MKT301 (Chapter 3)

Collecting Information and Forecasting Demand

➢ Components of a Modern Marketing Information System (MIS):

➢ Internal company records

➢ Marketing intelligence activities

➢ Internal Records:

Marketing managers use internal reports to spot important opportunities and

potential problems. These reports include information on:

1. Orders: What customers have ordered.

○ Example: A clothing retailer receives 100 orders for a new line of
summer dresses. This indicates high customer interest in this product.
2. Sales: What has been sold.
○ Example: The retailer sold 90 out of the 100 ordered summer dresses
within the first week, showing strong sales performance for this new
line.
3. Prices: How much products cost.
○ Example: Each summer dress is priced at $50. The retailer keeps
track of this price to ensure it is competitive with other brands.
4. Costs: How much it costs to produce and sell products.
○ Example: The cost to produce each summer dress, including materials
and labor, is $20. This cost helps the retailer determine the profit
margin.
5. Inventory Levels: How much stock is available.
○ Example: After selling 90 dresses, the retailer has 10 dresses left in
stock. They track inventory levels to know when to reorder more stock.
6. Receivables: Money that is owed to the company.
○ Example: Some customers bought dresses on credit. The retailer has
$500 in receivables, which means customers owe the retailer $500.
7. Payables: Money that the company owes to others.
○ Example: The retailer owes $3000 to the supplier for the materials
used to produce the dresses. This is tracked as payables.

Order-to-Payment Cycle

This cycle is crucial for the internal records system. It involves the following steps:

1. Order Placement: Sales representatives, dealers, or customers place orders.

 2. Invoice Preparation: The sales department creates invoices and sends
copies to different departments.
3. Handling Out-of-Stock Items: If items are out of stock, they are
back-ordered.
4. Shipping and Billing: When items are shipped, shipping and billing
documents are generated and sent to various departments.

Sales Information Systems:

Marketing managers need up-to-date reports on what’s selling well.

● Example: Walmart uses a system that tracks every item bought by every
customer, at every store, every day. It updates this information hourly to make
smart business decisions.

Cookies and Targeted Marketing: Cookies are records of website usage stored on
browsers. Companies use these to personalize marketing based on user
preferences. Many consumers accept this in exchange for personalized deals and
offers.

Data Management Challenges:

● Big Data: The internet and mobile tech have created tons of data for
companies to use. It’s a big opportunity but can overwhelm decision-makers.
● Solution: Companies use databases, data warehouses, and data mining to
sift through all this data and find useful insights for better business decisions.

➢ Marketing Intelligence:

A marketing intelligence system helps managers gather information about what's

happening in the market. It's different from internal records because it focuses on
current events and trends. To gather this intelligence, managers might read books,
newspapers, and trade publications, talk to customers, suppliers, and other
managers, and monitor social media.

Before the internet, some companies used creative methods like observing
competitors directly to gain insights, much like how T. Boone Pickens watched his
rival's drilling operations from a distance to estimate their costs.
It's crucial that gathering marketing intelligence is legal and ethical. For instance, a
firm once faced legal consequences for using deceptive tactics to obtain confidential
information.

Companies can take several steps to improve their marketing intelligence:

1. Train and motivate sales teams to report new developments they notice from
interacting with customers.
2. Encourage distributors and retailers to share insights they gain from the
market.
3. Hire external experts or conduct mystery shopper programs to gather more
detailed information.
4. Network extensively by attending industry events, purchasing competitors'
products, and staying updated on news.
5. Establish customer advisory panels to get direct feedback and insights from
key customers.
6. Utilize government data resources like census reports to understand
demographic changes.
7. Purchase information from research firms that collect data on consumer
behavior and market trends.

These actions help companies stay informed about their market environment, which
is crucial for making effective business decisions and staying competitive.

Collecting Marketing Intelligence on the Internet: (It is included in Marketing

Intelligence)

Online customer review boards, discussion forums, chat rooms, and blogs can
distribute one customer’s experiences or evaluation to other potential buyers and, of
course, to marketers seeking information. Here are five places to find competitors’
product strengths and weaknesses online:

1. Independent customer goods and service review forums:

○ Definition: These are online platforms where customers share their
experiences and opinions about products and services independently
of the companies that provide them.
○ Example: Websites like Trustpilot or Consumer Reports where users
can read and write reviews about various products and services.
2. Distributor or sales agent feedback sites:
○ Definition: Websites where distributors or sales agents provide
feedback on products or services they sell or represent.
 ○ Example: Amazon Seller Central forums or specialized forums for
distributor feedback within specific industries.
3. Combo sites offering customer reviews and expert opinions:
○ Definition: Platforms that combine customer reviews with expert
evaluations and analyses of products or services.
○ Example: CNET or Wirecutter, where experts review and compare
products alongside user reviews.
4. Customer complaint sites:
○ Definition: Websites where customers post complaints or negative
experiences about products or services.
○ Example: Consumer Affairs or Ripoff Report, where users can report
grievances and issues they've encountered with businesses.
5. Public blogs:
○ Definition: Blogs where individuals or groups share their experiences,
opinions, and recommendations about products, services, or industry
trends.
○ Example: TechCrunch or The Verge often feature reviews and opinions
on technology products, influencing consumer perception and
decisions.

These sources provide valuable insights into consumer sentiment, product

performance, and market trends, which businesses can use for marketing
intelligence and strategic planning.

Analysing the Macroenvironment:

Fads

Definition: A fad is something that becomes very popular quickly but fades away
just as fast. It doesn't have a long-lasting impact on society, the economy, or politics.

Example: Food, shelter, clothing, toy like Fidget, Pokémon toys and healthcare are
basic human needs.

Example: Think of fidget spinners. They were all the rage for a while, with everyone
wanting one. But after a few months, their popularity dropped, and people moved on
to the next big thing.

Trends
Definition: A trend is a direction or pattern of change that is more lasting than a fad.
Trends can shape the future and help companies plan their strategies.

Example : Consider the trend towards health and wellness. More people are
becoming conscious of what they eat and how they live. This trend has led to more
health-conscious products in the market, like low-calorie meals and fitness apps. For
instance, Macaroni Grill changed its menu to offer healthier options after facing
criticism for having high-calorie dishes.

Example 2 :The rise of eco-friendly products is a trend that has been growing
steadily over the past decade. Companies are increasingly adopting sustainable
practices to meet consumer demand for environmentally friendly goods.

Megatrends

Definition: A megatrend is a large-scale change that develops slowly but has a

significant and lasting impact on society, the economy, and politics over many years.

Example: Digitalization is a megatrend. It has transformed industries,

communication, and daily life globally over the past few decades. Technologies like
smartphones and the internet are part of this megatrend.

​Example: Digital transformation is a megatrend that has revolutionised industries

globally. It encompasses the shift towards digital technologies, online platforms, and
automation, influencing how businesses operate and interact with customers.

Why It Matters

Understanding the difference between fads, trends, and megatrends can help
businesses make better decisions. For example:

● Fads can be lucrative if you catch them at the right time but are risky because
they don't last.
● Trends provide more reliable opportunities for growth and strategic planning.
● Megatrends indicate long-term shifts that can reshape entire industries and
markets.

By recognizing these patterns, companies can better position themselves to meet

customer needs and stay ahead of the competition.
Identifying the Major Forces: (Analysing the Macroenvironment)

Firms must monitor six major forces in the broad environment: demographic,
economic, social-cultural, natural, technological, and political-legal.

➢ Demographic environment:

The demographic environment refers to factors related to populations, like size, age,
ethnicity, education levels, and household structures. These factors are crucial for
marketers because they shape consumer behavior and demand for products.

1. Population Size and Growth: This tells us how many people live in a certain
area and how quickly that number is changing. For example, a city with a
rapidly growing population might see increased demand for housing, schools,
and healthcare services.
2. Age Distribution: This refers to the different age groups within a population.
For instance, countries like Mexico with a young population might have higher
demand for products like diapers and toys, while in aging populations like
Italy, there could be more demand for healthcare services and retirement
products.
3. Ethnic and Racial Diversity: This varies across countries. In the U.S., for
instance, different ethnic groups have different buying behaviors and
preferences. Companies adjust their marketing strategies to appeal to these
diverse groups. For example, Fisher-Price tailored its advertising to resonate
with Hispanic mothers by focusing on the joy of playtime with their children.
4. Educational Levels: This indicates the level of education people have
attained. In countries with high education rates, there may be greater demand
for high-quality books and educational products.
5. Household Patterns: This describes how families and households are
structured. For instance, fewer households today fit the traditional model of a
married couple with children. More people are living alone, choosing not to
marry, or having non-traditional family structures.

Understanding these demographic factors helps businesses tailor their products and
marketing strategies to meet the specific needs and preferences of different
consumer groups. It's about recognizing that consumer behavior is influenced by
who they are, where they live, and their life stage.
 ➢ Economic environment:

These factors show how the economy influences what people buy and how
businesses operate, depending on factors like income, spending habits, and global
economic trends.

1. Purchasing Power: This depends on how much money consumers have

(income), how much they've saved, their debts, and their access to credit.
When these factors change, like during a recession, it affects how much
people can spend.
Example: During the 2008 recession, many consumers felt less secure
financially, so they spent less on luxury items and were more cautious with
their money.
2. Consumer Psychology: Economic changes can alter how people behave
when spending money. For instance, after a recession, people might become
more careful with their purchases, looking for discounts and comparing prices
more.
Example: Many consumers believed the changes caused by the recession
were permanent, leading them to spend less and be more thrifty in the long
term.
3. Income Distribution: Different countries have different income levels among
their population, which affects what products are in demand.
Example: In countries where there's a wide gap between rich and poor (like
Portugal), you might find a market for very expensive products, despite overall
lower average incomes.
4. Debt and Credit: When people borrow less or banks are more cautious about
lending (like during a financial crisis), consumer spending can decrease
because people can't afford to buy as much on credit.
Example: In the US during the recession, tighter credit policies meant fewer
people could borrow money for big purchases, which slowed down the
economy.
5. Globalization: Companies moving jobs overseas can change the economic
landscape by affecting employment and incomes in different countries.
Example: Infosys, based in India, provides services for companies like Cisco
and Microsoft, creating jobs in India but impacting employment opportunities
elsewhere.
These factors show how the economy influences what people buy and how
businesses operate, depending on factors like income, spending habits, and global
economic trends.

➢ Sociocultural Environment:

1. Views of Ourselves: People have different attitudes towards life. Some are
"pleasure seekers" who enjoy fun and excitement (like going to concerts or
amusement parks), while others are more focused on "self-realization" (such
as pursuing personal growth through hobbies or education).
2. Views of Others: People are concerned about social issues like
homelessness and crime, but they also seek relationships with similar
individuals. This leads to a demand for social-support services like health
clubs or social media platforms where people connect with others who share
their interests.
3. Views of Organizations: After corporate scandals, people have become less
loyal to companies. Organizations must regain trust by being transparent and
socially responsible. For example, companies that support environmental
causes or engage in community service can enhance their reputation.
4. Views of Society: Individuals have different roles and attitudes towards
society. Some are "makers" who are high achievers and consumers of luxury
goods, while "changers" are more frugal and environmentally conscious. Each
group influences consumption patterns, like the choice of cars or clothing.
5. Views of Nature: With increased environmental awareness, there's a growing
market for eco-friendly products. Companies are producing items like
sustainable clothing or energy-efficient appliances to appeal to consumers
concerned about their environmental impact.
6. Views of the Universe: Religious beliefs and practices vary, but there's a
trend towards spiritual exploration beyond traditional monotheism. This
includes interests in Eastern philosophies, mysticism, or the human potential
movement, influencing cultural trends in music, fashion, and lifestyle choices.

Understanding these aspects helps marketers tailor their strategies to resonate with
different societal values and behaviors, ensuring their products and messages align
with consumer attitudes and cultural shifts.

Core culture & Subculture:

Core Culture:Core culture, including fundamental beliefs, values, and behaviors,

typically comes from parents and is reinforced by social institutions such as schools,
churches, and communities. These are the foundational aspects of culture that
individuals inherit and are deeply ingrained from a young age.

● Example: In the United States, core cultural values include beliefs in hard
work, individualism, and equality.

Subculture: Subculture refers to a smaller group within a society that shares

distinctive values, norms, lifestyles, and behaviors different from the mainstream
culture.

● Example: Skateboarders form a subculture with their own fashion, music, and
attitudes, distinct from broader societal norms.

➢ Natural Environment:

1. Environmental Awareness: In Western Europe and the United States,

groups like green parties and environmental watchdogs (like the Sierra Club)
push for actions to reduce pollution from industries and improve ecological
conditions.
2. Technological Innovations: Companies are investing heavily in technologies
to reduce pollution and promote environmental sustainability. For example,
steel companies and utilities are using cleaner fuels and equipment to cut
down on emissions.
3. Examples of Environmental Solutions:
○ Clean Energy: Airtricity, based in Dublin, operates wind farms in the
US and UK to provide cheaper and greener electricity, reducing
reliance on fossil fuels.
○ Transportation: Westport Innovations from Vancouver developed
technology for diesel engines to run on cleaner-burning natural gas,
cutting down emissions significantly.
○ Air Quality Improvement: Sun Ovens International from Illinois makes
solar ovens that reduce pollution from cooking fires in Southern Asia,
benefiting health and the environment.
4. Business Strategy: Companies are increasingly integrating environmental
concerns into their strategic plans. This includes preparing for challenges like
resource shortages, rising energy costs, and stricter pollution regulations.
5. Global Impact: The environmental impact varies globally, with wealthier
nations often leading in pollution control efforts. However, there's a growing
recognition of the need for global cooperation to tackle environmental issues,
even in less economically developed countries.
These examples show how businesses and organizations are adapting to
environmental challenges while creating opportunities for sustainable growth and
innovation.

➢ Technological environment:

The technological environment in business is all about how new inventions and
advancements impact industries and consumer behavior. Here are some key points
simplified with examples:

1. Accelerating Pace of Change: Technology is evolving faster than ever. For

instance, when Apple launched the iPad, they sold 97 million units in just
two-and-a-half years, showing how quickly new products can become
widespread.
2. Unlimited Opportunities for Innovation: There are endless possibilities for
new ideas. For example, scientists are exploring using stem cells to grow
organs, which could revolutionize healthcare by providing organs for
transplant without relying on donors.
3. Varying R&D Budgets: Different countries and companies spend different
amounts on research and development (R&D). The U.S. spends a lot on R&D
across sectors like NASA, universities, and private companies like Intel.
However, some worry that too much R&D is focused on copying existing ideas
instead of creating new ones.
4. Increased Regulation of Technological Change: Governments are
increasingly regulating new technologies for safety and health. For instance,
the FDA regulates new drugs to ensure they are safe for consumers before
they reach the market.

These examples show how technology affects businesses and society, creating
opportunities for innovation but also requiring careful management and adaptation to
regulatory changes.

➢ Political and legal environment:

The political and legal environment includes laws, regulations, and the influence of
interest groups that affect businesses and individuals. For example, mandatory
recycling laws create opportunities for new recycling companies. However, political
instability in some regions poses risks, like disruptions for oil companies. Trends
include more business regulations and advocacy from special-interest groups.
Privacy concerns, such as data collection online, are also important, impacting how
companies operate and how consumers' information is handled.

Forecasting and Demand Measurement:

Understanding these market demand measures can help in effectively strategizing

and targeting customers. Here's a breakdown with examples:

1. Potential Market:
○ Definition: The total demand for a product or service if there were no
barriers, such as competition or economic constraints.
○ Example: Imagine a company that manufactures electric scooters. The
potential market would include everyone who could potentially use or
be interested in electric scooters worldwide, without considering factors
like income, accessibility, or competition.
2. Available Market:
○ Definition: The portion of the potential market that the company can
effectively reach with its current resources and capabilities.
○ Example: For the electric scooter company, the available market might
include regions where they have distribution channels, brand
recognition, and regulatory approval to sell their products. It narrows
down from the potential market to what is realistically accessible.
3. Target Market:
○ Definition: The specific segment of the available market that the
company decides to pursue based on its strategic positioning and
marketing efforts.
○ Example: Continuing with the electric scooter company, they might
decide to target urban commuters aged 25-40 who are environmentally
conscious and have disposable income. This segment is chosen
because it aligns best with the company's product features and market
positioning.
4. Penetrated Market:
○ Definition: The percentage or portion of the target market that the
company has successfully captured or currently serves.
○ Example: If the electric scooter company has sold their product to 10%
of their identified target market in a specific city, then their penetrated
market in that city is 10%.

These measures help businesses to analyze and refine their market strategies,
focusing efforts where they are most likely to achieve growth and profitability.