UCSI UNIVERSITY

MARKETING PROCESSES 2

GATHERING INFORMATION AND SCANNING THE ENVIRONMENT

 Components of a modern marketing information system

Many business firms are not sophisticated about gathering information. Many do not
have a marketing research department. Every firm must organize and distribute a
continuous flow of information to its marketing manager.

A marketing information system (MIS) consists of: People, Equipment, and

Procedures to Gather, Sort, Analyse, Evaluate. Distribute needed, timely, and accurate
information to marketing decision makers.

A marketing information system is developed from: Internal company records,

marketing intelligence activities, marketing research. The company’s marketing
information system should be a cross between what managers thinks they need, what
managers really need, and what is economically feasible.

 Internal records and marketing intelligence

Marketing mangers rely on internal reports on orders, prices, costs, inventory levels,
receivables, payables, and so on. By analysing this information, they can spot
important opportunities and problems.

1. Order-to-Payment Cycle

The heart of the internal records systems is the order-to-payment cycle. Sales
representatives, dealers, and customers send orders to the firm. The sales department
prepares invoices and transmits copies to various departments.

Shipped items are accompanied by shipping and billing documents that are sent to the
various departments. Today companies need to perform these steps quickly and
accurately.

2. Sales Information Systems

Marketing managers need timely and accurate reports on current sales. Companies
that make good use of “cookies” are smart users of targeted marketing. Companies
must carefully interpret the sales data so as not to get the wrong signals.

3. Databases, Data Warehouses, and Data-Mining

The explosion of data brought about by the maturation of the internet and mobile
technology gives companies unprecedented opportunities to engage their customers. It
also threatens to overwhelm decision makers.
The age of big data allows companies to collect unprecedented amounts of
information on everything from production activity through the supply chain, to

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customer interactions, and even clicks on a website. It can be a gold mine. But you
need to know how to use it.

4. Marketing Intelligence System

A marketing intelligence system is a set of procedures and sources managers use to

obtain everyday information about developments in the marketing environment. The
internal records systems supply results data, but the marketing intelligence system
supplies happenings data. A company can take steps to improve the quality of its
marketing intelligence:

a. Train and motivate the sales force to spot and report new developments.
The company must “sell” its sales force on their importance as intelligence
gatherers.
b. Motivate distributors, retailers, and other intermediaries to pass along
important intelligence. Marketing intermediaries are often closer to the
customer and competition and can offer helpful insights.
c. Hire external experts to collect intelligence. Service providers often send
mystery shoppers to their stores to assess how employees treat customers.
d. Network internally and externally. It can purchase competitors’ products;
attend open houses and trade shows; read competitors’ published reports;
attend stakeholders’ meetings; talk to employees, dealers, distributors,
suppliers, and freight agents; collect competitors’ ads; and look up news
stories about competitors.
e. Set up a customer advisory panel. Members might include representative
customers or the company’s largest customers or it’s most outspoken or
sophisticated customers.
f. Take advantage of government data resources. Population census and trade
data are valuable sources for a first cut about the market.
g. Purchase information from outside suppliers. These research firms gather
consumer-panel data at a much lower cost than the company can on its own.

 Collecting marketing intelligence on the internet

There are five ways marketers can research competitors’ strengths and weaknesses
online.

a. Independent customer goods and service review forum. These sites have
the advantage of being independent from the goods and service providers,
which may reduce bias.
b. Distributor or sales agent feedback sites. These sites offer either positive
and negative product or service reviews, but the stores or distributors have
built the sites themselves.
c. Combo-site offering customer reviews and expert opinions. The advantage
of this type of review site is that a product supplier can compare opinions from
the experts with those from consumers.
d. Customer complaint sites. These forums are designed mainly for dissatisfied
customers.
e. Public blogs. Consultancy firms analyse blogs and social networks to provide
firms with insights into consumer sentiment.

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  Analysing the macro-environment

Successful companies recognize and respond profitably to unmet needs and trends.

1. Needs and Trends

Enterprising individuals and companies manage to create new solutions to unmet

needs.

o A fad is “unpredictable, short-lived, and without social, economic, and

political significance.”
o A trend is a direction or sequence of events that has some momentum and
durability. Trends are more predictable and durable than fads. A trend reveals
the shape of the future and provides many opportunities.
o Mega-trends have been described as a “large social, economic, political, and
technological changes [that] are slow to form, and once in place, they
influence us for some time—between 7 and 10 years, or longer.

A new market opportunity does not guarantee success. Market research is necessary
to determine an opportunity’s profit potential.

2. Identifying the Major Forces

Firms must monitor six major forces: Demographic, Economic, Social-cultural,

Natural, Technological, and Political-legal. Marketers must pay attention to the
interactions of these forces, as these will lead to new opportunities and threats.

3. The demographic environment

The main demographic force that marketers monitor is population, including the size
and growth rate of populations in cities, regions, and nations; age distribution and
ethnic mix; educational levels; and household patterns.

 Worldwide Population Growth

The world’s population is showing explosive growth: It totalled over 7.4 billion in
2015 and will exceed 9 billion by the year 2045. Moreover, population growth is
highest in the countries and communities that can least afford it. A growing
population does not mean growing markets unless these markets have enough
purchasing power.

 Population Age Mix

National populations vary in their age mix. There is a global trend toward an aging
population. This implies good prospects for marketers of travel, entertainment, health
care, etc.

A population can be subdivided into six age groups: Preschool, School-age children,
Teens, Young adults age 25-40, Middle-aged adults age 40-65, Older adults ages 65

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and up. Cohorts are groups of individuals who are born during the same time and
travel through life together. The “defining moments” they experience as they become
adults can stay with them for a lifetime and influence their values, preferences, and
buying behaviours.

 Ethnic and Other Markets

Countries vary in ethnic and racial makeup. Ethnic groups have certain specific wants
and buying habits. Marketers must be careful not to over generalize about ethnic
groups. Within each ethnic group are consumers who are quite different from each
other. Diversity goes beyond ethnic and racial markets across Asia.

 Educational Groups

The population in any society falls into five educational groups: Illiterates, High
school dropouts, High school degrees, College degrees, and Professional degrees.

 Household Patterns

The “traditional household” consists of a husband, wife, and children (sometimes

grandparents). In some countries there may be many “non-traditional” families, and
these includes: Single live-alones, Adult live together of one or both sexes, Single-
parent families, Childless married couples, Empty-nesters.

Each group has a distinctive set of needs and buying habits. Marketers must
increasingly consider the special needs of non-traditional households, because they
are now growing more rapidly than traditional households

 Geographical Shifts in Population

This is a period of great migratory movements between and within countries. Within
countries, population movement occurs as people migrate from rural to urban areas,
and then to suburban areas. Location makes a difference in goods and service
preferences.

4. Economic Environment

Purchasing power depends on current income, prices, savings, debt, and credit
availability. Marketers must pay careful attention to trends affecting purchasing
power because they can have a strong impact on business, especially for companies
whose products are geared to high-income and price-sensitive consumers.

 Income Distribution

There are four types of industrial structures: subsistence economies like Laos (few
opportunities for marketers); raw-material-exporting economies like Brunei (oil),
with good markets for equipment, tools, supplies, etc.; industrializing economies like
China, where a new upper class and a growing middle-class demand new types of
goods; and industrial economies like Japan which are rich markets for all sorts of
goods.

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In a global economy, marketers need to pay attention to the shifting income
distribution in countries around the world, particularly in countries where affluence
levels are rising. Marketers often distinguish countries with five different 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.

 Income, savings, debt, and credit availability

Consumer expenditures are affected by income levels, savings, debt, and credit
availability.

5. Social-Cultural Environment

Society shapes the beliefs, values, and norms that largely define these tastes and
preferences. People absorb a worldview that defines their relationships to themselves,
others, organizations, society, nature, and to the universe.

a. Views of themselves - people vary in the relative emphasis they place on self-
gratification.
b. Views of others - people are concerned about the homeless, crime and
victims, and other social problems.
c. Views of organizations - people vary in their attitudes toward corporations,
government agencies, trade unions, and other organizations.
d. Views of society – Some people defend it (preservers), some run it (makers),
some take what they can from it (takers), and some want to leave it (escapers).
e. Views of nature – Business has responded to increased awareness of nature’s
fragility and finiteness by producing wider varieties of camping, hiking,
boating, etc.
f. View of the universe - people varies in their beliefs about the origin of the
universe and their place in it.

Here are some other cultural characteristics of interest to marketers: The persistence
of core cultural values, the existence of subcultures, Shifts of values through time.

 High Persistence of Core Cultural Values

The people living in a society hold many core beliefs and values that tend to persist.
Core beliefs and values are passed on from parents to children and are reinforced by
major social institutions. Secondary beliefs and values are more open to change.
Marketers have some chance of changing secondary values but little chance of
changing core values.

 Subcultures

Each society contains subcultures, groups with shared values emerging from their
special life experiences or circumstances. Marketers have always loved teenagers
because they are society’s trendsetters in fashion, music, entertainment, ideas, and
attitudes.

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Marketers know that if they attract someone as a teen, there is a good chance they will
keep the person as a customer later in life.

6. Natural Environment

The deterioration of the environment is a major global concern. In many world cities,
air and water pollution have reached dangerous levels. There is great concern about
“greenhouse gases.” New regulations have hit certain industries very hard.

Corporate environmentalism recognises the need to integrate environmental issues

into the firm’s strategic plans. Marketers need to be aware of the threats and
opportunities associated with trends in the natural environment: shortage of raw
materials, especially water, increased pollution levels and the changing role of
governments.

7. Technological Environment

The essence of market capitalism is a dynamism that tolerates the creative

destructiveness of technology as the price of progress. In some cases, innovation’s
long-run consequences are not fully foreseeable. The marketer should monitor the
following trends in technology:

 Accelerating Pace of Change

More ideas than ever are in the works, and the time between the appearance of new
ideas and their successful implementation is all but disappearing. So is the time
between introduction and peak production.

 Unlimited Opportunities for Innovation

Some of the most exciting work is being done in biotechnology, computers,

microelectronics, telecommunications, robotics, and designer materials. They are
designing robots for firefighting, underwater exploration, and home nursing.

 Varying R&D Budgets

Although the U.S. leads the world in annual R&D expenditures, Japan is fast
increasing its R&D expenditures, mostly on non-defence-related research in physics,
biophysics, and computer science. Many companies are content to put their money
into copying competitors' products and making minor feature and style improvements.

 Increased Regulation of Technological Change

Government agencies’ powers to investigate and ban potentially unsafe products have
been expanded. Safety and health regulations have also increased in the areas of food,
automobiles, clothing, electrical appliances, and construction.

8. Political-Legal Environment

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Marketing decisions are affected by developments in the political and legal
environment. This environment is composed of laws, government agencies, and
pressure groups. These laws also create new business opportunities. Four major trends
deal with the increase in business legislation, the growth of special interest groups,
market reform, and corruption.

 Increase in Business Legislation

Business legislation has main purposes of (1) protect companies from unfair
competition, (2) protect consumers from unfair business practices, (3) protect the
interests of society from unbridled business behaviour, and (4) charge businesses with
the social costs created by their products or production process.

Governments worldwide have been examining and enacting laws covering

competitive behaviour, product standards, product liability, and commercial
transactions. Regulations on counterfeiting are also increasing.

Sometimes, legislation is passed to protect home industries. To counter these

protectionist policies, some foreign companies introduce new local brands. Laws have
also been eased to encourage business. Marketers must have a good working
knowledge of the major laws protecting competition, consumers, and society.

 Growth of Special Interest Groups

The number and power of special interest groups have increased over time. An
important force affecting business is the consumerist movement—an organized
movement of citizens and government to strengthen the rights and powers of buyers
in relation to sellers.

With consumers increasingly willing to swap personal information for customized

products from firms, privacy issues will continue to be a public hot button. Several
companies have established consumer affairs departments to help formulate policies
and respond to consumer complaints.

Clearly, new laws and growing numbers of pressure groups have put more restraints
on marketers. Marketers must clear their plans with the company’s: Legal
departments, Public-relations departments, Public-affairs departments, and Consumer-
affairs departments.

 Market Reforms

Governments often introduce many market reforms as part of their nation building
agenda. These reforms take time to bear fruit and businesses need to be patient,
particularly in less developed Asian countries.

 Corruption

In some Asian markets, corruption is rife. There are different ethical perspectives to
view the matter of bribing in business. Such corruption may hinder economic
development as bribes have to be paid to get the smallest of clearance.

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