Chapter 3 Scanning the marketing environment, Forecasting Demand, and Conducting Marketing research

Components of a modern MIS (Marketing Information System) Everyone needs to observe the environment but marketers have two advantages: Disciplined methods for collecting information More time for interacting with customers & observe competition Marketers understand and have extensive information on consumption patterns Companies with superior information enjoy a competitive advantage MG 220 Marketing Management

Components of a modern MIS (Marketing Information System) Consists of: People, Equipment and Procedures to Gather, Sort, Analyze and Distribute needed, timely and accurate information to marketing decision-makers MG 220 Marketing Management

Components of a modern MIS (Marketing Information System) is developed from: Company’s internal records Marketing Intelligence Activities Marketing Research MIS should be a cross between: What managers think they need What managers really need What is economically feasible MG 220 Marketing Management

Internal Records & Marketing Intelligence Order-to-payment cycle Review of sales process & its complete transaction flow Doing it accurately and timely is the key Sales Information Systems Timely & accurate reports on current sales Need to correctly interpret sales data Database, Data Warehousing and Data Mining Customer databases, product databases, salespersons databases Use them to interact correctly with customers MG 220 Marketing Management

Internal Records & Marketing Intelligence Marketing Intelligence System A set of procedures and sources managers use to obtain everyday information about developments in marketing environment Several steps Train and motivate sales force to gather & report information Motivate distributors, retailers etc. to pass information Network externally (purchasing competitors’ products, attend their events etc. ) Customer advisory panels (interact with selected customers) Government data resources (census reports etc.) Purchase information from research houses etc. Online customer feedback for competitive intelligence MG 220 Marketing Management

Collecting marketing intelligence on the internet Review forums Distributors feedback Expert opinions MG 220 Marketing Management

Analyzing the Macroenvironment Successful companies recognize and respond profitably to unmet needs and trends Fad, trend & megatrend Fad is a “unpredictable”, short-lived and without social, economic, political significance. (a new style of haircut) Trend is a direction of sequence of events that has some momentum and more predictable and durable than fads. (music scene in Pakistan) Megatrends are large social, economic, political and technological changes that are slow to form and [once in place], they influence us for sometime. (access to TV/news all over Pakistan) MG 220 Marketing Management

Analyzing the Macroenvironment Identifying the major forces Demographic Economic Social-cultural Natural Technological Political-legal MG 220 Marketing Management

Analyzing the Macroenvironment Demographic Main demographic is population Population growth Differences and trends in different countries and regions and even cities Population Age mix Ethnicity Educational Household patterns Family structures, collective lifestyles Geographical shifts in population MG 220 Marketing Management

Analyzing the Macroenvironment Economic Markets require purchasing power [and people!] Few important trends Income distribution – a key development indicator Savings, Debt & credit availability Outsourcing & Free trade MG 220 Marketing Management

Analyzing the Macroenvironment Social-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 secondary beliefs Sub-cultures Shift of cultural values through time MG 220 Marketing Management

Islamic Banking: Reflecting Religious and Cultural Sensitivities • Consistent with principles of Islamic Laws (Shariah) Prohibits investing in business that are considered unlawful Growth is due to disenchantment with value-neutral capitalist and socialist financial systems Popular in Pakistan and Bangladesh, National and international banks want to start Islamic banking in India Copyright © 2009 Dorling Kindersley (India) Pvt. Ltd. 3-13

Analyzing the Macroenvironment Natural Degradation of natural environment is a serious issue Introduction of CNG riksaw 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 MG 220 Marketing Management

Analyzing the Macroenvironment Technological Changing the way we live and that too rapidly! Innovation and new concepts Cutting-edge research MG 220 Marketing Management

Analyzing the Macroenvironment Political-Legal Environment Businesses are being regulated and more controlled More stringent rules and regulations. Special interest groups (SIGs) Such as senior citizens, women rights, consumers etc. MG 220 Marketing Management

Forecasting and Demand Measurement There are many productive ways to break the market. Define potential market: the set of consumers with a sufficient level of interesting a market offer. Define available market: the set of consumers who have interest, income and access to a particular offer Target market: is the part of the qualified available market the company decides to pursue. Penetrated market : is the set of consumers who are buying the company's product. MG 220 Marketing Management

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 MG 220 Marketing Management

(NOT INCLUDED IN COURSE) Vocabulary for Demand Measurement Market demand Market forecast Market potential Company demand Company sales forecast Company sales potential Copyright © 2009 Dorling Kindersley (India) Pvt. Ltd. 4-19

The Marketing Research Process Schematic Step 1 Define the problem and research objectives Step 2 Develop the Research plan Step 3 Collect the information Step 4 Analyze the information Step 5 Present the findings Step 6 Make the decision MG 220 Marketing Management

The Marketing Research Process Step 1: Define the Problem and Research objectives Marketing Management defines the problem Not too broad What features should be in our new blackberry model Not too narrow Should the internet connectivity be through 3G if we increase plan price by 45% Balanced, well-thought and result-oriented What should be enhancements in camera, internet and messenger services compared to existing blackberry MG 220 Marketing Management

The Marketing Research Process Step 2: Develop the Research plan Most efficient plan for gathering information Decisions for: Data sources Research Approaches Research Instruments Sampling Plan Contact Methods MG 220 Marketing Management

The Marketing Research Process Step 2: Develop the Research plan (…contd.) Decisions for: Data sources Secondary data – collected for another purpose Readily available | Good starting point | Low cost Research from past models | competitor analysis Primary data – specifically for this project Focus of Main research | critical information Needs to be designed completely based on given problem MG 220 Marketing Management

The Marketing Research Process Step 2: Develop the Research plan (…contd.) Decisions for: Research Approaches Observational Research observing of customers (video/voice recorder at service desk selling Blackberry) Focus Group Research Gathering of consumers for discussing the problem. Carefully selected and observed (existing customers of blackberry services can be invited) Survey Research Learning more about consumers. Mass activity (A survey among existing blackberry users) Behavioral data Purchasing behavior data or usage data or preference data (Data from datacenters showing what is usage of different functions) Experimental Research A small activity emulating real product/service and getting feedback (Few prototypes given to selected consumers and their behavior/feedback is observed) MG 220 Marketing Management

Focus Group in Session Video icon links to Wild Planet snippet on product research methods. Copyright © 2009 Dorling Kindersley (India) Pvt. Ltd. 4-25

The Marketing Research Process Step 2: Develop the Research plan (…contd.) Decisions for: Research Instruments Questionnaires A set of questions | carefully developed and tested before circulation Closed-end questions: MCQs | Open-ended questions: descriptive (A questionnaire developed for users) Qualitative measures Qualitative analysis of consumers’ behaviors, activities and interpretation. May involve psychological tests related to product and their reactions. Possible only for very small group (observe consumers using phones) Mechanical devices Devices (galvanometers, eye cameras) to observe user’s reaction on exposed to product (view user’s experience on seeing a prototype) MG 220 Marketing Management

Questionnaire Do’s and Don’ts Ensure questions are free of bias Make questions simple Make questions specific Avoid jargon Avoid sophisticated words Avoid ambiguous words Avoid negatives Avoid hypotheticals Avoid words that could be misheard Use response bands Use mutually exclusive categories Allow for “other” in fixed response questions Copyright © 2009 Dorling Kindersley (India) Pvt. Ltd. 4-27

Question Types—Dichotomous In arranging this trip, did you contact American Airlines?  Yes  No Copyright © 2009 Dorling Kindersley (India) Pvt. Ltd. 4-28

Questionnaires (Contd…) Question Types—Multiple Choice With whom are you traveling on this trip?  No one Spouse Spouse and children Children only Business associates/friends/relatives An organized tour group Copyright © 2009 Dorling Kindersley (India) Pvt. Ltd. 4-29

Questionnaires Question Types—Likert Scale Indicate your level of agreement with the following statement: Small airlines generally give better service than large ones.  Strongly disagree Disagree Neither agree nor disagree Agree Strongly agree Copyright © 2009 Dorling Kindersley (India) Pvt. Ltd. 4-30

Questionnaires (Contd…) Question Types—Semantic Differential American Airlines Large ………………………………...…….Small Experienced………………….….Inexperienced Modern……………………….…..Old-fashioned Copyright © 2009 Dorling Kindersley (India) Pvt. Ltd. 4-31

Questionnaires (Contd…) Question Types—Importance Scale Airline food service is _____ to me.  Extremely important Very important Somewhat important Not very important Not at all important Copyright © 2009 Dorling Kindersley (India) Pvt. Ltd. 4-32

Questionnaires (Contd…) Question Types—Rating Scale American Airlines’ food service is _____.  Excellent Very good Good Fair Poor Copyright © 2009 Dorling Kindersley (India) Pvt. Ltd. 4-33

Questionnaires (Contd…) Question Types— Intention to Buy Scale How likely are you to purchase tickets on American Airlines if in-flight Internet access were available?  Definitely buy Probably buy Not sure Probably not buy Definitely not buy

Question Types—Completely Unstructured What is your opinion of American Airlines?

Question Types—Word Association What is the first word that comes to your mind when you hear the following? Airline ________________________ American _____________________ Travel ________________________

Question Types— Sentence Completion When I choose an airline, the most important consideration in my decision is: ________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________.

Question Types—Story Completion “I flew American a few days ago. I noticed that the exterior and interior of the plane had very bright colors. This aroused in me the following thoughts and feelings.” Now complete the story. __________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Question Types—Picture (Empty Balloons)

Question Types—Thematic Apperception Test Make up a story that reflects what you think is happening in this picture.

Qualitative Measures Word Association: what word come to mind when they hear the brand name Projective Techniques: give people an incomplete statement and ask them to complete it. Visualization: to collect info regarding perception of people Brand Personification: what kind of people they think when they hear the name of a certain brand. Laddering: gathering more information from customers by asking them the why question.

The Marketing Research Process Step 2: Develop the Research plan (…contd.) Decisions for: Sampling Plan Sampling Unit Who is to be surveyed Based on product, problem etc. decision about who is going to form sample (High-end users, corporate clients, access to data networks) Sample size How many people to be surveyed Again based on requirements, budget etc. General rule: Larger sample => better results (e.g. Total Blackberry user base in Pakistan: 100,000, Sample: 1,000) Sampling Procedure How respondents shall be chosen Probability sampling (simple random, stratified random, cluster sample) Non-probability sampling (Convenience, judgment, quota) (convenience and judgment sampling for blackberry users) MG 220 Marketing Management

The Marketing Research Process Step 2: Develop the Research plan (…contd.) Decisions for: Contact Methods Mail Questionnaire Access to people who cannot or do not want to be interviewed Simple questionnaire is to be used Very low response rate (send a questionnaire to existing user with monthly invoice) Telephonic interview Quick and convenient. Questions might be clarified easily Response rate is good | but cannot be too long or personalized (e.g. make a call to 500 of Blackberry users and take 1-2minutes interview) Personal interview Most versatile and elaborate method Most expensive and requires lot of administrative work Arranged (meeting) | Intercept (in malls etc) (Interviewing at service centers when use r is there for some other purpose) Online interview Efficient and highly used inexpensive | faster | More ‘honesty’ | Versatile using technology Small and skewed sample | technological problems (Use online advertising or even website to request a survey) MG 220 Marketing Management

The Marketing Research Process Step 3: Collect the information This is the execution of Step 2 Most expensive and most prone to error Errors can be: Respondents not available. Need to re-engage (typical for high-end clients) Respondents refuse to cooperate Give dishonest or biased answers (biased because of very recent experience) Interviewers can be biased or dishonest (just filling false information) Still: Getting the right respondents is critical MG 220 Marketing Management

The Marketing Research Process Step 4: Analyze the information Data tabulation Frequency distributions Statistical analysis Discover! MG 220 Marketing Management

The Marketing Research Process Step 5: Present the Findings Researchers’ findings Related to management’s defined problem Irrelevant information not required (Give a finding of what features are wanted by what kind of customers-users, new users, age-wise etc.) MG 220 Marketing Management

The Marketing Research Process Step 6: Make the Decision Management’s task Based on what researcher has provided (Marketing and Product Development team takes the final decision based on available results and information) MG 220 Marketing Management

The Marketing Research Process Overcoming barriers to use of Marketing Research Narrow conception of research Uneven (or even low) caliber of researchers Poor farming of the problem Late and occasionally erroneous findings Personality and presentational differences MG 220 Marketing Management