978-0134492513 Chapter 4 Lecture Notes Part 1

Chapter 4

MANAGING MARKETING INFORMATION TO GAIN

CUSTOMER INSIGHTS

MARKETING STARTER: CHAPTER 4

The LEGO Group: Digging Out Fresh Customer Insights

Synopsis

Classic LEGO plastic bricks have been fixtures in homes for more than 65 years. In the past 10 years, revenues have

quadrupled to more than $5.7 billion. But just over a decade ago, the company was near bankruptcy and losing

money at the rate of $1 million a day. The company had lost touch with its customers. Through marketing research

from traditional research methods and data analytics to in-depth ethnographic studies to observing children at play,

interviewing parents, shopping with families, and studying toy store operations, The LEGO Group discovered many

customer insights that led it to rebound to the energetic, hugely successful company it is today. It is now the world’s

largest toy company, ahead of Hasbro and Mattel, and is referred to as the “Apple of Toys.”

Discussion Objective

A focused 10-minute discussion of The LEGO Group’s consumer research program will reveal just how much

corporations need to focus on the opinions and needs of their customers. The chapter-opening LEGO story

underscores the importance of recognizing one’s problems, gaining customer insights (even when it is painful), and

then taking bold steps to re-invent a product or its branding. This discussion should also illustrate how The LEGO

Group is adapting to lifestyle changes and going to where its customers are by using both social media and

traditional media to transmit its new message. It is adapting to who its customers are, as it realizes that children are

not its only target market.

Starting the Discussion

Start this discussion by asking students whether they played with LEGOs when they were growing up. Did they play

with them? Why or why not? How did they play with them? Did both boys and girls play with them? Why or why

not? Focus on the big ideas behind this case: recognizing issues that emerge through marketing research, gaining

customer insights, and re-inventing one’s strategies when necessary. Use the questions below to guide the

discussion.

Discussion Questions

1. How is it possible that a successful corporation such as The LEGO Group (TLG) drifted so far from what

its customers wanted? (Consider how companies can weaken their market position and lose their

competitive edge when they fail to conduct continual market research, revisiting customer preferences,

checking out the competition, and double-checking their assumptions.)

2. How did The LEGO Group gain key customer insights into the underlying needs, emotions, and brand

connections of its toys customers? How did it apply these customer insights in the development of LEGO

MINDSTORMS and LEGO Friends? (Here’s a chance to dig into one of the main points of the LEGO story

—that companies must listen closely to their customers and be brutally honest in re-assessing their products

and how they market them.)

3. How does TLG’s story relate to the major points made in the rest of the Managing Marketing Information

chapter? (The chapter discusses sources and approaches for obtaining and managing marketing

information. But perhaps the most important point is made early in the chapter and is emphasized in the

TLG story: The real value of marketing information lies in how it is used—in the customer insights that it

provides. A great place to start in Chapter 4 is with the top box in Figure 4.1.)

CHAPTER OVERVIEW

Use Power Point Slide 4-1 Here

This chapter looks at how companies develop and manage information about important market–

place elements. This chapter is an examination of marketing information systems designed to

assess the firm’s marketing information needs, develop the needed information, and help

managers to use the information to gain actionable customer and market insights.

CHAPTER OBJECTIVES

Use Power Point Slide 4-2 here

1 Explain the importance of information in gaining insights about the marketplace and

customers.

2 Define the marketing information system and discuss its parts.

3 Outline the steps in the marketing research process.

4 Explain how companies analyze and use marketing information.

5 Discuss the special issues some marketing researchers face, including public policy and

ethics issues.

CHAPTER OUTLINE

p. 98 INTRODUCTION

While LEGOs have been a fixture in toy stores and homes

for 65 years, a few years ago, The LEGO Group was in

serious trouble and facing bankruptcy.

The LEGO Group determined that the company needed to

review its product offerings, as children play differently than

in the heyday of the original LEGO bricks.

Research indicated that The LEGO Group had lost sight of

its customers and needed to find out how children play in

this age of technology and digital input.

The LEGO Group performed in-depth marketing research

and learned that children actually do play differently. In

response, the LEGO product line was redesigned, and now

the company is the largest toy maker in the world.

Talking to customers, hearing what they have to say, and

acting on the resulting insights can pay big dividends.

p. 99

Photo: LEGO

Opening Vignette Questions

1. In the beginning, how did The LEGO Group lose

sight of its customers’ sense of excitement and

enjoyment from playing with the toys and

building things? What should the company have

been doing all along?

2. How did The LEGO Group utilize marketing

research to learn about its customers and their

wants and needs?

3. If you were The LEGO Group’s CEO, how might

you have handled the initial marketing challenge?

p. 100

PPT 4-3

p. 101

PPT 4-4

PPT 4-5

PPT 4-6

PPT 4-7

Explain the importance of information in gaining insights

about the marketplace and customers.

MARKETING INFORMATION AND CUSTOMER

INSIGHTS

Far from lacking marketing information, marketers are

overloaded with data and often overwhelmed by it.

The value is in the customer insights gained from the

information and how marketers use these insights to make

better decisions.

The real value of marketing research and marketing

information lies in how it is used—in the customer insights

that it provides.

Customer insights teams collect customer and market

information from a wide variety of sources.

To create value for customers and build meaningful

relationships with them, marketers must first gain fresh, deep

insights into what customers need and want. Such customer

insights come from good marketing information. Companies

use these customer insights to develop a competitive

advantage.

Companies are forming customer insight teams that include

all company functional areas. Their job is to develop

actionable insights from marketing information and work

strategically with marketing decision makers to apply those

insights.

A marketing information system (MIS) consists of people

and procedures for assessing information needs, developing

the needed information, and helping decision makers to use

the information to generate and validate actionable customer

and market insights.

Learning Objective

1

p. 101

Photo: PepsiCo

p. 101

Key Terms: Big

data, Customer

insights

p. 101

Key Term:

Marketing

information system

(MIS)

p. 102

PPT 4-8

Figure 4.1 shows that MIS begins and ends with information

users—marketing managers, internal and external partners,

and others who need marketing information.

Review Learning Objective 1: Explain the importance of

information in gaining insights about the marketplace and

customers.

p. 102

Figure 4.1: The

Marketing

Information System

Assignments, Resources

Use Discussion Question 4-1 here

Use Individual Assignments 1 here

PPT 4-9 Define the marketing information system and discuss its

parts.

Learning Objective

2

p. 102

PPT 4-10

PPT 4-11

ASSESSING INFORMATION NEEDS AND

DEVELOPING DATA

MIS provides information to the company’s marketing and

other managers and external partners such as suppliers,

resellers, and marketing service agencies.

A good marketing information system balances the

information users would like to have against what they really

need and what is feasible to offer. Too much information can

be as harmful as too little.

The MIS must monitor the marketing environment to

provide decision makers with information and insights they

should have to make key marketing decisions.

The company must decide whether the value of insights

gained from additional information is worth the costs of

providing it, and both value and cost are often hard to assess.

p. 102

PPT 4-12

PPT 4-13

DEVELOPING MARKETING INFORMATION

Marketers obtain information from internal data, marketing

intelligence, and marketing research.

Internal Data

Internal databases are electronic collections of consumer

and market information obtained from data sources within

the company network.

Information in the database can come from many sources

and is available quickly and cheaply.

p. 103

Key Term: Internal

databases

p. 103

Ad: USAA

p. 103

PPT 4-14

p. 105

p. 106

Problems with internal data:

It may be incomplete or in the wrong form for

making marketing decisions.

Keeping the database current requires a major effort

because data ages quickly.

Managing all of the information requires highly

sophisticated equipment and techniques.

Competitive Marketing Intelligence

Competitive marketing intelligence is the systematic

collection and analysis of publicly available information

about consumers, competitors, and developments in the

marketplace.

Social media makes it easier than ever for people to

converse, share opinions, needs, ideas, and complaints.

Companies use specialized software to track trends and

better respond to consumers.

Competitive marketing intelligence gathering has grown

dramatically.

Firms use competitive intelligence to gain early warnings of

competitor moves and strategies.

Much competitor intelligence can be collected from people

inside the company.

Competitors often reveal intelligence information through

their suppliers, resellers, key customers, and the Internet.

The gathering of competitive marketing intelligence raises a

number of ethical issues. Most companies are now taking

steps to protect their own information.

Review Learning Objective 2: Define the marketing

information system and discuss its parts.

p. 103

Key Term:

Competitive

marketing

intelligence

p. 104

Photo: MasterCard

Assignments, Resources

Use Discussion Question 4-2 here

p. 106

PPT 4-15

PPT 4-16

Outline the steps in the marketing research process.

MARKETING RESEARCH

Marketing research is the systematic design, collection,

Learning Objective

3

p. 106

PPT 4-17

PPT 4-18

PPT 4-19

p. 108

PPT 4-20

PPT 4-21

analysis, and reporting of data relevant to a specific

marketing situation facing an organization.

The marketing research process has four steps (see Figure

4.2).

Defining the Problem and Research Objectives

Defining the problem and research objectives is often the

hardest step in the research process.

A marketing research project might have one of three types

of objectives.

1. Exploratory research: to gather preliminary

information that will help define the problem and

suggest hypotheses.

2. Descriptive research: to describe things, such as the

market potential for a product.

3. Causal research: to test hypotheses about

cause-and-effect relationships.

Start with exploratory research and later follow with

descriptive or causal research.

Developing the Research Plan

The research plan outlines sources of existing data and spells

out the specific research approaches, contact methods,

sampling plans, and instruments that researchers will use to

gather new data.

Research objectives must be translated into specific

information needs.

The research plan should be presented in a written proposal

that covers the management problems addressed, research

objectives, information needed, how the results will help

management decisions, and budget.

Secondary data consist of information that already exists

somewhere, having been collected for another purpose.

Primary data consist of information collected for the

specific purpose at hand.

p. 106

Key Term:

Marketing research

p. 106

Figure 4.2: The

Marketing Research

Process

p. 107

Key Terms:

Exploratory

research,

Descriptive

research, Causal

research

p. 107

Photo: Chipotle

p. 108

Key Terms:

Secondary data,

Primary data

p. 114

PPT 4-22

Gathering Secondary Data

Researchers usually start by gathering secondary data.

Using commercial online databases, marketing researchers

can conduct their own searches of secondary data sources.

Secondary data is usually obtained more quickly and at a

lower cost than primary data.

Secondary sources can provide data an individual company

cannot collect on its own.

Secondary data can present problems.

The needed information may not exist.

The data might not be very usable.

oRelevant (fits research project needs)

oAccurate (reliably collected and reported)

oCurrent (up-to-date enough for current decisions)

oImpartial (objectively collected and reported)

p. 108

Photo: LexisNexis

Assignments, Resources

Use Discussion Question 4-4 here

Use Critical Thinking Exercise 4-6 and 4-8 here

Use Additional Projects 1 here

Use Outside Example 1 here

Troubleshooting Tip

Although today’s students have grown up with

computers, the idea of an “information system” may

be very new to them. They typically will not have

conducted much research, and any jobs they’ve held

will most likely have entailed very basic, entry-level

tasks. To get them past this, you could discuss the

type of information the university has for each

student—their major, coursework, grades, current

address, home address, parents’ names, whether they

are paying full tuition or are on scholarship, what

high school they attended and their grade point

average there, what sports they play or activities they

participate in, and so forth. Then discuss how the

university might use that information to understand

the current student population to determine how to

target future students who are in high school. This

should help them grasp how data gets turned into

information, and then to knowledge.