MBA 206 Marketing Management

I. INTRODUCTION

Collecting Information and Forecasting Demand

Making marketing decisions in a fast-changing world is both an art and a science. To provide context,
insight, and inspiration for marketing decision making, companies must possess comprehensive, up-to-
date information about macro trends, as well as about micro effects particular to their business. Holistic
marketers recognize that the marketing environment is constantly presenting new opportunities and
threats, and they understand the importance of continuously monitoring, forecasting, and adapting to
that environment

Firms are adjusting the way they do business for more reasons than just the economy. Virtually every
industry has been touched by dramatic shifts in the demographic, economic, natural, social-cultural,
technological, and political-legal environments. In this chapter, we consider how firms can develop
processes to identify and track important macroenvironment trends. We also outline how marketers can
develop good sales forecasts. Chapter 4 will review how they conduct more customized research on
specific marketing problems.

II. DEFINITION OF TERMS

● data mining the extracting of useful information about individuals, trends, and segments from
the mass of data
● data warehouse a collection of current data captured, organized, and stored in a company’s
contact center.
● database marketing the process of building, maintaining, and using customer databases and
other databases for the purpose of contacting, transacting, and building customer relationships.
● market various groups of customers.
● marketer someone who seeks a response (attention, a purchase, a vote, a donation) from another
party, called the prospect.
● marketing the activity, set of institutions, and processes for creating, communicating,
delivering, and exchanging offerings that have value for customers, clients, partners, and society
at large.
● marketing intelligence system a set of procedures and sources managers use to obtain everyday
information about developments in the marketing environment.
● marketing plan written document that summarizes what the marketer has learned about the
marketplace, indicates how the firm plans to reach its marketing objectives, and helps direct and
coordinate the marketing effort.
● psychographics the science of using psychology and demographics to better understand
consumers.
● strategy a company’s game plan for achieving its goals

III. REPORT CONTENT

Components of a Modern Marketing Information System

The major responsibility for identifying significant marketplace changes falls to the company’s
marketers. Marketers have two advantages for the task: disciplined methods for collecting information,
and time spent interacting with customers and observing competitors and other outside groups. Some
firms have marketing information systems that provide rich detail about buyer wants, preferences, and
behavior.
Companies with superior information can choose their markets better, develop better offerings, and
execute better marketing planning. The Michigan Economic Development Corporation (MEDC) studied
the demographic information of its visitors and those of competing Midwestern cities to create a new
marketing message and tourism campaign. The information helped MEDC attract 3.8 million new trips
to Michigan, $805 million in new visitor spending, and $56 million in incremental state tax revenue over
the period 2004–2008.
Every firm must organize and distribute a continuous flow of information to its marketing managers. A
marketing information system (MkIS) consists of people, equipment, and procedures to gather, sort,
analyze, evaluate, and distribute needed, timely, and accurate information to marketing decision makers.
It relies on internal company records, marketing intelligence activities, and marketing research. We’ll
discuss the first two components here, and the third one in the next chapter. The company’s marketing
information system should be a mixture of what managers think they need, what they really need, and
what is economically feasible. An internal MIS committee can interview a cross-section of marketing
managers to discover their information needs. Table 3.2 displays some useful questions to ask them
TABLE 3.2 Information Needs Probes
1. What decisions do you regularly make?
2. What information do you need to make these decisions?
3. What information do you regularly get?
4. What special studies do you periodically request?
5. What information would you want that you are not getting now?
6. What information would you want daily? Weekly? Monthly? Yearly?
7. What online or offline newsletters, briefings, blogs, reports, or magazines would you like to
see on a regular basis?
8. What topics would you like to be kept informed of?
9. What data analysis and reporting programs would you want?
10. What are the four most helpful improvements that could be made in the present marketing
information system?

Internal Records
To spot important opportunities and potential problems, marketing managers rely on internal reports of
orders, sales, prices, costs, inventory levels, receivables, and payables.
The Order-to-Payment Cycle
The heart of the internal records system is the order-to-payment cycle. Sales representatives,
dealers, and customers send orders to the firm. The sales department prepares invoices, transmits
copies to various departments, and back-orders out-of-stock items. Shipped items generate
shipping and billing documents that go to various departments. Because customers favor firms
that can promise timely delivery, companies need to perform these steps quickly and accurately.
 Many use the Internet and extranets to improve the speed, accuracy, and efficiency of the order-
to-payment cycle.

Sales Information Systems

Marketing managers need timely and accurate reports on current sales. Walmart operates a sales
and inventory data warehouse that captures data on every item for every customer, every store,
every day and refreshes it every hour.
Companies that make good use of “cookies,” records of Web site usage stored on personal
browsers, are smart users of targeted marketing. Many consumers are happy to cooperate A
recent survey showed that 49 percent of individuals agreed cookies are important to them when
using the Internet. Not only do they not delete cookies, but they also expect customized
marketing appeals and deals once they accept them.
Companies must carefully interpret the sales data, however, so as not to draw the wrong
conclusions. Michael Dell gave this illustration: “If you have three yellow Mustangs sitting on a
dealer’s lot and a customer wants a red one, the salesman may be really good at figuring out how
to sell the yellow Mustang. So the yellow Mustang gets sold, and a signal gets sent back to the
factory that, hey, people want yellow Mustangs.”

Databases, Data Warehousing, and Data Mining

Companies organize their information into customer, product, and salesperson databases—and
then combine their data. The customer database will contain every customer’s name, address,
past transactions, and sometimes even demographics and psychographics (activities, interests,
and opinions). Instead of sending a mass “carpet bombing” mailing of a new offer to every
customer in its database, a company will rank its customers according to factors such as purchase
recency, frequency, and monetary value (RFM) and send the offer to only the highest-scoring
customers. Besides saving on mailing expenses, such manipulation of data can often achieve a
double-digit response rate. Companies make these data easily accessible to their decision makers.
Analysts can “mine” the data and garner fresh insights into neglected customer segments, recent
customer trends, and other useful information. Managers can cross-tabulate customer information
with product and salesperson information to yield still-deeper insights. Using in-house
technology, Wells Fargo can track and analyze every bank transaction made by its 10 million
retail customers—whether at ATMs, at bank branches, or online. When it combines transaction
data with personal information provided by customers, Wells Fargo can come up with targeted
offerings to coincide with a customer’s lifechanging event. As a result, compared with the
industry average of 2.2 products per customer, Wells Fargo sells 4 products. Best Buy is also
taking advantage of these new rich databases.

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 internal records system supplies
results data, but the marketing intelligence system supplies happenings data. Marketing managers collect
marketing intelligence in a variety of different ways, such as by reading books, newspapers, and trade
publications; talking to customers, suppliers, and distributors; monitoring social media on the Internet;
and meeting with other company managers. Before the Internet, sometimes you just had to go out in the
field, literally, and watch the competition. This is what oil and gas entrepreneur T. Boone Pickens did.
Describing how he learned about a rival’s drilling activity, Pickens recalls, “We would have someone
who would watch [the rival’s] drilling floor from a half mile away with field glasses. Our competitor
didn’t like it but there wasn’t anything they could do about it. Our spotters would watch the joints and
drill pipe. They would count them; each [drill] joint was 30 feet long. By adding up all the joints, you
would be able to tally the depth of the well.” Pickens knew that the deeper the well, the more costly it
would be for his rival to get the oil or gas up to the surface, and this information provided him with an
immediate competitive advantage.
Marketing intelligence gathering must be legal and ethical. In 2006, the private intelligence firm
Diligence paid auditor KPMG $1.7 million for having illegally infiltrated it to acquire an audit of a
Bermuda-based investment firm for a Russian conglomerate. Diligence’s cofounder posed as a British
intelligence officer and convinced a member of the audit team to share confidential documents. A
company can take eight possible actions to improve the quantity and quality of its marketing
intelligence. After describing the first seven, we devote special attention to the eighth, collecting
marketing intelligence on the Internet.

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. Grace Performance Chemicals, a division of
W. R. Grace, supplies materials and chemicals to the construction and packaging industries. Its sales
reps were instructed to observe the innovative ways customers used its products in order to suggest
possible new products. Some were using Grace waterproofing materials to soundproof their cars and
patch boots and tents. Seven new-product ideas emerged, worth millions in sales.
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.
ConAgra has initiated a study with some of its retailers such as Safeway, Kroger, and Walmart to study
how and why people buy its foods. Finding that shoppers who bought their Orville Redenbacher and Act
II brands of popcorn tended to also buy Coke, ConAgra worked with the retailers to develop in-store
displays for both products. Combining retailers’ data with its own qualitative insights, ConAgra learned
that many mothers switched to time-saving meals and snacks when school started. It launched its
“Seasons of Mom” campaign to help grocers adjust to seasonal shifts in household needs.
Hire external experts to collect intelligence. Many companies hire specialists to gather marketing
intelligence. Service providers and retailers send mystery shoppers to their stores to assess cleanliness of
facilities, product quality, and the way employees treat customers. Health care facilities’ use of mystery
patients has led to improved estimates of wait times, better explanations of medical procedures, and less-
stressful programming on the waiting room TV.
Network internally and externally. The firm can purchase competitors’ products, attend open houses
and trade shows, read competitors’ published reports, attend stockholders’ meetings, talk to employees,
collect competitors’ ads, consult with suppliers, and look up news stories about competitors.
Set up a customer advisory panel. Members of advisory panels might include the company’s largest,
most outspoken, most sophisticated, or most representative customers. For example, GlaxoSmithKline
sponsors an online community devoted to weight loss and says it is learning far more than it could have
gleamed from focus groups on topics from packaging its weight loss pill to where to place in-store
marketing.
Take advantage of government-related data resources. The U.S. Census Bureau provides an in-depth
look at the population swings, demographic groups, regional migrations, and changing family structure
of the estimated 304,059,724 people in the United States (as of July 1, 2008). Census marketer Nielsen
Claritas cross-references census figures with consumer surveys and its own grassroots research for
clients such as The Weather Channel, BMW, and Sovereign Bank. Partnering with “list houses” that
provide customer phone and address information, Nielsen Claritas can help firms select and purchase
mailing lists with specific clusters.
Purchase information from outside research firms and vendors. Well-known data suppliers include
firms such as the A.C. Nielsen Company and Information Resources Inc. They collect information about
product sales in a variety of categories and consumer exposure to various media. They also gather
consumer-panel data much more cheaply than marketers manage on their own. Biz360 and its online
content partners, for example, provide real-time coverage and analysis of news media and consumer
opinion information from over 70,000 traditional and social media sources (print, broadcast, Web sites,
blogs, and message boards,)
Collecting Marketing Intelligence on the Internet Thanks to the explosion of outlets available on the
Internet, 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 about the consumers and the competition. There are five main ways marketers can research
competitors’ product strengths and weaknesses online.
Independent customer goods and service review forums. Independent forums include Web
sites such as Epinions.com, RateItAll.com, ConsumerReview.com, and Bizrate.com. Bizrate.com
collects millions of consumer reviews of stores and products each year from two sources: its 1.3
million volunteer members, and feedback from stores that allow Bizrate.com to collect it directly
from their customers as they make purchases.
Distributor or sales agent feedback sites. Feedback sites offer positive and negative product or
service reviews, but the stores or distributors have built the sites themselves. Amazon.com offers
an interactive feedback opportunity through which buyers, readers, editors, and others can review
all products on the site, especially books. Elance.com is an online professional services provider
that allows contractors to describe their experience and level of satisfaction with subcontractors.
Combo sites offering customer reviews and expert opinions. Combination sites are
concentrated in financial services and high-tech products that require professional knowledge.
ZDNet.com, an online advisor on technology products, offers customer comments and
evaluations based on ease of use, features, and stability, along with expert reviews. The
advantage is that a product supplier can compare experts’ opinions with those of consumers.
Customer complaint sites. Customer complaint forums are designed mainly for dissatisfied
customers. PlanetFeedback.com allows customers to voice unfavorable experiences with specific
companies. Another site, Complaints.com, lets customers vent their frustrations with particular
firms or offerings.
Public blogs. Tens of millions of blogs and social networks exist online, offering personal
opinions, reviews, ratings, and recommendations on virtually any topic—and their numbers
continue to grow. Firms such as Nielsen’s BuzzMetrics and Scout Labs analyze blogs and social
networks to provide insights into consumer sentiment.
Communicating and Acting on Marketing Intelligence
 In some companies, the staff scans the Internet and major publications, abstracts relevant news, and
disseminates a news bulletin to marketing managers. The competitive intelligence function works best
when it is closely coordinated with the decision-making process.
Given the speed of the Internet, it is important to act quickly on information gleaned online. Here are
two companies that benefited from a proactive approach to online information:
• When ticket broker StubHub detected a sudden surge of negative sentiment about its brand after
confusion arose about refunds for a rain-delayed Yankees–Red Sox game, it jumped in to offer
appropriate discounts and credits. The director of customer service observed, “This [episode] is a canary
in a coal mine for us.”
• When Coke’s monitoring software spotted a Twitter post that went to 10,000 followers from an upset
consumer who couldn’t redeem a prize from a MyCoke rewards program, Coke quickly posted an
apology on his Twitter profile and offered to help resolve the situation. After the consumer got the prize,
he changed his Twitter avatar to a photo of himself holding a Coke bottle.

IV. 5 QUESTIONS
1. What is a Marketing Information System?
2. What are the components of a modern marketing information system?
3. What are useful internal records for such a system?
4. What makes up a marketing intelligence system?
5. Name at least one of the five ways marketers can research competitors’ product strengths and
weaknesses online.

V. REFERENCES
Marketing Management 14th Edition, Philip Kotler and Kevin Lane Keller