Marketing management ch. 3 notes
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. marketing intelligence system supplies happenings data Marketing intelligence gathering must be legal and ethical. Marketing managers collect marketing intelligence by reading books, newspapers, and trade publications; talking to customers, suppliers, distributors, and other company managers; and monitoring online social media.
measures of market demand
Companies can prepare as many as 90 different types of demand estimates for six different product levels, five space levels, and three time periods (see Figure 3.1). Each serves a specific purpose. Space level: World, USA, Region, territory, customer Product level: all sales, industry sales, company sales, product line sales, product form sales, product item sales Time level: short, medium, or long run The potential market: the set of consumers with a sufficient level of interest in a market offer. However, their interest is not enough to define a market unless they also have sufficient income and access to the product. The available market is the set of consumers who have interest, income, and access to a particular offer. -- Eligible adults constitute the qualified available market—the set of consumers who have interest, income, access, and qualifications for the market offer. The target market is the part of the qualified available market the company decides to pursue. The penetrated market is the set of consumers who are buying the company's product. if the company isn't satisfied with its current sales, it can try to attract a larger percentage of buyers from its target market. It can lower the qualifications for potential buyers. It can expand its available market by opening distribution elsewhere or lowering its price, or it can reposition itself in the minds of its customers.
Core cultural values
Core beliefs and values are passed from parents to children and reinforced by social institutions—schools, churches, businesses, and governments. Secondary beliefs and values are more open to change. Believing in the institution of marriage is a core belief; believing people should marry early is a secondary belief. Marketers have some chance of changing secondary values but little chance of changing core values. Although core values are fairly persistent, cultural swings do take place. In the 1960s, hippies, the Beatles, Elvis Presley, and other cultural phenomena had a major impact on hairstyles, clothing, sexual norms, and life goals. Today's young people are influenced by new heroes and activities: music entertainer and mogul Jay-Z, singer Lady Gaga, and snowboarder and skateboarder Shaun White. Each society contains subcultures, groups with shared values, beliefs, preferences, and behaviors emerging from their special life experiences or circumstances.
The natural environment
Corporate environmentalism recognizes the need to integrate environmental issues into the firm's strategic plans. Trends for marketers to be aware of include the shortage of raw materials, especially water; the increased cost of energy; increased pollution levels; and the changing role of governments. Consumers have put their very real environmental concerns into words and actions, focusing on green products, corporate sustainability, and other environmental issues. Here are highlights of some notable studies. WPP GREEN BRANDS STUDY. The WPP Green Brands Study surveys 9,000 people in eight countries and evaluates 370 brands - Sixty percent of consumers stated they wanted to buy products from environmentally responsible companies. In developed countries such as the United States and United Kingdom, 20 percent were willing to spend more than 10 percent extra on a green product. -Consumers in developing countries put even more value on green products: Ninety-five percent of Chinese consumers, for example, said they were willing to pay more for a green product. GREENDEX. A collaboration between National Geographic and environmental research consultants GlobeScan, Greendex is a sustainable consumption index of actual consumer behavior and material lifestyles across 17 countries. - The 2012 survey found the top-scoring consumers in developing countries: India, China, and Brazil in descending order. Developed countries scored lower, with U.S. consumers lowest, followed by Canadians, Japanese, and the French. GALLUP. Gallup has consistently found U.S. consumers are most concerned about pollution of drinking water, rivers, lakes, and reservoirs and maintenance of fresh water for household needs and least concerned about global warming. GFK ROPER. The 2012 GfK Roper Green Gauge Study showed key aspects of "green" culture—from organic purchase to recyclability—have gone mainstream. U.S. consumers increasingly turn to digital devices to learn about the environment and share their green experiences.
Needs and Trends
Fads: "unpredictable, short-lived, and without social, economic, and political significance. Trend: A direction or sequence of events with momentum and durability, a trend is more predictable and durable than a fad; trends reveal the shape of the future and can provide strategic direction. -- A trend toward health and nutrition awareness has brought increased government regulation and negative publicity for firms seen as peddling unhealthy food. MegaTrend: "large social, economic, political, and technological change [that] is slow to form, and once in place, influences us for some time—between seven and ten years, or longer." Several firms offer social-cultural forecasts. The Yankelovich Monitor has tracked 35 social value and lifestyle trends since 1971, such as "anti-bigness," "mysticism," and "living for today." A new market opportunity doesn't guarantee success, of course. Even if the new product is technically feasible, market research is necessary to determine profit potential.
Sociocultural environment
From our sociocultural environment we absorb, almost unconsciously, a world view that defines our relationships to ourselves, others, organizations, society, nature, and the universe. VIEWS OF OURSELVES: Some "pleasure seekers" chase fun, change, and escape; others seek "self-realization." VIEWS OF OTHERS: People are concerned about the homeless, crime and victims, and other social problems. At the same time, they seek those like themselves for long-lasting relationships, suggesting a growing market for social-support products and services such as health clubs, cruises, and religious activity as well as "social surrogates" like television, video games, and social networking sites. VIEWS OF ORGANIZATIONS:After a wave of layoffs and corporate scandals, organizational loyalty has declined. VIEWS OF SOCIETY: Some people defend society (preservers), some run it (makers), some take what they can from it (takers), some want to change it (changers), some are looking for something deeper (seekers), and still others want to leave it (escapers). VIEWS OF NATURE: Business has responded to increased awareness of nature's fragility and finiteness by making more green products, seeking their own new energy sources, and reducing their environmental footprint. COMPANIES ARE also making more nature products for camping, hiking, boating, etc. VIEWS OF THE UNIVERSE :Most U.S. citizens are monotheistic, although religious conviction and practice have waned through the years
MARKET FORECAST
MARKET FORECAST Only one level of industry marketing expenditure will actually occur. The market demand corresponding to this level is called the market forecast.
Estimating Current Demand
Marketing executives want to estimate total market potential, area market potential, and total industry sales and market shares. Total market potential: maximum sales available to all firms in an industry during a given period, under a given level of industry marketing effort and environmental conditions. A common way to estimate total market potential is to multiply the potential number of buyers by the average quantity each purchases and then by the price. -- Ex: if 100 million people buy books each year and the avg book buyer buys three books a year at an avg price of $20 each, then the total market potential for books is $6 billion (100 million x 3 books x $20). Hardest to estimate the number of buyers. You can start with the total pop of in the nation 314 million people, then eliminate groups that would not buy the product (illiterate and children under 12 .. so say 20% of the pop.) this means now the pop. pool is 251 mill people.Further research might tell us that people of low income and low education rarely buy books, and they constitute more than 30 percent of the potential pool. Eliminating them, we arrive at a prospect pool of approximately 175.7 million book buyers. We use this number to calculate total market potential A variation on this method is the chain-ratio method, which multiplies a base number by several adjusting percentages. Ex: Suppose a brewery is interested in estimating the market potential for a new light beer especially designed to accompany food. It can make an estimate with the following calculation. Area Market Potential: Because companies must allocate their marketing budget optimally among their best territories, they need to estimate the market potential of different cities, states, and nations. Two major methods are the market-buildup method, used primarily by business marketers, and the multiple-factor index method, used primarily by consumer marketers. - Market buildup method: The market-buildup method calls for identifying all the potential buyers in each market and estimating their potential purchases. It produces accurate results if we have a list of all potential buyers and a good estimate of what each will buy. - Multiple factor index method: Like business marketers, consumer companies also need to estimate area market potentials, but because their customers are too numerous to list, they commonly use a straightforward index. A single factor is rarely a complete indicator of sales opportunity. Regional drug sales are also influenced by per capita income and the number of physicians per 10,000 people. Thus, it makes sense to develop a multiple-factor index and assign each factor a specific weight. 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)]. Thus, 2.04 percent of the nation's drug sales (not 2.28 percent) might be expected to take place in Virginia. Normally, the lower the BDI, the higher the market opportunity, in that there is room to grow the brand. Other marketers would argue instead that marketing funds should go into the brand's strongest markets, where it might be important to reinforce loyalty or more easily capture additional brand share. Investment decisions should be based on the potential to grow brand sales. Industry sales and market shares: Besides estimating total potential and area potential, a company needs to know the actual industry sales taking place in its market. This means identifying competitors and estimating their sales. The industry trade association will often collect and publish total industry sales, although it usually does not list individual company sales separately. With this information, however, each company can evaluate its own performance against the industry's. Another way to estimate sales is to buy reports from a marketing research firm that audits total sales and brand sales. Nielsen Media Research audits retail sales in various supermarket and drugstore product categories. A company can purchase this information and compare its performance to the total industry or any competitor to see whether it is gaining or losing share, overall or brand by brand.
sales information system
Marketing managers need timely and accurate reports on current sales. Companies that make good use of "cookies," records of Web site usage stored on personal browsers, are smart users of targeted marketing. Marketers must carefully interpret sales data, however, to avoid drawing wrong conclusions.
Collecting and communicating on marketing intelligence: "Collecting Marketing Intelligence 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. Here are five places to find competitors' product strengths and weaknesses online. Independent customer goods and service review forums. --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 customers as they buy Distributor or sales agent feedback sites. --Amazon.com offers an interactive feedback opportunity through which buyers, readers, editors, and others can review all products on the site, especially books. 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 offers customer and expert evaluations of technology products based on ease of use, features, and stability. Customer complaint sites. -- Customer complaint forums are designed mainly for dissatisfied customers. PlanetFeedback.comallows customers to voice unfavorable experiences with specific companies. Public blogs. -- Tens of millions of blogs and social networks offer personal opinions, reviews, ratings, and recommendations on virtually any topic—and their numbers continue to grow.
Market Demand
Sales forecasts prepared by marketing are used by finance to raise cash for investment and operations; by manufacturing to establish capacity and output; by purchasing to acquire the right amount of supplies; and by human resources to hire the needed workers. If the forecast is off the mark, the company will face excess or inadequate inventory. Because it's based on estimates of demand, managers need to define what they mean by market demand. The marketer's first step in evaluating marketing opportunities is to estimate total market demand. Market demand for a product is the total volume that would be bought by a defined customer group in a defined geographical area in a defined time period in a defined marketing environment under a defined marketing program. Market demand is not a fixed number, but rather a function of the stated conditions. For this reason, we call it the market demand function. . An expansible market, such as the market for racquetball playing, is very much affected in size by the level of industry marketing expenditures. A nonexpansible market—for example, the market for weekly trash or garbage removal—is not much affected by the level of marketing expenditures; the distance between Q 1 and Q 2 is relatively small. Organizations selling in a nonexpansible market must accept the market's size—the level of primary demand for the product class—and direct their efforts toward winning a larger market share for their product, that is, a higher level of selective demand for their product.
Natural Environment - company perspectives
Some green products have emphasized their natural benefits for years, like Tom's of Maine, Burt's Bees, Stonyfield Farm, and Seventh Generation. Products offering environmental benefits are becoming more mainstream. The recession took its toll on some newly launched green products, however, and Green Works and similar products from Arm & Hammer, Windex, Palmolive, and Hefty found sales stalling. Some consumers have also become more skeptical of green claims that are hard to verify. Some experts recommend avoiding "green marketing myopia" by focusing on consumer value positioning, understanding what consumers know and should know, and credible product claims
Communicating and Acting on Marketing Intelligence
The competitive intelligence function works best when it is closely coordinated with the decision-making process. Companies can use these resources to respond quickly to un happy consumers. Given the speed of the Internet, it is important to act quickly on information gleaned online.
Estimating future demand
The few products or services that lend themselves to easy forecasting generally enjoy an absolute level or a fairly constant trend and competition that is either nonexistent (public utilities) or stable (pure oligopolies). Companies commonly prepare a macroeconomic forecast first, followed by an industry forecast, followed by a company sales forecast. The macroeconomic forecast projects inflation, unemployment, interest rates, consumer spending, business investment, government expenditures, net exports, and other variables. The end result is a forecast of gross domestic product (GDP), which the firm uses, along with other environmental indicators, to forecast industry sales. How do firms develop forecasts? They may create their own or buy forecasts from outside sources such as marketing research firms, which interview customers, distributors, and other knowledgeable parties. Specialized forecasting firms produce long-range forecasts of particular macroenvironmental components, such as population, natural resources, and technology. All forecasts are built on one of three information bases: what people say, what people do, or what people have done. Using what people say requires surveying buyers' intentions, composites of sales force opinions, and expert opinion. Building a forecast on what people do means putting the product into a test market to measure buyer response. To use the final basis—what people have done—firms analyze records of past buying behavior or use time-series analysis or statistical demand analysis. - SURVEY OF BUYERS' INTENTIONS Forecasting is the art of anticipating what buyers are likely to do under a given set of conditions. Surveys also inquire into consumers' present and future personal finances and expectations about the economy. For business buying, research firms can carry out buyer-intention surveys for plant, equipment, and materials, usually falling within a 10 percent margin of error. These surveys are useful in estimating demand for industrial products, consumer durables, product purchases where advanced planning is required, and new products. COMPOSITE OF SALES FORCE OPINIONS When interviewing buyers is impractical, the company may ask its sales representatives to estimate their future sales. Few companies use these estimates without making some adjustments, however. Sales representatives might be pessimistic or optimistic, they might not know how their company's marketing plans will influence future sales in their territory, and they might deliberately underestimate demand so the company will set a low sales quota. EXPERT OPINION Companies can also obtain forecasts from experts, including dealers, distributors, suppliers, marketing consultants, and trade associations. PAST-SALES ANALYSIS Firms can develop sales forecasts on the basis of past sales. Time-series analysis breaks past time series into four components (trend, cycle, seasonal, and erratic) and projects them into the future. MARKET-TEST METHOD When buyers don't plan their purchases carefully or experts are unavailable or unreliable, a direct-market test can help forecast new-product sales or established product sales in a new distribution channel or territory.
Demographic change
The main demographic factor marketers monitor is population, including the size and growth rate of population in cities, regions, and nations; age distribution and ethnic mix; educational levels; and household patterns. (pop. size, age, ethnic mix, educational levels, household patterns, gender, income). For example, explosive population growth (demographic) leads to more resource depletion and pollution (natural), which leads consumers to call for more laws (political-legal), which stimulate new technological solutions and products (technological) that, if they are affordable (economic), may actually change attitudes and behavior (social-cultural). Population growth is highest in countries and communities that can least afford it. A growing population does not mean growing markets unless there is sufficient purchasing power. Education can raise the standard of living but is difficult to accomplish in most developing countries. Age: There is a global trend toward an aging population. Marketers generally divide the population into six age groups: preschool children, school-age children, teens, young adults age 20 to 40, middle-aged adults 40 to 65, and older adults 65 and older. Ethnic: Ethnic and racial diversity varies across countries. At one extreme is Japan, where almost everyone is native Japanese; at the other extreme is the United States, 12 percent of whose people were born in another country.-------------Companies are refining their products and marketing to reach this fastest-growing and most influential consumer group (Hispanics). Yet marketers must not overgeneralize—within each group are consumers quite different from each other.30 Diversity also goes beyond ethnic and racial markets. More than 51 million U.S. consumers have disabilities, and they constitute a market for home delivery companies such as Internet grocer Peapod. Educational Groups: The population in any society falls into five educational groups: illiterates, high school dropouts, high school diplomas, college degrees, and professional degrees. The United States has one of the world's highest percentages of college-educated citizens. Household patterns: The traditional U.S. household included a husband, wife, and children under 18 (sometimes with grandparents). By 2010, only 20 percent of U.S. households met this definition, down from about 25 percent a decade before and 43 percent in 1950. (LESS MARRIED COUPLES, MEDIAN AGE FOR MARRIAGE IS HIGHER, MORE SINGLE PARENTS, MORE CHILDLESS MARRIED COUPLES. ----The biggest change for the decade was the jump in households headed by women without husbands—up 18 percent. Each type of household has distinctive needs and buying habits. The single, separated, widowed, and divorced may need smaller apartments; inexpensive and smaller appliances, furniture, and furnishings; and smaller-size food packages. Many non-traditional households feel advertising ignores families like theirs, suggesting an opportunity for advertisers
Market Potential
The market forecast shows expected market demand, not maximum market demand. For the latter, we need to visualize the level of market demand resulting from a very high level of industry marketing expenditure, where further increases in marketing effort would have little effect. Market potential is the limit approached by market demand as industry marketing expenditures approach infinity for a given marketing environment. Companies cannot do anything about the position of the market demand function, which is determined by the marketing environment. However, they influence their particular location on the function when they decide how much to spend on marketing. Companies interested in market potential have a special interest in the product-penetration percentage, the percentage of ownership or use of a product or service in a population. The lower the product-penetration percentage, the higher the market potential, although this also assumes everyone will eventually be in the market for every product.
Marketing Information System
The three components of an MIS are an internal records system, a marketing intelligence system, and a marketing research system. To carry out their analysis, planning, implementation, and control responsibilities, marketing managers need a marketing information system (MIS). The role of the MIS is to assess the managers' information needs, develop the needed information, and distribute that information in a timely manner. Marketers also have extensive information about how consumption patterns vary across and within countries. A marketing information system (MIS) consists of people, equipment, and procedures to gather, sort, analyze, evaluate, and distribute needed, timely, and accurate information to marketing decision makers.
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 internal records system supplies results data 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.
Ways to improve the quantity and quality of marketing intelligence
Train and motivate the sales force to spot and report new developments. Motivate distributors, retailers, and other intermediaries to pass along important intelligence. -----Combining data from its retailers Safeway, Kroger, and Walmart with its own qualitative insights, food producer ConAgra learned that many mothers switched to time-saving meals and snacks when school started. Hire external experts to collect intelligence. -- Many companies hire specialists to gather marketing intelligence 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. 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 more than 311,591,917 people in the United States Purchase information from outside research firms and vendors. --Well-known data suppliers like A.C. Nielsen Company and Information Resources Inc. collect information about product sales and consumer exposure to media; they also gather consumer-panel data.