and other relevant
information. Design strategy is to hold all data. Retrieval is not
Feeds updates to Data-warehouse
c Data Marts are subsets of the Data-warehouse. Marketers use
specific software to access Data Marts. But data mart can be as
simple as an Excel Spreadsheet. Most data-mining efforts acces
Data Marts
B Marketing Intelligence
pertinent developments in the marketing environment
2 Internal records systems supplies “results” data, and the marketing
intelligence system supplies “happenings” data
d Develop customer advisory panels
e Purchase information from outside suppliers
f Gather customer feedback on competition
III Marketing Research System
A Marketing Research
company
2 Suppliers of Marketing Research - Can be achieved through an in-house
department, an outside marketing research firm, or a variety of other cost
efficient ways. Increasing amounts of information available via the
Internet
contact methods
a Data sources - primary and secondary data
b Research approaches
1 Observational
2 Focus groups
3 Survey research
4 Analyze customer behavioral data – transaction data
provides the most accurate information on customer
behavior
5 Experimental research p- capture cause and effect
c Research instruments
1 Questionnaires
2 Qualitative measures
3 Technical devices – e.g. galvanometers, neuromarketing
d Sampling plan
2 Sample size
3 Sampling procedure – method of chosing respondents
e Contact methods - mail, telephone, personal, online (refer to
table 3.2)
to error
4 Step 4 - Analyze the Information - extract pertinent findings from
the collected data
5 Step 5 - Present the Findings - pertinent to the major marketing
decisions facing management
6 Step 6 - Make the decision.
IV Forecasting and Demand Measurement
market (served), penetrated market
B Market Demand Function
1 Market demand – a function of stated conditions (refer to Figure 3.2a)
2 Market minimum and potential
a Expansible (much affected by level of industry marketing
curves in Figure 3.2a
b Primary demand, selective demand (market share)
c Market forecast
d Market potential (refer to market demand function in figure 3.2b)
3. Company demand and sales forecast
a). Sales forecast - expected level of sales based on plan and
environment
b) Sales quota - sales goals set for product line, specific business
entity
c) Sales budget - conservative sales representative estimate of expected
sales volume to be used for making current purchasing, production
and cash flow decisions
d) Company sales potential – sales limit approached by the company
demand as company marketing effort increases relative to that of
competitors...........................................................................................
C. Estimating current demand
1. Total market potential – maximum sales available to all firms for a
and environmental conditions.
2. Area market potential
a). Market-buildup method (B-to-B markets)
b). Multiple-factor index method (consumer markets)
D. Estimating future demand
1. Three stages of forecasting
2. Macroeconomic forecast, industry forecast, company sales forecast
3. Sales forecast based on company assumption of market share
Methods: survey of buyers’ intentions, composite of sales-force opinion;
V Macro environmental Trends and Forces
A Introduction - identify trends (sequence of events with momentum and durablility)
and fads (unpredictable and short lived occurrences) in macroenvironment.
B Demographic environment
1 Worldwide population growth – source of concern for two reasons
a Resources are required to support vast growth
Pyramid”
2 Population age mix - a strong determinant of needs. Cohorts are groups
of individuals born in the same time period who share experiences which
influence their values, preferences and buying behavior.
disability.
4 Educational groups - from illiterates to those with professional degrees
5 Household patterns - traditional household is no longer the dominant
special needs
C. Economic Environment
1. Consumer Psychology – identify consumer spending patterns
2. Income distribution - four types of industrial structures
a) Subsistence economies - few marketing opportunities
a Raw-material exporting economies
class
c Industrial economies - rich markets
Five different income distribution patterns
a) Very low incomes
b) Mostly low incomes
c) Very low and very high incomes
d) Low, medium, high incomes
e) Mostly medium incomes
3. Income, Savings, Debt, and Credibility –
a) high debt-to-income ratio for U.S. consumers
and the universe
2. High persistence of core values
change)
b) Secondary beliefs more open to change by marketers
3. Existence of subcultures - Shifts of secondary cultural values through
time
The latter provides opportunities for firms to create substitutes
2. Corporations are being forced to view alternative operational and
manufacturing strategies in lieu of diminishing resources
3. Anti-pollution pressures requiring altrernative production and packaging
recycling and disposal
financial pressures.
5. Many companies adopting a “green” strategy in which they publicize
their environmental conservation efforts.
D. Technological environment
1. Accelerating pace of technological change
2. Unlimited opportunities for innovation
3. Varying R&D budgets
4. Increased regulation of technological change
E. Political environment
1. Increase in business legislation (EU has been very progressive and a
leader in protecting the consumer and the environment. The U.S. has
formal policies and structures in place to do the same.)
a) protect firms from unfair competition
b) protect consumers from unfair business practices
c) protect society from unbridled business behavior
2. Growth of special-interest groups (PACs, increased general public
pressure via Blogs). Recently major pressure from Privacy advocates
VI. Summary
Lectures
A. “Marketing Research and Measurement”
The focus in this discussion is the development of information for marketing management. It is
important to keep the examples current so that students will be able to identify readily with this concept
based on their general knowledge of the techniques, companies, and products.
Teaching Objectives
Learn about establishment of the role of marketing research and information systems in
development of overall marketing strategies.
Discuss and learn specific marketing research considerations and principles.
Introduce some of the more important concepts in contemporary marketing research.
Discussion
INTRODUCTION
Marketing research and measurement long have been areas of great difficulty and opportunity
for the marketer, not just because they provide more complex and precise responses, but also
because training, analytical and communication requirements are substantial. Measurement in
some areas has been much easier than in others. For example, it is much more difficult to
measure directly the results of advertising expenditures than to learn about the attitudes of
prospective buyers toward a product or service. Between an advertisement and the actual
purchase of goods or services there are lag effects, multiple distribution channels, and other
marketing efforts directly to sales.
However, the other side of the equation relates to what we are able to do with an area of
marketing research “marketing research” where there is more certainty. Marketers increasingly
utilize marketing research to improve product and service value to current customers and find
new customers.
options in between.
PURPOSEFUL MARKETING RESEARCH
However, before we can do any of this we need to determine what we want to ask and why, and
recognize that every marketing research tool has a different purpose. With all the new
technologies available and some very sophisticated interpretation tools, the research and
qualitative or quantitative information is most important and which type of research technique
will provide the best value for the money.
Quantitative research deals with numbers and answers questions about how many, how much,
or how often. Quantitative-oriented survey research generally relies on close-ended questions
their feelings, opinions, attitudes, and values.
In some situations a telephone survey may be the best way to talk to consumers about the
product, but in other situations focus groups may provide a better result. One of the more
important questions is whether the company can or should attempt to perform independent
research project or buy into a syndicated or omnibus study.
sources.
One of the best methods for getting good quantitative research data is to use scanner
information. This information has become much more flexible and usable. Effective use of
tools such as Behavior Scan and InfoScan, both products of Information Resources, Inc., (IRI)
has added substantial depth to efforts to understand the buying process.
enabling not only enhanced data-checking capabilities but also rapid and effective comparisons
at various local, regional, and national levels.
While such information by itself cannot provide predictions of the future, it can and does
provide the means to evaluate various trends and make it possible to apply an expert system in
usage.
Another method is the consumer diary. Diaries are especially appropriate for answering
questions on brand penetration and loyalty. This approach indicates what factors influence
purchasing behaviors, such as price and advertising, and where purchases are made—
clients in packaged goods, apparel, home furnishings, financial services, travel, and
entertainment.
An area of less measurement, advertising impact measurement, remains the activity where
research efforts have been less successful. Until recent years the result is that most marketers of
communications programs on customers and prospects.
Advertisers and agencies have been able to evaluate consumer attitudes toward the product,
plus awareness and knowledge levels about their advertising and marketing communications
program. Much of this research was based on testing the ability of the consumer to recall
advertising messages or state how seeing or hearing advertising messages might, could, or in
buying it.
Thus, mass marketing in the past has operated on the assumption that attitudes lead to behavior.
That may be true, but it is just as likely true that behavior leads to attitudes. If you see an ad on
TV, form a favorable impression of a product, try it out, and decide you hate it, then your new
attitude is a result of your purchase behavior. So perhaps there is more going on in a purchase
decision than the linear model suggests.
marketing and sales problems.
There have been efforts to measure the effects of marketing communications on sales even less
directly, for example, by looking at incremental units sold after a promotion. But by and large,
incremental units have measured sales stolen from a competitor for a short period of time or
DATABASE MARKETING AND THE FUTURE
Database marketing eliminates much of the need for surrogates. With cheap computing power
and the ability to capture, store, and manipulate massive amounts of data, new methods of
marketing communications and planning are possible. For example, with what is called
single-source data, marketers can identify specific customers and users of products and
categories.
Up to now, database-centered advertising and marketing communications research for the most
part has been conducted with consumers who shop in supermarkets, drugstore chains, and
mass-merchandising outlets. This is because these retailer categories have been the pioneers in
various forms of electronic data capture and storage. The technology is rapidly diffusing, and it
prospects.
To a large extent, the contemporary database marketing approach makes obsolete many
existing statistical research and analysis techniques. In the past, researchers took a sample,
projected it to the whole world, and hoped they had it right. With database marketing, when the
researcher deals with real-world data, he or she begins to understand that quite often traditional
statistical techniques do not make any sense.
direction is research built on two-way communication between marketer and customer. The
marketer receives feedback from the customer, both explicitly (through survey responses,
warranty cards, etc.) and implicitly (through purchase behavior tracked in the database). The
dialogue between marketer and customer is always evolving. While mass marketing treats
activities.
