Marketing Research and Information System

Lecture # 2 January 19, 2012 Text Reference: Principles of Marketing

Phillip Kotler & Gary Armstrong

14th Edition Pearson Prentice Halll

Unit 2

Marketing Research & Information Systems

Learning Objectives
Explain the concept of the marketing information system Identify the ways of assessing information needs Describe the sources used for developing information Outline the Marketing Research Process Compare and contrast the main ways of measuring current

demand
Explain how future demand can be forecasted

For Discussion
Marketers are always keen on acquiring useful data

and information on their target market by way of market research. Assume the role of a Consultant Marketer explore the ,marketing research process and its value for your client.

WHY THE NEED FOR A M.I.S?

Identification of significant marketplace changes, hence.
Provision of useful

A marketing information

system (MIS)
consists of people, equipment, and procedures to gather, sort, analyze, evaluate and distribute needed, timely and accurate information to marketing decision makers.
Kotler,P. & Keller, K.(2006)

information to impact the planning process as it relates to buyer wants, preferences, and behaviour.

Components of a MIS
(A) Internal Records system
this supplies results data
Sources include:

B) Market Intelligence system this supplies happening data. Defined as: procedures and sources
managers use to obtain everyday information about the marketing environment

Sales information, payment to order cycle, inventory levels, receivables, payables, monthly reports, etc.

Components of a MIS
Marketing Intelligence Systematic collection and analysis of publicly available information about competitors and developers in the marketing environment Mini quizzes Bench marking competing products (Spies)

Sources of Marketing Intelligence

1. Trained and
motivated salesforce spotting and reporting developments
2.

4. Consumer Advisory Panel 5. Motivating intermediaries to pass along important information. 6. Government data resources

Purchasing information suppliers

of from

3. A company networking regionally and internationally

Components of a MIS
C) MARKET RESEARCH
Market intelligence system and internal record system supplies happening and results data respectively

Marketing Research
Acquisition and analysis of

information required for the making of marketing decisions. (Cole, 2006).

Increasing needed for

Marketing Research :
markets

Shift from local to wider internal

He highlights 2 basic areas : Markets (existing & potential)

the changing emphasis from buyer needs to wants (buyer behaviour) based on non price

External markets
Marketing tactics & method

The trend towards competition

Internal - response to customers, present & future

Name some non-price methods

used by marketers

MARKET RESEARCH
Systematically
Some companies

gathering, analyzing, interpreting and transforming data, structures and results into decision making information.
Bush, R.P. et. al. (2000)

Research Team This info will help companies to: Assess market potential Understand customer satisfaction & purchase behaviour Measure the effectiveness of pricing product, distribution & promotion activities

MARKET RESEARCH
Decision situations marketing are created by the awareness of :
1. Decision Problems 2. Decision Opportunities 3. Market performance

MARKET RESEARCH CAN

PROVIDE INFORMATION NECESSARY TO ALLOW FOR THESE DECISIONS

symptoms.

Marketing Information System

Begins with assessing

information needs for users

Internal Database Electronic collection of info

obtained from data source within the company

Develops from internal

database, marketing intelligence activities, & research

External source

Analyses of data received for

decision making to manage customer relations.

Marketing Research Process

Define the problem & research objectives

Develop the research Plan For collecting information

Implement the Research Plan Collect & analyze data

Interpreting & Reporting findings

Step 1- Defining the Problem & Research Objectives

(usually considered the

most difficult step

E.g.. Would a 10% decrease at

UCC increase enrollment enough to offset/ reduced tuition?

Exploratory research Gathers preliminary info

that will help to define the problem (s) and suggest an hypothesis

Casual Research This tests hypotheses about cause & effect relationships The statement of the problem and research objectives guides the entire research process.

Descriptive Research Describes marketing

problems, situations or markets- demo, cust attitude

 In determining the research problem: a. Determine and clarify information needs B. Re define the decision problem as a

research problem
C. Establish research objectives

Step 2 Developing the Research Plan

An efficient plan is
How customers are

developed for collecting information Plan outlines sources of existing information Specific approach, contact, methods instruments Information is usually gathered from primary & secondary data source.

responding to the seasoned fish & chicken on the market.

The product may cost more,

but think about convenience

What specific information

would be needed? Consumers, Retailers Demographics Economics

Step 2 Developing the Research Plan

Secondary data Information already exists for Primary Data Care must be taken

another purpose Comps Internal database Commercial database STATIN - Online database Usually less expensive Sometimes required info. may not exist (reactions to new product)

when collecting primary data to ensure relevance to the research being conducted. Accuracy (reliably collected & reported Currency (up-to-date) Impartiality (obj. coll. & reported)

Approaches to Research
a. Observation, Observing relevant people, b. Survey Research Gathering of data by asking

actions & situations E.g. How much of a particular product consumers purchase, traffic patterns
Mechanical Observation

questions Knowledge, attitudes, preferences, buying patterns Descriptive research Most widely used approach

TVJ Rising Stars, Kings &

Queens, Dancing Dynamites

Flexibility Advantages used to collect different type of

Scanners at Supermarkets.
Do you know of any other type

data

being used?

Approaches to Research

Disadvantage Some persons inability to

Single Source data

system

answer survey question- --never thought about what they

do or why or cannot remember
Persons may be unwilling to

Electronic monitoring

systems - link consumers expend. to television advertising & promotion

respond to unknown interviewers & what they consider private information -Resent intrusion May give answers they think interviewers want.

(using TV meters with

what they buy in stores (store check out scanners

Approaches to Research
Experimental Research The gathering of primary data by
Advantages Contact Methods -includes mail,

selecting matched groups of subjects, giving them different treatments, controlling unrelated factors and for checking for differences in group responses. product they may use different prices in different parts of the country to test consumers response. different prices in Kingston & Ocho Rios

telephone personal interviews Mail large qty, low cost per respondent no interviewer bias
Disadvantage Low return rate All respondents respond in the

Eg. A comp introduces a new

same order] Takes longer, no control over sample

E.g. Burger King May have

Approaches to Research
Telephone Advantages Best for gathering information quickly & greater flexibility Respondents can ask for explanation to questions or not answer Reponses are usually higher more controlled because the interviewer can seek persons with specific characteristics. Disadvantages
Higher cost than mail Respondents may or may not

want to answer personal question. There may be interviewer bias (can skew the questions to obtain particular response Interviewer may even cheat on questionnaires Interviewer may not interpret and record respondents response objectively

Personal Interviews
2 forms Individual in homes, offices, street, mallsoffers flexib.

The interviewer focuses the group

discussion on important issues. Very popular nowadays

Interviewers probe respondents to elicit more meaningful information explore issues. Respondents may be able to view actual products, advt pkg & observer reactions Group Interviews

Focus can make use of : Video conferencing links, remote

control TV Camera computer assisted interviewing

Online Marketing Research Collecting primary data thru

Focus group personal interviewing involves inviting 6-10 people to gather with a trained interviewer to talk about a product, service organ.

internet surveys & online focus groups. (Digiport Montego Bay)

Approaches to Research

Sampling A segment of the population selected for marketing research to represent her population as a whole

Types of sample Research Instruments 2 methods for primary data

3 decisions are required for sampling: i. Who is to be surveyed (sampling unit) ii. How many people should be surveyed (sample size -the larger the sample the more reliable the results iii. (How you choose the people for sampling (procedure)
Method chosen depends on the need of the research project.

collection Questionnaire Commonly used Flexible Open-ended question- all possible answers Multiple choice scaled

E.g. the most importance

consideration in choosing a tertiary is

 Open ended questions are useful in exploratory research (what

First question should create

people think but not necessarily how many people.

interest

Difficult & personal

Closed ended Provide answers that are easier to

interpret and tabulate.

questions should be asked last.

Care should be taken with the

Researchers use

wording of the question and ordering of the question. unbiased, and arranged in a logical manner

Questions should be simple, direct,

mechanical instrument to monitor consumer behaviour (supermarket)

Implementing the Research Plan

Involves collecting, Interpreting & Reporting

processing and analyzing information

Check for accuracy &

the Findings
Application of the finding in the

decision-making process
Computer aided techniques

completeness and code analysis

Results tabulated &

may be used for more detailed findings.

computed

Measuring Current Demand

One very important reason For conducting market research

to identify potential marketing opportunities.

Companies can lose profits by overestimating or underestimating the market:

overly optimistic

When a company finds an attractive market it must carefully estimate that markets:Current size Future potential

estimates of current or future demand can result in costly overcapacity or excess inventories.

1. 2.

Underestimating demand

can mean missed sales and profit opportunities.

A. CURRENT SIZE
Measurement of Current Market Demand For this demand marketers need three (3) important pieces of information:
I. II. III.

Total market demand Area market demand Actual sales and market shares

Measurement of Current Market Demand

I.

Total market demand

Definitions: i) Total market demandThe volume of a product or service that would be bought by a defined customer group in a defined geographic area in a defined time period in defined marketing environment under defined level and mix of industry marketing effort. (Kotler & Armstrong,2008)

Measurement of Current Market Demand

Definitions: ii) Primary Demand Total demand for product/service class or form iii) Selective Demand Demand for a given brand of product or service
Total market demand (contd)

According to Fig.1.1 Market minimum (Q1) this would take place without stimulated marketing activities. As expenditure increase then demand will be positively impacted.

Measurement of Current Market Demand

Total market demand (contd) However, expenditure beyond a certain point would not stimulate further demand hence: Market Potential: This relates to the upper limit of market demand.

Estimating total market demand

Common way to do this is as follows: Q=n*q*p Where : Q = total market demand N = number of buyers in the market q = quantity purchased by average buyer per year p = price of an average unit
Thus:

If 20 million buyers of bottled water each year, with an average buyer buying 60 bottles per year @$50, then the total market demand for bottled is :

20,000,000*60*$50 = $60billion

II. Estimating Area Market Demand

In selecting the best sales territories, companies need to estimate the market potential (upper limit for market demand) for different cities, states and countries.

i)

Market Build up or Index Method (consumer markets

Two commonly used methods are: i) Market build up method (for business goods)
ii)

Procedure: Identify all the potential buyers in each business market Then estimate their potential purchases.

Market factor Index

method (consumer markets)

Estimating Area Market Demand

ii) Market Index factor Procedure:

Identify all the potential buyers in each consumer market estimate their potential purchases.

Estimating Area Market Demand

ii) Market index factor A common example used by Sales & Marketing Management Survey of Buying Power, is the Buying Power Index (BPI). This estimates the buying power (ability to buy) for a region.

Estimating Area Market Demand

Market Index Factor
This is based on three (3) factors : - areas share of the total population
-

Effective buying income Retail sales

Thus: BPI= .2* % of Nat. pop. + .5*% of buy. Income +.3% of Nat. ret. sales

Estimating Area Market Demand Market index factor

E.g: If a soft drinks manufacturer looks at St. Ann area and finds that . 5596% of Nat. pop. is within this region &
.5984% of nations Then

BPI= (.2*.5596)+(.5*.5984) +(.3*.6594) =.6089

Therefore St. Ann would account for . 6089% of the total potential demand for soft drinks in the Island

effective buying power is also from this region along with .6594% of the nations retail sales.

III. Estimating Actual Sales & Market Shares

A company must identify its competitors and estimate their sales This will provide a greater understanding of the position of the firm in the industry as it relates to market share. Total sales information can be acquired from: a) Document and reports published by trade associations. b) Marketing research firms that audit total sales and brand sales

B. FUTURE POTENTIAL
Forecasting future Demand

Definition: This relates to the art of estimating future demand by anticipating what buyers are likely to do under given conditions.

Forecasting future Demand

Companies commonly use a three step approach to forecast sales:

i)

Macroeconomic Forecast (environmental forecast) Industry forecast (Trade Ass. & Mktg firms) Company Sales forecast (past sales info.)

ii) iii)

Forecasting Future Demand

All forecasts are built on:

what people have done.

what people say, Involves the use of surveys of buyers opinion what people do, Involves the use of test markets for product/services and measure buyer response

b. Involves analysis of past

buying activities and behaviour and/or using various statistical tools to forecast sales from past records

SUMMARY

Current and future demand measures are important in providing information to the marketer about the opportunities that exist in the marketplace. Market potential estimates and industry and company sales forecasts are important for the development of corporate marketing strategies and products objectives. Middle management decisions regarding size and allocation of marketing expenditures depend heavily on sales forecasts.

Questions for Review and Discussion

Explain the importance of information to the company and its understanding

of the marketplace
Explain the steps in the Marketing Research Process Marketing information has no value unless it is used to make better

decision, explain how companies can analyze and distribute marketing information.
What are some of the unique issue facing marketers in terms of public

policy, ethics
How can marketers use technology to improve marketing. Identify some

weaknesses of this method.

Market Segmentation
Lecture # 2 January 19, 2012

What is a market segment?

A group of consumers who respond in a similar way to a given set of marketing efforts.

People or organizations with

Kotler,. and Armstrong ) (2012) A subgroup of people or organization sharing one or more characteristics that cause them to have similar product needs.
Lamb, C., Hair, J. & McDaniel, C.

needs or wants and the ability and willingness to buy.

The marketer does not create the segments, he identifies the segment and decides which one (s) to target.

Market Segmentation
Dividing a market into

smaller groups of buyers distinct needs, characteristics, or behaviour who might require separate products or marketing programms.
Kotler, P. and Armstrong, G.

Capitalizes on differences

in consumers taste and preferences with the ultimate aim of targeting segment(s) with a product and distinct marketing strategy.
The

overall purpose of market segmentation in both consumer and business markets, is to identify marketing opportunities.

Reasons for Market Segmentation

3 main reasons
1. Segmentation enables

marketers to identify groups of customers with similar needs and to analyze the characteristics and buying behaviour of these groups. 2. Segmentation provides marketers with information to help them design marketing mixes specially matched with

3. Segmentation is consistent with the marketing concept of satisfying customer wants and needs while meeting the organizations objectives

Market Segmentation
1. Select a market or

product for study:

category

Define the overall market or product to be studied. It may be a market in which the firm already competes, a new but related market or product category or a totally new one.

This step requires managerial insight, creativity, and market knowledge. There are no scientific procedures for selecting segmentation variables, however a successful segmentation scheme must meet the criteria of :
accessibility,

2.

Choose a basis or bases For segmenting the market:

measurability,

differentiability, actionability and

Steps in Segmenting a Market

3. Select segmentation descriptors:
After choosing one or more bases, the marketer identify the specific segmentation variables to use. E.g. if a company selects demographics as a basis of segmentation, it may use: age, occupation and income as descriptors. A company that selects usage segmentation needs to decide whether to go after heavy users, nonusers, or light users.

Profile and analyze segments:

The profile should include: the segments size, expected growth, purchase frequency, current brand usage, brand loyalty, and long-term sales and profit potential. This information can be used to rank potential market segments by: profit opportunity, risk, consistency with organizational mission and objectives, and other factors important to the firm.

Steps in Segmenting a Market

5. Select

markets:

target

6. Design, implement, and

maintain appropriate marketing mixes:

Selecting target markets is not a part of but a natural outcome of the segmentation process. It is a major decision that influences and often directly determines the firms marketing mix.

The marketing mix has been described as product, distribution, promotion and pricing strategies to bring about mutually satisfying exchange relationships with target markets.

Market Segmentation
Three (3) activities are involved in market segmentation:
1. Formation and profiling of segments 2. Evaluation of market segments [Link] of segmentation strategy

1. Formation and profiling of

segments consumer markets
A market segment consists of a group of customers whose requirement for satisfaction in a product is similar. Consumer goods marketers use one or more characteristics to segment the markets: Geography Demographics Psychographics Benefits sought Usage rate

1.

Formation and Profiling of segments

To create these segments four (4) types of data is usually collected:

2. Geographic
Segmenting markets by: region of the country or world, market size, market density, or climate.
Dividing markets into

I.

Demographic:

Gender, life stage, age, family-life cycle, income, generation, ethnic background and social class

different geographic units such as: states, nations, regions, countries, cities, parishes or local neighbourhoods.

1. Formation and profiling of Segments

iii) Psychographic: Market segmentation based on the following variables:

iv) Behavioural

dividing a market into groups based on consumer knowledge, attitude, use, or response to a product: Decision roles occasions benefits sought user status usage rate loyalty status attitude

Personality/traits Motives Lifestyles Social class Value Psychological

2. Evaluation of market
segments
Market segmentation study may be evaluated based on the following criteria. For market segmentation to be effective, they must rate favorably on all five criteria: i.

ii) Actionability the extent to

which actions can be taken by the marketer on the results of the segmentation analysis. marketer must be able to design separate market programs for attracting and serving each segment

Uniqueness/differentiability
the more unique or different the segments are the easier it is to translate segmentation results into strategic actions. The segments must are distinguishable and respond differently to different marketing mix elements and programs.

The

2. Evaluation of market segments

iii) Identifiability/

Measurability

iv)

the extent to which the

Substantial/Profitabili ty
the segment should be large enough and profitable to serve. Segments should be consistent with the companys mission and objectives.

size, purchasing power, and characteristics/profiles of the segment can be measured.

2. Evaluation of market segments

v) Responsiveness

vi. Accessibility
The segments should beeffectively reached and served. The firm must be able to reach members of targeted segmentswith customized marketing mixes. Some market segments are hard to reach e.g. senior citizens especially those with hearing and seeing impairments, and Individuals; who dont speak English - language barriers or literacy levels or

segmenting markets using any criteria that seems logical. Unless one market segment responds to a marketing mix differently from other segments, that segment need not be treated separately. If all customers are equally price conscious about a product/service, there is no need to offer high, medium -, and low-priced

[Link] of segmentation strategy

After evaluating different segments the company can consider five target market selection:
i) Single segment concentration ii) Full coverage iii) Selective specialization iv) Product specialization v) Market specialization

SUMMARY

Consumer markets can be segmented based on four variables demographic, psychographic, behavioural and geographic. A company must then evaluate the segment and decide which segment (s) to target. Marketers must select target markets in a socially responsible way and apply appropriate strategies to the selected segment (s)

Questions for Review

Making use of specific examples, outline the principles

and processes of market segmentation, market targeting and market positioning

Explain the link between ethics and culture