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Organizational Environment

Includes all elements existing outside

the boundary of the organization that
have the potential to affect the

Two Layers of the

External Environment

Task environment
General environment


General Environment

Labor Market











Task Environment


Information related to:
macro trends
micro effects
particular to their business
environment is constantly presenting new
opportunities and threats.
Marketers should continue monitoring and
adapting to that environment.


falls to the company's marketers.

trend trackers and opportunity seekers.


Evidence (s)
Marketers also have extensive information
about how consumption patterns vary across
the Swiss consume the most chocolate,
the Greeks eat the most cheese,
the Irish drink the most tea, and
the Austrians smoke the most cigarettes


Why Information?

Companies with superior information enjoy a

competitive advantage.
The company can :
1) choose its markets better,
2) develop better offerings, and
3) execute better marketing planning


Paths and Channels

Every firm must organize and distribute a
continuous flow of information to its marketing
Companies study their managers' information
needs and design marketing information
systems (MIS) to meet these needs.


consists of:
equipment, and
procedures to gather,
evaluate, and
distribute needed, timely, and accurate information to
marketing decision makers.


MIS has three components

internal records system, which includes
information on the order-to-payment cycle and sales
reporting systems;
2. marketing intelligence system, a set of procedures
and sources used by managers to obtain everyday
information about pertinent developments in the
marketing environment
3. marketing research system that allows for the
systematic design, collection, analysis, and reporting
of data and findings relevant to a specific marketing

MIS Probes for Information

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?
What information would you want that you are not getting
What are the four most helpful improvements that could
be made in the present marketing information system?


Internal Records
Marketing managers rely on internal reports on:
1. orders,
2. sales,
3. prices,
4. costs,
5. inventory levels,
6. receivables,
7. Payables
8. By analyzing this information, they can spot
important opportunities and problems.

Internal Records

Order-to-Payment Cycle
Sales Information System
Databases, Warehousing, Data mining
Marketing Intelligence System


Order-to-Payment Cycle
1.Customers and sales representatives fax or
e-mail their orders.
2.Computerized warehouses quickly fill these
3.The billing department sends out invoices as
quickly as possible.
using the Internet and extranets to improve
the speed, accuracy, and efficiency of the
order-to-payment cycle.

Internal Records

Sales Information System

Marketing managers need timely and accurate reports on current sales.

knows the sales of each product by store and total each evening.
enables it to transmit nightly orders to suppliers for new shipments of
replacement stock.
Wal-Mart shares its sales data with its larger suppliers such as P&G and
expects P&G to re-supply Wal-Mart stores in a timely manner.
Wal-Mart has entrusted P&G with the management of its inventory.


Internal Records

Databases, Data Warehousing, and

Data Mining
companies organize their information in
1.customer databases,
2.product databases,
3.salesperson databases
Organizations combine data from the
different databases.

customer database
customer database will contain every customer's:
2. address,
3. past transactions,
4. demographics and
5. psychographics (activities, interests, and
opinions) in some instances.


Pizza Hut claims to have:
the largest fast-food customer data warehouse in the world,
with 40 million U.S. householdsor between 40 and 50
percent of the U.S. market.
The millions of customer records are gleaned from point-ofsale transactions at its restaurants.
Pizza Hut can slice and dice data by:
favorite toppings, date of last order, or by whether you
order a salad with your pepperoni pizza. Using its data
Warehouse Miner, Pizza Hut has not only been able to
purge expensive duplicates from its direct-mail
campaigns, but can also target its marketing to find
the best coupon offers for each household and
predict the success of campaigns

The Marketing Intelligence

is a set of procedures and sources managers
use to obtain everyday information about
developments in the marketing environment.


Sources of Information
Marketing managers collect marketing
intelligence by:
reading books,
2. newspapers, and trade publications;
talking to customers, suppliers, and
distributors; and
4. meeting with other company managers.

Steps to Improve Marketing Intelligence

Train and motivate sales force

Motivate channel members to share intelligence
Network externally
Utilize customer advisory panel
Utilize government data resources
Purchase information
Collect customer feedback online


Analyzing the Macroenvironment

unmet needs and trends (affordable housing)

Within the rapidly changing global picture, the

firm must monitor six major forces:
demographic, economic, social-cultural,
natural, technological, and political-legal.

Needs and Trends



"unpredictable, short-lived, and without social,

economic, and political significance

is a direction or sequence of events

large social, economic, political and technological

changes [that] are slow to form, and once in place,
they influence us for some time between
seven and ten years, or longer.


10 Megatrends Shaping the

Consumer Landscape

Aging boomers
Delayed retirement
Changing nature of
Greater educational
Labor shortages

Increased immigration
Rising Hispanic
Shifting birth trends
Widening geographic
Changing age

Environmental Forces
opportunities and threats



Population and Demographics

Growth rate
Age distribution
Ethnic mix



Economic Environment
$ Purchasing Power

$ Income Distribution
$ Savings Rate
$ Debt
$ Credit Availability


Types of Industrial Structures

Industrial economies
Industrializing economies
Raw-material exporting economies
Subsistence economies


Social-Cultural Environment
Views of themselves
Views of others
Views of organizations
Views of society
Views of nature
Views of the universe


Natural Environment
Shortage of raw materials
Increased energy costs
Anti-pollution pressures
Governmental protections


Technological Environment
Pace of change
Opportunities for innovation
Varying R&D budgets
Increased regulation of change


Melting Pot VS Salad Bowl

According to the 2000 census:
the U.S. population of 276.2 million was 72% white.
African Americans constituted 13%, and Latinos 11%.
The Latino population had been growing fast, with the largest
subgroups of Mexican (5.4 percent), Puerto Rican (1.1
percent), and Cuban (0.4 percent) descent.
Asian Americans constituted 3.8 percent of the U.S. population,
with the Chinese as the largest group, followed by the
Filipinos, Japanese, Asian Indians, and Koreans, in that order.
Latino and Asian American consumers are concentrated in the
far western and southern parts of the country, although some
dispersal is taking place.
Moreover, there were nearly 25 million people living in the United
Statesmore than 9 percent of the populationwho were
born in another country.

the increase in the percentage of Hispanics
in the total population, represents a major
shift in the nation's center of gravity.
Hispanics made up half of all new workers
in the past decade and will bump up to 25
percent of workers in two generations.

In addition to monitoring a changing marketing

environment, marketers also need to develop specific
knowledge about their particular markets.
Good marketers want information to help them
interpret past performance as well as plan future
Marketers need timely, accurate, and actionable
information on consumers, competition, and their
They need to make the best possible tactical
decisions in the short run and strategic decisions in the
long run.
Discovering a consumer insight and understanding its
marketing implications can often lead to a successful
product launch or spur the growth of a brand.

T-Louis-based Build-A-Bear Workshop has cleverly capitalized on the "kiddiecraft" trend in children's toys as well as the trend for interactive
entertainment retailing. Instead of making pottery or
play jewelry,
the chain, with more than 160 stores in the United States, the United Kingdom,
Japan, Denmark, and Korea, allows kids (and adults too) to design their own
teddy bears and other stuffed animals, compete with clothing, shoes, and
The chain boasts an average of over $500 per square foot in annual revenue,
double the U.S. mall average, ten percent of sales in 2003 came from
hosting nearly 100,000 parties at a cost to customers of approximately $250
for two hours, which includes a stuffed animal for each child.
Build-A-Bear has created a database on 9 million kids and their households by
inviting customers to register their bears:


By including a barcode inside the bear, the
company can reunite the owner with the
bear if it gets lost.
The database allows Build-A-Bear to contact
customers by surface and e-mail with gift
certificates, promotions, and party

Marketing Research Definition

Marketers request
market survey

product-preference test

sales forecast by region

advertising evaluation

marketing research is systematic design,

collection, analysis, and reporting of data
and findings relevant to a specific marketing
situation facing the company.
Marketing research is now about a $16.5 billion industry

Who Is Responsible for Marketing

Most large companies have their own marketing
research departments.
At much smaller companies, marketing research is
often carried out by everyone in the company

Business Organizations normally budget marketing

research at 1 to 2 percent of company sales

Marketing research & firms

Marketing research firms fall into three categories:


Syndicated-service research firms

Gather & sell

Custom marketing research firms

hired to carry out

Specialty-line marketing research firms

(specialized in services) sells field

interviewing services to other firms.

The Marketing Research Process

six steps as
shown in
this Figure

Case Study: American Airlines (AA)

American Airlines (AA) is constantly looking for new ways to serve its passengers; it was one of the
first companies to install phone handsets.
Now it is reviewing many new ideas, especially to cater to its first-class passengers on very long
flights, many of whom are businesspeople whose high-priced tickets pay most of the freight.
Among these ideas are:
(1) to supply an Internet connection with limited access to Web pages and e-mail messaging;
(2) (2) to offer 24 channels of satellite cable TV; and
(3) (3) to offer a 50-CD audio system that lets each passenger create a customized play list of
music and movies to enjoy during the flight.
The marketing research manager was assigned to investigate how first-class passengers would
rate these services and how much extra they would be willing to pay if a charge was made. He
was asked to focus specifically on the Internet connection. One estimate says that airlines might
realize revenues of $70 billion over the next decade from in-flight Internet access, if enough
first-class passengers would be willing to pay $25 for it. AA could thus recover its costs in a
reasonable time. Making the connection available would cost the airline $90,000 per plane.6
FIG. 4.1 I The Marketing Research Process

Case Study: American Airlines (AA)

The marketing research manager was assigned to investigate
1) how first-class passengers would rate these services and
2) how much extra they would be willing to pay if a charge
was made.
He was asked to focus specifically on the Internet connection.
One estimate says that airlines might realize revenues of $70
billion over the next decade.
if enough first-class passengers would be willing to pay $25
for it.
AA could thus recover its costs in a reasonable time.
Making the connection available would cost the airline
$90,000 per plane.

Defining the Problem

Will offering an in-flight Internet service
create enough incremental preference and
profit for American Airlines to justify its
cost against other possible investments
American might make?"

Research Objectives
Research objectives:

What types of first-class passengers would respond

most to using an in-flight Internet service?
How many first-class passengers are likely to use the
Internet service at different price levels?
How many extra first-class passengers might choose
American because of this new service?
How much long-term goodwill will this service add to
American Airlines' image?
How important is Internet service to first-class
passengers relative to providing other services such as a
power plug, or enhanced entertainment?

Research Types
Exploratoryresearch: its goal is to shed light
on the real nature of the problem and to suggest
possible solutions or new ideas.
Descriptiveresearch: is it seeks to ascertain
certain magnitudes, such as how many firstclass passengers would purchase in-flight
Internet service at $25.
Causalresearch: Its purpose is to test a causeand-effect relationship.

Developing Research Plan

Designing a research plan calls for
decisions on the data sources, research
approaches, research instruments,
sampling plan, and contact methods

Data sources
Data sources: Primary data can be
collected in five main ways:
Focus groups,
behavioral data, Customers leave traces of
their purchasing behavior in store scanning
data, catalog purchases, and customer

Behavioral Data
Customers leave traces of their purchasing
behavior in store scanning data, catalog
purchases, and customer databases.

Survey Research
Companies undertake surveys to learn
about people's knowledge, beliefs,
preferences, and satisfaction, and to
measure these magnitudes in the general

Focus Group
is a gathering of six to ten people who are
carefully selected based on certain
demographic, psychographic, or other
considerations and brought together to
discuss at length various topics of interest.

Experimental Research
The most scientifically valid. The purpose of experimental
research is to capture cause-and-effect relationships by
eliminating competing explanations of the observed

Experiments call for selecting matched groups of

subjects, subjecting them to different treatments,
controlling extraneous variables, and checking whether
observed response differences are statistically

three main research instruments in
collecting primary data:
1) questionnaires,
2) qualitative measures, and
3) mechanical devices.

Qualitative research
QR techniques are relatively unstructured
measurement approaches that permit a
range of possible responses, and they are
a creative means of ascertaining
consumer perceptions that may otherwise
be difficult to uncover.

seven techniques

Shadowing observing people using products, shopping, going to

hospitals, taking the train, using their cell phones.
Behavior mappingphotographing people within a space, such as a
hospital waiting room, over two or three days.
Consumer journeykeeping track of all the interactions a consumer
has with a product, service, or space.
Camera journalsasking consumers to keep visual diaries of their
activities and impressions relating to a product.
Extreme user interviewstalking to people who really knowor
know nothingabout a product or service and evaluating their
experience using it.
Storeytellingprompting people to tell personal stories about their
consumer experiences.
Unfocus groupsinterviewing a diverse group of people: To explore

Mechanical Devices

Mechanical devices are occasionally used in

marketing research.
After each exposure, the respondent describes
everything he or she recalls.
Eye cameras study respondents' eye
movements to see where their eyes land first,
how long they linger on a given item, and so on.
Audiometers can be attached to television sets
in participating homes to record when the set is
on and to which channel it is tuned.

SAMPLING PLAN After deciding on the research
approach and instruments, the marketing
researcher must design a sampling plan.
1. Sampling unit: Who is to be surveyed?
2. Sample size: How many people should be
3. Sampling procedure: How should the
respondents be chosen?7o

A. Probability Sample

Simple random sample: Every member of the

population has an equal chance of selection.

Stratified random sample:

Cluster (area) sample: The population is divided into

The population is divided

into mutually exclusive groups (such as age groups), and random
samples are drawn from each group.
mutually exclusive groups (such as city blocks), and the researcher
draws a sample of the groups to interview.

B. Non-probability Sample

Convenience sample: The researcher selects the

most accessible population members.

Judgment sample: The researcher selects

population members who are good prospects for
accurate information.

Quota sample: The researcher finds and interviews

a prescribed number of people in each of several

Once the sampling plan has been determined, the marketing
researcher must decide how the subject should be contacted:
2) telephone,
3)personal, or
online interview.

Step 3: Collect the Information


Getting the right respondents is critical.

In the case of surveys, four major problems arise.
Some respondents will not be at home and must
be contacted again or replaced.
Other respondents will refuse to cooperate.
Others will give biased or dishonest answers.
some interviewers will be biased or dishonest.

Step 4: Analyze the Information

The next-to-last step in the process is to extract
findings from the collected data.
The researcher tabulates the data and develops
frequency distributions.
Averages and measures of dispersion are
computed for the major variables.
The researcher will also apply some advanced
statistical techniques and decision models in the
hope of discovering additional findings.

Step 5: Present the Findings

As the last step, the researcher presents the
findings. The researcher should present
findings that are relevant to the major
marketing decisions facing management.

The main survey findings for the

American Airlines case show that:
The chief reasons for using in-flight Internet
service are to pass the time surfing, and
to send and receive messages from
colleagues and family. The charge
would be put on passengers' charge
accounts and paid by their

The main survey findings for the

American Airlines case show that:
About 5 first-class passengers out of every 10 would use the Internet
service during a flight at $25;
about 6 would use it at $15. Thus, a charge of $15 would produce less
revenue ($90 = 6 x $15) than $25 ($125 = 5 X $25).

By charging $25, AA would collect $125 per flight.

Assuming that the same flight takes place 365 days a year, AA
would annually collect $45,625.

Since the investment is $90,000, it will take approximately two

years before American Airlines breaks even.

Step 6: Make the Decision

The last step is decision-making process
Evaluating the decision made
The decision process itself
Two questions should be asked:
1) Was the decision made (analyst do not
make decisions)
2) Was a decision right

The Seven Characteristics of Good

Marketing Research
Scientific method

careful observation, formulation of hypotheses,

Research creativity

innovative ways to solve a problem

Multiple methods

two or three methods to increase confidence

Interdependence of
models and data

recognize that data are interpreted from underlying

Value and cost of


Costs are typically easy to determine, but the value of

research is harder to quantify

Healthy skepticism

alert to the problems caused by "marketing myths

Ethical marketing

The misuse of marketing research can harm or annoy

prediction, and testing

models that guide the type of information sought