Marketing Research and Information System

Lecture # 2January 19, 2012

Text Reference: Principles of Marketing Phillip Kotler & Gary Armstrong

14th EditionPearson Prentice Halll

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

Unit 2

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

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)

Components of a MIS

(A) Internal Records system

this supplies results data

Sources include:

Sales information, payment to

order cycle, inventory levels, receivables, payables, monthly reports, etc.

B) Market Intelligence system

this supplies happening data.

Defined as:

…procedures and sources managers use to obtain everyday information about the marketing environment

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. Purchasing of information from suppliers

3. A company networking regionally and internationally

4. Consumer Advisory Panel

5. Motivating intermediaries to pass along important information.

6. Government data

resources

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).

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

External markets Marketing tactics & method

Internal - response to customers, present & future

Increasing needed for Marketing Research :

Shift from local to wider internal markets

the changing emphasis from buyer needs to wants (buyer behaviour)

The trend towards competition based on non price

Name some non-price methods used by marketers

MARKET RESEARCH

Systematically

gathering, analyzing,

interpreting and

transforming data,

structures and results

into decision making

information.

Bush, R.P. et. al. (2000)

Some companies –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 symptoms.

MARKET RESEARCH CAN PROVIDE INFORMATION NECESSARY TO ALLOW FOR THESE DECISIONS

Marketing Information System

Begins with assessing information needs for users

Develops from internal database, marketing intelligence activities, & research

Analyses of data received for decision making to manage customer relations.

Internal Database Electronic collection of info

obtained from data source within the company

External source

Marketing Research Process

Define the problem & research objectives

Develop the research PlanFor collectinginformation

Implement the Research Plan

Collect & analyzedata

Interpreting & Reporting findings

Step 1- Defining the Problem & Research Objectives

(usually considered the most difficult step

Exploratory research Gathers preliminary info

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

Descriptive Research Describes marketing

problems, situations or markets- demo, cust attitude

E.g.. Would a 10% decrease at

UCC increase enrollment enough

to offset/ reduced tuition?

Casual Research This tests hypotheses about

cause & effect relationships

The statement of the problem and research objectives guides the entire research process.

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 developed for collecting information

Plan outlines sources of

existing information Specific approach,

contact, methods instruments

Information is usually gathered from primary & secondary data source.

How customers are 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 another purpose

Comp’s Internal database Commercial database

STATIN - Online database Usually less expensive Sometimes required info.

may not exist

(reactions to new product)

Primary Data Care must be taken

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,

actions & situations E.g. How much of a

particular product consumers purchase, traffic patterns

Mechanical Observation TVJ – Rising Stars, Kings &

Queens, Dancing Dynamites

Scanners at Supermarkets.

Do you know of any other type being used?

b. Survey Research

Gathering of data by asking questions

Knowledge, attitudes, preferences, buying patterns

Descriptive research Most widely used approach

Flexibility Advantages used to collect different type of

data

Disadvantage Some persons inability to

answer survey question- - --never thought about what they do or why or cannot remember

Persons may be unwilling to respond to unknown interviewers & what they consider private information

-Resent intrusion May give answers they think

interviewers want.

Single Source data system

Electronic monitoring systems - link consumers expend. to television advertising & promotion

(using TV meters with what they buy in stores

(store check out scanners

Approaches to Research

Approaches to Research

Experimental Research The gathering of primary data by

selecting matched groups of subjects, giving them different treatments, controlling unrelated factors and for checking for differences in group responses.

Eg. A comp introduces a new product they may use different prices in different parts of the country to test consumers response.

E.g. Burger King May have different prices in Kingston & Ocho Rios

Advantages Contact Methods -includes mail,

telephone personal interviews Mail –large qty, low cost per

respondent no interviewer bias

Disadvantage Low return rate All respondents respond in the

same order] Takes longer, no control over

sample

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, malls- offers flexib.

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

The interviewer focuses the group discussion on important issues.

Very popular nowadays

Focus can make use of : Video conferencing links, remote

control TV Camera computer assisted interviewing

Online Marketing Research

Collecting primary data thru internet surveys & online focus groups. (Digiport – Montego Bay)

Sampling A segment of the population

selected for marketing research to represent her population as a whole

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.

Types of sample Research Instruments

2 methods for primary data 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……

Approaches to Research

Open ended questions are useful in exploratory research (what

people think but not necessarily how many people.

Closed ended Provide answers that are easier to

interpret and tabulate.

Care should be taken with the wording of the question and ordering of the question.

Questions should be simple, direct, unbiased, and arranged in a logical manner

First question should create interest

Difficult & personal questions should be asked last.

Researchers use mechanical instrument to monitor consumer behaviour (supermarket)

Implementing the Research Plan

Involves collecting, processing and analyzing information

Check for accuracy & completeness and code analysis

Results – tabulated & computed

Interpreting & Reporting the Findings

Application of the finding in the decision-making process

Computer aided techniques may be used for more detailed findings.

Measuring Current DemandOne very important reason For conducting market

research

to identify potential marketing opportunities.

When a company finds an attractive market it must carefully estimate that market’s:-

1. Current size

2. Future potential

Companies can lose profits by overestimating or underestimating the market:

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

• 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. Total market demand

II. Area market demand

III. Actual sales and market shares

Measurement of Current Market Demand I. Total market demand

Definitions:i) Total market demand-

The volume of a product or service that would be boughtby a defined customer group in a defined geographicarea in a defined time period in defined marketingenvironment under defined level and mix of industrymarketing 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 (cont’d)

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 (cont’d)

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*pWhere :Q = total market demandN = number of buyers in

the marketq = 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.

Two commonly used methods are:

i) Market build up method (for business goods)

ii) Market factor Index method (consumer markets)

i) Market Build up or Index Method

(consumer markets

Procedure: Identify all the potential

buyers in each business market

Then estimate their potential purchases.

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 :

- area’s 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 nation’s effective buying power is also from this region along with .6594% of the nation’s retail sales.

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

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)

ii) Industry forecast (Trade Ass. & Mktg firms)

iii) Company Sales forecast (past sales info.)

Forecasting Future Demand

All forecasts are built on:

‘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

‘what people have done’.

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 SegmentationMarket Segmentation

Lecture # 2Lecture # 2

January 19, 2012January 19, 2012

What is a market segment?

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

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.

• “People or organizations with 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 consumer’s 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 Segmentation3 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 withthe characteristics and the desires of one or more segments.

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

Market Segmentation

1. Select a market or product category for study:

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.

2. Choose a basis or bases

For segmenting the market:

This step requires managerial insight, creativity, and market knowledge. There are noscientific procedures for selecting segmentation

variables, however a successful

segmentation scheme must meet the criteria

of :

accessibility,

measurability,

differentiability,

actionability and

profitability.

Steps in Segmenting a Market3. 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 target markets:

• 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 firm’s marketing mix.

6. Design, implement, and maintain appropriate marketing mixes:

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 marketsegmentation:

• 1. Formation and profiling of segments

• 2. Evaluation of market segments

• 3.Selection 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:

I. Demographic:Gender, life stage, age,family-life cycle, income, generation, ethnic background and social class

2. Geographic

Segmenting markets by:• region of the country or

world, • market size, • market density, or climate.

• Dividing markets into 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:

• Personality/traits• Motives• Lifestyles• Social class• Value• Psychological

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

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. 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.

• ii) Actionability • the extent to which

actions can be taken by the marketer on the results of the segmentation analysis.

• The marketer must be able to design separate market programs for attracting and serving each segment

2. Evaluation of market segments

iii) Identifiability/ Measurability

• the extent to which the

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

iv) Substantial/Profitability

the segment should be large enough and profitable to serve. Segments should be consistent with the company’s mission and objectives.

2. Evaluation of market segments

• v) Responsiveness

• – 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 versions to different segments.

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 don’t speak

English - language

barriers or literacy levels or

limited or no media exposure to

product/service.

3.Selection 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