Collecting Information

and Forecasting Demand

Chapter 3
Chapter Outline
⚫ Collecting Information
⚫ What is a Marketing Information System (MIS)?
⚫ Components of a Modern Marketing Information System
⚫ 1. Internal Records
⚫ 2. Marketing intelligence activities
⚫ 3. Marketing research
⚫ Major Forces in the Environment
1. Demographic Environment
2. Economic Environment
3. Social-cultural Environment
4. Natural Environment
5. Technological Environment
6. Political-legal Environment
• Forecasting and Demand Measurement
• Estimating Future Demand
 Collecting Information
⚫ The major responsibility for identifying important
marketplace changes falls to the company’s marketers.
⚫ Marketers have two advantages to accomplish this
task:
⚫ Disciplined methods for collecting information
⚫ Their time spent interacting with customers and
observing competitors and other outside groups.
 Collecting Information
⚫ Companies with superior information can choose
their markets better and develop better offerings and
execute better marketing plans.
⚫ Every company must organize and distribute a
continuous flow of information to its marketing
managers.
 Components of Modern Marketing
Information System
⚫ A marketing information system (MIS) is made of
people, equipment, and procedures to gather, sort,
analyze, and distribute needed, timely and accurate
information to marketing decision makers.
⚫ 10 useful questions for determining the information
needs of marketing managers.
⚫ What decisions do you regularly make?
⚫ What information do you need to make these decisions?
⚫ What information do you regularly get?
⚫ What special studies do you periodically request?
Components of Modern Marketing
Information System
Information Needs Probes

⚫ What information would you want that you are not

getting now?
⚫ What information would you want daily? Weekly?
Monthly? Yearly?
⚫ What magazines and trade reports would you like to see
on a regular basis?
⚫ What topics would you like to be kept informed of?
⚫ What data analysis programs would you want?
⚫ What are the four most helpful improvements that
could be made in the present marketing information
system?
Components of a modern MIS
(Marketing Information System)

⚫ Marketing Information System

is developed from:
1. Company’s internal records
2. Marketing Intelligence Activities
3. Marketing Research

⚫ MIS should be a cross between:

What managers think they need
What managers really need
What is economically feasible

7
1. Internal Records
⚫ Companies use reports of orders, sales, prices, costs,
inventory levels, receivables and payable to look for
opportunities and potential problems.
⚫ Order-to-Payment Cycle
1. Sales Representatives and customers send orders to the
company
2. The sales department prepares invoices, transmit copies
to various departments
3. Shipped items generate shipping and billing documents
that go to various departments
⚫ Customers want companies to perform these steps
quickly and accurately.
1. Internal Records
⚫ Sales Information Systems- Marketing managers
need timely and accurate reports on current sales.
⚫ Databases- Companies organize information into
customer, product, and salesperson databases and
place them in data warehouses.
⚫ Data mining- Analysts can mine the data to get
information on neglected customer segments, and
customer trends.
2. Marketing Intelligence
⚫ A marketing intelligence system is a set of
procedures and sources that managers use to obtain
everyday information about developments in the
marketing environment.
⚫ The marketing intelligence system is happening data
while the internal records is results data.
⚫ Marketing managers get their intelligence by
⚫ Reading books, newspapers, talking to customers,
suppliers, and distributors; monitoring social media,
and meeting with other company managers.
How can companies improve the quality and quantity of
their marketing intelligence?

1. Train and motivate the sales force to spot and report

new developments.
2. Motivate distributors, retailers, and other
intermediaries to share intelligence.
3. Hire specialists to gather marketing intelligence
(mystery shoppers).
4. Purchase competitors’ products, published reports,
and ads, consult with suppliers and attend trade
shows.
How can companies improve the quality and quantity of
their marketing intelligence?

5. Set up a customer advisory panel made up of either

the largest, most outspoken, most sophisticated, or most
representative customers.
6. Take advantage of government-related data resources.
7. Purchase information from outside research firms and
vendors.
It is important to act quickly on the information
gathered through marketing intelligence.
Collecting marketing intelligence on the internet

⚫ Independent customer goods and service review forum

⚫ Distributor or sales agent feedback sites
⚫ Combo sites offering customer reviews and expert
opinions
⚫ Customer complain sites
⚫ Public blogs

Communicating and acting on marketing intelligence

Analyzing the Macro Environment
Needs and Trends
⚫ Successful companies recognize and respond profitably to
unmet needs and trends.
⚫ A fad is a product, service, or idea that is extremely popular for a
very brief period of time and then becomes unpopular just as
quickly.
⚫ A trend is a pattern or direction in the way something is
changing; a movement toward a style or idea. Example: A trend
towards healthier eating; (a new style of haircut).
⚫ Trends have a more lasting effect on the marketplace than fads
(music scene in Pakistan).
⚫ A megatrend is a major movement in pattern or emerging
trend in the macro-environment. It is an emerging force that
will have an impact on the kinds of products consumers will
prioritize when buying in the future. Example: People living
longer, Globalization, and alternative energy; (access to
TV/news all over Bangladesh).
Major Forces in the Environment
1. Demographic Environment
2. Economic Environment
3. Social-cultural Environment
4. Natural Environment
5. Technological Environment
6. Political-legal Environment
1. The Demographic Environment
⚫ Demography: the study of human populations-- size, density,
location, age, gender, race, occupation, and other statistics.
⚫ Population growth- A growing population does not mean a
growing market unless there is enough purchasing power.
⚫ Population age mix-
⚫ Preschool children, school-age children, teens, young adult age
20-40, middle age adults 40-65, and older adults 65 and over.
⚫ Some countries have a young population and some countries
have an old population.
⚫ Educational Groups
⚫ Illiterates, high school dropouts, high school diplomas, college
degrees, and professional degrees.
2. The Economic Environment

⚫ The available purchasing power in an economy is

dependents on:
⚫ Current incomes
⚫ Prices
⚫ Savings
⚫ Debt
⚫ Credit Availability
⚫ Outsourcing & Free trade
3. The Socio-cultural Environment-
- Society’s impact on individuals and groups
Some interesting ‘views’
⚫ How people view themselves
⚫ How people view others
⚫ How people view companies, organizations
⚫ How people view their society and values
⚫ How people view nature
⚫ How people view life, universe, religion

⚫ Core Beliefs and values- are passed from parents to children and
reinforced by social institutions-schools, religious institutions,
businesses, and governments.
⚫ Secondary beliefs and values are more open to change.
⚫ Marketers have some change of changing secondary values but little
chance of changing core values.
⚫ Subcultures are a group with shared values, beliefs, preference, and
behaviors emerging from their special life experiences or
circumstances.
4. The Natural Environment
⚫ Natural
⚫ Degradation of natural environment is a serious issue
⚫ Introduction of CNG rikshaw in Delhi.
⚫ Important O&Ts
⚫ Shortage of Raw materials
⚫ Infinite
⚫ finite renewable (earth minerals etc)
⚫ finite non-renewable (oil, coal, platinum, zinc, silver etc.)

⚫ Increased energy costs

⚫ Anti-pollution pressures
⚫ Changing role of governments
The Technological Environment
❖ Changing the way we live and that too rapidly!
❖ Innovation and new concepts
❖ Cutting-edge research

⚫ Marketers should monitor the following

technology trends:
⚫ Accelerating pace of change- more ideas than ever
are in the works and the time between idea and
implementation is shrinking. (shorter product life
cycles)
⚫ Unlimited opportunities for innovation-
(biotechnology, telecommunications, robotics)
The Technological Environment
⚫ Varying R & D Budgets- Companies are focusing on
the development as opposed to the research side.
⚫ Increased regulation of technological
change-Regulations to ban potentially unsafe
products.
The Political-Legal Environment

⚫ Increase in Business Legislation to

1. Protect companies from unfair competition.
2. Protect consumers for unfair business practices.
3. Protect society from unethical business behavior.
4. Charge businesses with the social costs of their
products or production processes.
⚫ The consumerist movement-organized citizens
and government to strengthen the rights and powers
of buyers in relationship to sellers.
Forecasting and Demand Measurement
⚫ Companies must measure and forecast the size, growth,
and profit potential of each new opportunities.

⚫ Forecasting is the art of anticipating what buyers are

likely to do under a given set of conditions.
Forecasting and Demand Measurement
The Measures of Market Demand

⚫ Different ways of looking at “market”

⚫ Potential Market
Set of consumers who profess a sufficient level of interest
in a market offer (able to buy?)
⚫ Available Market
Set of consumers who have interest, income and access
to a particular offer.
⚫ Target Market
Part of Qualified Available market, the company decides to
pursue (most attractive segment)
⚫ Penetrated Market
Set of consumers who are buying the company’s products
24
 Vocabulary for Demand Measurement

⚫ Market demand
⚫ Market forecast
⚫ Market potential
⚫ Company demand
⚫ Company sales forecast
⚫ Company sales potential
Ninety Types of Demand Measurement
 Demand Measurement
Market Demand

Company Demand
Forecasting and Demand Measurement
Market demand function

Figure 5-4: Market Demand Functions

 Estimating Current Demand
Area market potential
Total market potential
Average
Potential Average
X purchase X
Buyers price
quantity

Chain-ratio method
Average percentage of income spent on:

Demand Expected % of
Alcoholic
for new X Population X Food X Beverages X X spending on
beverages
light beer Light beer
 Estimating Future Demand

Sales Force Opinions

Buyer’s Intentions Forecasting

Past Sales Analysis

Expert Opinions
Forecasting and Demand Measurement

The market-buildup method calls for identifying all the potential buyers in
each market and estimating their potential purchases

North American Industry Classification System (NAICS)

Forecasting and Demand Measurement

Multiple-Factor Index Method: Suppose Virginia has 2.00 percent of U.S. disposable
personal income, 1.96 percent of U.S. retail sales, and 2.28 percent of U.S. population, and
the respective weights for these factors are 0.5, 0.3, and 0.2. The buying-power index for
Virginia is then 2.04 [0.5(2.00) + 0.3(1.96) + 0.2(2.28)]
Estimating future demand
⚫ Composite of Sales Force Opinions
⚫ Expert Opinion
⚫ Group discussion method
⚫ Pooling of individual estimates

⚫ Past-Sales Analysis
⚫ Time-series analysis
⚫ Exponential smoothing
⚫ Statistical demand analysis
⚫ Econometric analysis
⚫ Market-Test Method