LEARNING OBJECTIVES
In this chapter, we will address the following questions:
1. What are the components of a modern marketing information system?
2. What are useful internal records for such a system?
3. What makes up a marketing intelligence system?
4. What are some influential macroenvironment developments?
5. How can companies accurately measure and forecast demand?
CHAPTER SUMMARY
1. To carry out their analysis, planning, implementation, and control responsibilities,
marketing managers need a marketing information system (MIS) to assess information
needs, develop the needed information, and distribute it in a timely manner.
2. An MIS has three components: (a) an internal records system, which includes
information about the order-to-payment cycle and sales information systems; (b) a
marketing intelligence system, a set of procedures to obtain everyday information about
the marketing environment; and (c) a marketing research system that allows for the
systematic design, collection, analysis, and reporting of data and findings relevant to a
specific marketing situation.
3. Marketers find many opportunities by identifying trends (directions or sequences
of events that have some momentum and durability) and megatrends (major social,
economic, political, and technological changes that have long-lasting influence).
4. Within the rapidly changing global picture, marketers must monitor six major
environmental forces: demographic, economic, social-cultural, natural, technological, and
political-legal.
5. In the demographic environment, marketers must be aware of worldwide
population growth; changing mixes of age, ethnic composition, and educational levels;
the rise of nontraditional families; and large geographic shifts in population.
6. In the economic arena, marketers need to focus on income distribution and levels
of savings, debt, and credit availability.
7. In the social-cultural arena, marketers must understand people’s views of
themselves, others, organizations, society, nature, and the universe. Their products must
correspond to society’s core and secondary values and address the needs of different
subcultures within a society.
C H A P T E R
3COLLECTING
INFORMATION AND
FORECASTING
DEMAND
8. Acknowledging the public’s increased concern about the health of the natural
environment, marketers are embracing sustainability and green marketing programs.
9. In the technological arena, marketers should take account of the accelerating pace
of technological change, opportunities for innovation, varying R&D budgets, and the
increased governmental regulation brought about by technological change.
10. In the political-legal environment, marketers must work within the many laws
regulating business practices and with various special-interest groups.
11. To estimate current demand, companies attempt to determine total market
potential, area market potential, industry sales, and market share. To estimate future
demand, companies survey buyers’ intentions, solicit their sales force’s input, gather
expert opinions, analyze past sales, or engage in market testing. Mathematical models,
advanced statistical techniques, and computerized data collection procedures are essential
to all types of demand and sales forecasting.
OPENING THOUGHT
Students new to the discipline of marketing will probably be surprised at the level of
marketing information, intelligence, and arenas that marketing managers must operate within.
The instructor is encouraged to stress that the marketing of products/services and the processes
of making marketing decisions do not operate without careful consideration of the
environments identified in this chapter. Today, marketers must be cognizant of “how” their
product or service is perceived as much as “how” it functions.
In many cases, the chief marketing executive of the firm can sometimes see himself/herself as
a player in the game of chess. Each move must be carefully chosen for subsequent moves by
competition and public scrutiny for acceptance or rejection. Products marketed must meet
both the consumer’s needs as well as the public’s acceptance of the product.
The instructor’s challenge for this chapter is to communicate to the students the complexity of
and sometimes the conflicting forces impacting marketing managers in the today’s
environment.
TEACHING STRATEGY AND CLASS ORGANIZATION
PROJECTS
1. Semester-long marketing plan: Competitive information and environmental scanning
project(s) completed and presented for instructor’s review.
2. Commission a marketing research study on topic(s) of interest to the students at your
institution. During the course of the semester (15-16 weeks), have the students develop the
questionnaire, collection method, conduct the survey, and tabulate the results. The students
can be divided into groups for this project. Suggested topics can include the school or
university students’ opinions of campus issues such as the athletic program, sale of
alcohol, use of and availability of technology, or students’ perceptions of their current
education experiences.
3. Sonic PDA Marketing Plan Marketing information systems, marketing intelligence
systems, and marketing research systems are used to gather and analyze data for various
parts of the marketing plan. These systems help marketers examine changes and trends in
markets, competition, customer needs, product usage, and distribution channels. Some
changes and trends may turn up evidence of opportunities or threats.
Sonic has developed information about the competition and competitive situation, but Jane
Melody believes more information is needed in preparation for launching the first PDA.
Based on the marketing plan contents discussed in Chapter 2, how can you use MIS and
marketing research to support the marketing planning for the new PDA.
For which sections of the plan will you need secondary data? Primary data? Why do
you need information for each section?
Where can you find secondary data that will be useful? Identify two Internet sources
and two non-Internet sources. Describe what you plan to draw from each source, and
indicate how you will use the data in your marketing plan.
What primary research will Sonic need to support its marketing strategy, including
product management, pricing, distribution, and marketing communication? What
questions or issues should Sonic seek to resolve using primary data?
What technological, demographic, and/or economic changes can potentially affect
PDA development, buyer acceptance of PDAs, and development of substitute or
enhanced products?
Enter your answers about Sonic’s use of marketing research in a written marketing plan or in
the Marketing Research, Market Analysis, Market Trends, and Macroenvironment sections of
Marketing Plan Pro.
ASSIGNMENTS
Using information from the web like FEDSTATS and the U.S. Census Bureau, have the
students predict the population of the U.S. for the years 2020, and 2060 and specifically
answer the following questions: a) What is the demographic makeup of the U.S. in these
years? b) What is the age dispersion in the U.S. in these years, and c) What industries do you
see benefiting/losing within the U.S. because of these population figures.
Obesity has been officially called an epidemic. In small groups, have the students collect, from
the university or college administrators, information about the students eating habits (on
campus students would be one group; commuting students another group), exercise, and
lifestyle. For example, how many students (as a percentage of the total student population)
regularly take advantage of the available exercise facilities? How many students presently on
campus are clinically obese? This is a very good project to demonstrate the skill of data
mining and the use of secondary data.
Select or suggest a current “fad” or “trend” exhibited by students on campus. Each student is
to select either a fad or trend and then research this fad and trend in light of the marketing
opportunities present. Would a firm be successful in capitalizing on this “fad?” If so, why?
Should companies capitalize on this “trend”—What are the “upsides” for producing products
that are currently “trendy?” What are the “downsides?” What generation do these fads and
trends appeal to? How large is the potential market for the fad and/or trend? Students should
prepare a report with as much detail into the specific characteristics of these markets as is
available. This is a good secondary data and data mining assignment.
Each student is a member of an identifiable ethic and demographic segment of society. As an
individual assignment, ask each student to describe their sub-segment in terms of population,
age distribution, growth potential, income, education levels, and other demographic
characteristics. The conclusion of their report should explain the marketing implications of
their findings in terms of potential market, over-saturated market, declining market, or hidden
or ignored market with potential.
Global forces and macroenvironment factors continually challenge marketers. Selecting one
of the macroenvironmental factors from Table 3.3 challenge the students to prepare a report on
how they see that global force affecting, influencing, and limiting marketers in the near future.
For example, point # 2 states that “the movement of manufacturing capacity and skills to
lower-cost countries” is one of the forces affecting marketing. How will this statement affect
multi-nationals in their marketing plans for the future? Suggested responses might point out
that the multi-nationals must consider the low cost of wages in these countries when pricing
their products; that the increase in manufacturing in lower-cost countries may increase the
residents’ standard of living, thus opening up markets for new products such as time saving
and labor saving devices. Open up the class for discussion regarding how these global forces
will affect (positively and negatively) marketing practices in the 21st Century.
DETAILED CHAPTER OUTLINE
Opening vignette: Marketers need up-to-date information to make marketing decisions.
Campbell attempted to understand macroenvironmental trends to boost soup sales among
millenials.
I. Components of a Modern Marketing Information System
A. Marketers are responsible for identifying significant marketplace changes
i. They have disciplined methods for collecting information
ii. The spend time interacting with customers and observing competitors
and other outside groups
B. Some firms, like DuPont, have marketing information systems that provide
details about buyer wants, preferences and behavior
C. A marketing information system consists of people, equipment and procedures
to gather, sort, analyze, evaluate and distribute needed, timely and accurate
information to marketing decision makers.
i. Internal company records
ii. Marketing intelligence activities
iii. Marketing research
D. Information needs probes for marketing managers
i. What decisions do you regularly make?
ii. What information do you need to make these decisions?
iii. What information do you regularly get?
iv. What special studies do you periodically request?
v. What information would you want that you are not getting now?
vi. What information would you want daily? Weekly? Monthly? Yearly?
vii. What online and offline newsletters, briefings, blogs, reports, or
magazines would you like to see on a regular basis?
viii. What topics would you like to be kept informed of?
ix. What data analysis and reporting programs would you want?
x. What are the four most helpful improvements that could be made in
the present marketing information system?
II. Internal Records
A. Internal reports of orders, sales, prices, costs, inventory levels, receivables and
payables
B. The Order-to-Payment Cycle, which is the heart of the internal records
system, includes invoices, shipping and billing documents
C. Sales Information Systems include sales and inventory data
D. Databases, Data Warehouses and Data Mining provide information that
enables customer engagement, but present challenges because it cannot be
effectively managed with traditional database and business intelligence tools
due to:
i. Volume (hundreds of terabytes/petabytes)
ii. Velocity (real-time, sub-second delivery)
iii. Variety (structured, unstructured and semi-structured formats)
iv. Volatility (with hundreds of new data sources in apps, Web services,
and social networks)
III. Marketing Intelligence
A. A marketing intelligence system is a set of procedures and sources that
managers use to obtain everyday information about developments in the
marketing environment.
B. It reports “happenings” data from books, newspapers, trade publications,
customers, suppliers, distributors, managers and social media monitoring
C. Marketing intelligence gathering must be legal and ethical
D. Eight actions to improve the quantity and quality of its marketing intelligence
i. Train and motivate the sales force to spot and report new
developments.
ii. Motivate distributors, retailers, and other intermediaries to pass along
important intelligence.
iii. Hire external experts to collect intelligence.
iv. Network internally and externally.
v. Set up a customer advisory panel.
vi. Take advantage of government-related data resources.
vii. Purchase information from outside research firms and vendors.
viii. Collect marketing intelligence on the Internet
1. Independent customer goods and service review forums
2. Distributor or sales agent feedback sites
3. Combo sites offering customer reviews and expert opinions
4. Customer complaint sites
5. Public blogs
E. Communicating and Acting on Marketing Intelligence: competitive
intelligence works best when it is closely coordinated with decision-making
process
IV. Analyzing the Macroenvironment
A. Needs and Trends
i. Create new solutions to similarly unmet needs
ii. A fad is an unpredictable, short-lived, and without social, economic
and political significance
iii. A trend is more predictable and durable than a fad; trends reveal the
shape of the future and can provide strategic direction
iv. A megatrend is a large social, economic, political and technological
change that is slow to form and, once in place, influences us for some
time
B. Identifying the Major Forces
i. Demographic
ii. Economic
iii. Socio-cultural
iv. Natural
v. Technological
vi. Political-legal
C. The Demographic Environment
i. Population size and growth, rate in cities, regions and nations, age
distribution and ethnic mix, educational levels, household patterns
ii. Population growth fastest in developing regions
iii. 5 billion unserved and underserved people make up the “bottom of the
pyramid”
1. Services have adjusted their pricing and service models to
serve them
2. Reverse innovation – focus on the needs and constraints of a
developing market to create an inexpensive product that can
succeed there and introduce it as a cheaper alternative in
developed markets
iv. Age and Population
1. Age and population growth varies by country
2. Global trend toward the aging population
3. Six age groups
a. Preschool
b. School-age
c. Teens
d. Young adults 20-40
e. Middle-aged adults 40-65
f. Older adults 65+
4. Cohorts are groups of individuals born during the same time
period who travel through life together
5. Ethic and racial diversity varies across countries
a. Hispanic population is fastest-growing and most
influential consumer group in the U.S.
b. Indian-American population is well-educated and
consumer-oriented
6. Educational groups
a. Illiterates
b. High school dropouts
c. High school diplomas
d. College degrees
e. Professional degrees
7. Household patterns affect buying behavior
a. Only 20% of US households will include a husband,
wife and children under 18 by 2010.
b. Women without husbands as head of household is up
18%]
D. The Economic Environment
i. Purchasing power depends on income, savings, debt, credit availability
and price
ii. Consumers have been shaken by the recession, have more debt and
less savings, and feel it will change their behavior, to be more risk
averse, going forward
iii. Income distribution: four types of industrial structures
1. Subsistence economies
2. Raw-material-exporting economies
3. Industrializing economies
4. Industrial economies
iv. Five income-distribution patterns
1. Very low incomes
2. Mostly low incomes
3. Very low, very high incomes
4. Low, medium, high incomes
5. Mostly medium incomes
v. Income, savings, debt and credit affect expenditures
1. U.S. consumers have high debt-to-income ratio, which slows
expenditures on housing and large-ticket items
2. Consumer borrowing dropped for the first time in two decades
during the recession because credit was less available
3. Manufacturers and service jobs are migrating offshore
E. The Sociocultural Environment impacts consumption trends and behavior,
including: views of ourselves, others, organizations, society, nature and of the
universe.
i. Core Cultural Values
1. Core beliefs and values are passed from parents to children and
reinforced by social institutions
2. Secondary beliefs and values are more open to change
ii. Subcultures are groups with shared values, beliefs, preferences and
behaviors emerging from their special life experiences or
circumstances
F. The Natural Environment
i. In the U.S., experts have documented ecological deterioration
ii. There are opportunities for those who can reconcile prosperity and
environmental protection
iii. Corporate environmentalism recognizes the need to integrate
environmental issues into the firm’s strategic plans
iv. Trends to be aware of include the shortage of raw materials, especially
water; the increased cost of energy; increased pollution levels; and the
changing role of governments
v. Firms whose products require finite nonrenewable resources face
substantial cost increases as depletion approaches
G. The Technological Environment
i. Innovation’s long-run consequences are not fully foreseeable
ii. Trends include:
1. Accelerating pace of change
2. Unlimited opportunities for innovation
3. Varying R&D budgets
4. Increased regulation of technological change
H. The Political-Legal Environment
i. Laws, government agencies and pressure groups that influence
organizations and individuals create business opportunities or
uncertainty/confusion
ii. Two major trends:
1. Increased business legislation
2. Growth of special interest groups (including the consumerist
movement)
iii. The personal data economy worries consumers
V. Forecasting and Demand Measurement
A. The company must measure and forecast the size, growth and profit potential
of each new opportunity
B. Sales forecasts are used by finance to raise cash for investment and
operations, by manufacturing to establish capacity and output, by purchasing
to acquire the right amount of supplies, by human resources to hire the needed
workers
C. Measures of Market Demand
i. Potential market: sufficient interest in market offer (becomes a market
if sufficient income and access)
ii. Available market: interest, income and access to a particular offer
iii. Qualified available market: interest, income, access and qualifications
for the market offer
iv. Target market: part of the qualified available market the company
decides to pursue
v. Penetrated market: set of consumers who are buying the company’s
product
D. Vocabulary for Demand Measurement
i. Market demand for a product is the total volume that would be bought
by a defined customer group in a defined geographical area in a
defined time period in a defined marketing environment under a
defined marketing program
ii. Market demand is a function of the stated conditions
iii. The market minimum would take place without any
demand-stimulating expenditures; higher expenditures would yield
higher levels of demand, first at an increasing rate, then at a decreasing
rate
iv. Market potential is the upper limit
v. Marketing sensitivity of demand: expansible or nonexpansible
vi. The market size is the level of primary demand
vii. Market share is the selective demand for a particular product
viii. Market-penetration index: low index indicates substantial growth
potential; high index suggests it will be expensive to attract the few
remaining prospects
ix. Share-penetration index: low index means the company can greatly
expand its share; low awareness, availability, budget deficiencies or
high price could be holding it back
x. Market forecast is the market demand corresponding to the actual
marketing expenditure
xi. Product-penetration percentage is the percentage of ownership or use
of a product or service in a population
xii. Company demand is the company’s estimated share of market demand
at alternative levels of company marketing effort during a given period
xiii. Sales quota is the sales goal for a product line, company division, or
sales representative
xiv. Sales budget is a conservative estimate of the expected volume of sales
xv. Company sales potential is the conservative estimate of the expected
volume of sales
E. Estimating Current Demand
i. Total market potential is the maximum sales available to all firms in an
industry during a given period, under a given level of industry
marketing effort and environmental conditions.
1. Common way to estimate is to multiply potential buyers by the
average quantity each purchases and then by the price
2. The most difficult component to estimate is number of buyers
ii. Area market potential allocates the marketing budget optimally among
the best territories
1. Market-buildup method identifies all the potential buyers in
each market and estimates their potential purchases
2. Multiple-factor index method incorporates things like
promotional expenditures and competitors
3. Normally, the lower the Brand Development Index, the higher
the market opportunity, in that there is room to grow the brand.
4. Other marketers would argue instead that marketing funds
should go into the brand’s strongest markets, where it might be
important to reinforce loyalty or more easily capture brand
share
iii. Industry sales and market shares means finding out competitors and
estimating their sales/evaluating performance against the industry’s
F. Estimating Future Demand
i. The macroeconomic forecast projects inflation, unemployment,
interest rates, consumer spending, business investment, government
expenditures, net exports, and other variables (forecasts GDP)
ii. They buy forecasts from someone else
iii. They build a forecast on what people say, what people do, or what
people have done
1. Survey of buyers’ intentions
2. Ask the sales force
3. Expert opinion
4. Past sales analysis
5. Market-test method