CH 1 Marketing Information System & Measuring Market Demand Data: Data can be defined as Facts, Statistics, either historical

l or developed by calculation or experimentation. The term, data and information are often interchangeable when referring to two distinct concepts. Data are raw facts in isolation which when placed in meaningful context by data processing operations. The basic purpose of capturing and processing data is to produce information. Although Data are key ingredients, not all data produce relevant and timely information. There is an unlimited amount of data from sources both internal and external to the organization. The primary function of information is to increase the knowledge or reduce the uncertainty of the user. In general, we can say that information provides relevant details in a time frame about the state of affairs which gives a greater degree of predictability. The Dimensions of Information: Ideally information should be adequate, up-to date, reliable, timely, and understandable. Information is now regarded as a basic resource of the organization along with other resources such as personnel, money, material, machines and facilities. Thus, it is important to give emphasis not only to generation, storage and retrieval of the relevant of information to fill in the existing gaps but attention should be paid to elimination of irrelevant data. Figure: The dimensions of Information Accessibility Free from
Comprehensivenes

Information Authenticity Timeliness Accuracy

1. Accessibility: This refers to information should be obtained in the easiest and quickest way. Faster and easier access will have more value as compared to and difficult access. 2. Comprehensiveness: More complete the information in itself becomes more valuable. It does not mean how important information but it is mean usefulness of information. 3. Accuracy: The information if free from any error will have a more value than otherwise. 4. Timeliness: It takes certain time to generate the information and the value of the information depends very much on how it is made available to the user manager. 5. Authenticity: If the information is being generated from a formal information system, it is authentic and could be measurable. 6. Free from Bias: The information if free from any bias towards the prejudiced conclusion will have more value than otherwise. Information System: Information system is an organized way of sending, receiving and recording messages. It includes both flow of information formal and informal flow. We have internal and external source of information. Components of Information System: In business planning marketers select, screen, Integrate internal and external information in order to manage change, competition and customer relations. Marketing decisions influences internal (Within the company) and external (Outside the company) environment. Results are compared with preset goals. Feedback information provides corrective actions and offers

further information for revising your decisions. Entire process and components of information can be diagrammatically represented as follows:
Effects upon External Environment Relevant Information For Decision Decision Making Effects upon Internal Environment Compare With Standard s

Internal Information Source

External Information Source

Necessary Corrective Action

FEEDBACK

Figure: Components of Information System Internal Source Customer Complaint Notes Sales Orders Salesmens reports Past Research of company Literature and publication Companys annual reports Companys magazines Sales and Purchase Records External Source Government Publications Advertising Media Commercial libraries General libraries Marketing Research Agency Trade Associations Technical & Professionals Trade Fair & Exhibitions Marketing Information System (MIS): Every firm must organize and distribute a continuous flow of information to its marketing managers. Companies study their managers information needs and design marketing information system (MIS) to meet these needs. It can be defined as follows: MIS: A MIS consist of people, equipment, and procedure to gather, sort, analyze, evaluate, and distribute needed,

timely, and makers.

accurate

information

to

marketing

decision

A marketing information system is developed from internal company records, marketing intelligence activities, marketing research and Decision support system. Characteristics of MIS: MIS is an ongoing process. It operates continuously. MIS provides best integration between functional departments. Electronic equipments are available to process data and produce MIS. MIS is future oriented. It prevents problems of various fields. It is preventive and creative process. System analyst design and operates MIS. It uses computer and decisions making tools. Management gets steady flow of information of right type, at the right time, and for right type of people.

Components of MIS: 1. 2. 3. 4. There are four major components of MIS as follows: Internal Marketing (Record) Information marketing Intelligence system Marketing Research System Marketing Decision Support System Marketing Research System

Internal Marketing or Record Information

Marketing Intelligence System

Marketing Decision Support System

Figure: Components of MIS 1. Internal Marketing (Record) Information: It is major and easily accessible source of information. It consists of all the records of marketing operations available within the organizations. Data on

sales, purchases, Inventories, costs, cash flows, account receivables and payables, etc particularly, for sales orders and sales forces reporting, computer technology is excessively used for accurate, efficient, and speedy transmission of information.

2. 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. It supplies information about external happening / external environment. It keeps marketing executives informed about the current marketing environment, and changing conditions in the market. Census data, market news, newspapers, trade papers, magazines, etc provides valuable sources of market intelligence. The marketer can also buy some special marketing intelligence services from outside professional marketing agencies. Information of market intelligence will have to be evaluated and distributed to the right people in the right form as early as possible.
Product Marketing Communication Price Marketing Programme

Marketin g Mix Place Promotion

Buyers, Suppliers, Marketing Political, Environment Economical,

Technological

Internal Marketing Information Marketing Information System Analysing Marketing Intelligence & Processin g of Informati on

Planning Execution Control

Social, Cultural, Competitors

Marketing Research

Figure: MIS Functioning with Marketing Environment Marketing Intelligence is an organized feedback process of marketing communication or inflows of information.

3. Marketing Research: Marketing research is a powerful and important branch of MIS. Managers needed detailed information on specific problem or specific marketing area. Marketing research consists of collecting primary and secondary data from various sources using various tools through various methods for definite period. It involves study related to consumer buying behaviour, product or brand awareness and preferences, liking and disliking about brand, effectiveness of promotion, sales promotions, channel partners, competitors, etc 4. Marketing Decision Support System: Above three components supplies data, the marketing Decision support systems concern more with processing, or analyzing available data. This component can improve efficiency and utility of the whole marketing information system. The system is used to help managers make better decisions. A Marketing Decision Support System (MDSS) is coordinated collection of data, systems, tools, and techniques with supporting software and hardware by which an organization gathers, and interprets relevant information from environment and turns it into a basis for making decisions. According to definition, the MDSS includes tools, techniques, or modes used for (1) Data collection, (2) Data analysis, (3) interpreting, (4) managerial decision making. The MDSS can be applied to improve efficiency and usefulness other three components, it is not a separate component but extension of other components.

Need and Importance of MIS: Dynamic Internal and External environment forces demand that every company must manage marketing information efficiently so that it can accomplish the states goal and objectives as per marketing plan. 1. Anticipation of consumer demand: Under customer oriented marketing approach, every marketer must understand the need of customer and should have up- to date knowledge about consumer buying behaviour. In a dynamic economy, customer needs, taste and preferences, liking and disliking, fashions, etc without precise information on the nature, character and size of the consumer demand, marketers will be simply going in dark. 2. Complexity of Marketing: Modern marketing process became much more complex and elaborate. Expanding market and multinational marketing require active intelligence system. Hence, we have systematic organized information system. 3. Significance of Economic Indicators: Forces of demand and supply are changing constantly. In a wider market, fluctuations in demand and supply are drastic. Marketer must have latest information about current trends of demand and supply of prices. For these reason marketer depends on marketing intelligence system. Intelligent forecasting of the future is based on parameters, such as national income, population, price, money flow, growth rate, etc 4. Significance of competitors: Modern markets are competitive. Marketers can not neglect their competitors in decision making. Predicting the behaviour of competitors in a right manner can help marketer to become a market leader in a particular product category. So, marketer should always update with key activities, strategies, plans and actions of rivalry in this competitive environment. 5. Consumerism: In an ever-widening market we do have a communication gap between consumers, users and marketers.

This is gap responsible for unrealistic marketing plans and programmes. This has force to customer dissatisfaction. This Consumerism indicate that products do not match consumer needs and desires and marketers have no up-to date knowledge of real and precise consumer demand. 6. Marketing Planning: Every marketer is establishing their business with proper planning. In every stage of planning marketer should have information related to internal and external environment. From the beginning of the stage of idea generation marketing research provides useful information of customer. At the end of the stage after selling the product information related to after sales service or feedback on product such information can help marketer in planning. 7. Development of science and technology: The energy crisis since 1974, gave a great encouragement to discover the other source of energy. Modern marketer should be innovative. Innovations are based on information given by research and development. Marketer must have not only updated technological information but also implementation of those technologies. Example: Wall-mart. It has implemented such a latest technology in the field of information technology in their retail chain that their store will never be out of stock in any of product category.

Concept of Measurement of Market Potential & Sales Potential

Marketing is a composite process in which demand structure for economic goods and services is intelligently forecasted through techniques is known as Marketing Research. Marketing research as a managerial tool used in solving any problem in the field of marketing. It is an invaluable tool in decision making based on scientific investigation and analysis of a marketing problem. Research: Research is the process of gathering, recording and analysing of critical and relevant facts about any problem in any branch of human activity. Marketing Research: Marketing Research as the systematic design, collection, analysis, and reporting of data and findings relevant to a specific marketing situation or facing the problem. - Philip Kotler Research Process: Effective marketing research involves six steps as shown in figure: 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 decisions

DEMAND AND SALES FORECASTING:

One major reason for undertaking marketing research is to identify market opportunities. Once the research is complete, the company must measure and forecast the size, growth, and profit potential of each market opportunity. Once market segment identified, marketer has to measure the demand for each segment. Demand in a segment is based on three factors: 1. Purchasing Power 2. Market Potential 3. Sales Potential Demand for a product begins with wants and desires of buyers. Effective demand for a product needs purchasing power and buying motives. Market Demand: As we have seen the first step of marketer is to estimate total market demand. Definition: Market demand for a product 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 merely affected by price only there are many factors which affects market demand. E.g. marketing mix, marketing environment, competition, buyers behaviour, general economic conditions, fashion trends, government regulations, etc Market demand is not a fixed number but rather function of the stated conditions. For this reason, it can be called the Market demand function. Figure: Demand Measurement Demand Measurement

Market Demand

Company Demand

Market Potential

Market Forecast

Sales Potential

Sales Potential

Market (Industry) Demand: Market demand is some theoretical upper line of sales of an entire industry. It is a function that specifies the quantity of goods brought by customer under different condition. It is the level of demand which would be realised if the industry employed unlimited marketing effort. Company Demand: Company demand is the volume of sales expected under given conditions for a specific firm. It is a function of the firms marketing effort that specifies the amount of sales turnover which would be realised by company. Market (Industry) Forecast: It indicates the customer demand under the expected level of marketing effort which can be put forward by all the sellers within an industry. Company Sales Forecast: It is the estimated sales turnover under a defined marketing programme. The sales forecast is the planned level of sales based upon a given marketing strategy. Market Potential: Market potential is the maximum possible level of market or industry demand. It points out the total possible sales available in a given area to all sellers of a product during a stated period of time, under stated marketing environment. Additional marketing efforts have the little influence and little change in market demand. Sales Potential: Sales potential is that portion of the market potential that a particular company can expect to achieve. ECONOMY
LEVEL & TREND OF ECONOMIC ACTIVITY Examples: RECESSION PROSPERITY

MARKET
MARKET (INDUSTRY) DEMAND POTENTIAL MARKET FORECAST

SALES
COMPANY DEMAND COMPNAY FORECAST

Country Level

Industry Level

Company Level

FIGURE: Interaction among Basic Types of forecast

Market Demand in specific period (Market OR Industry Demand)_

Market demand Sales demand

Market Potential

Market Forecast

Market Minimum

Planned Expenditure Industry Marketing Expenditure

Figure: Market or Industry Demand

Company Sales Volume in specific period (Company Sales Demand)_

Sales Potential

Sales Forecast

Sales Minimum

Planned Level Planned Marketing Expenditure

Figure: Company Demand

Methods of Measuring Market Potential: In estimating the size of a market for a new product we may have the following steps to be taken in sequence: 1. Define the Market Population: The market is defined by laying down regional limits and by demographic features of potential buyers, e.g. age, gender, income, occupation, etc 2. Estimate of consumption units: In each market segment we have to count the number of buyers. 3. Estimate of purchasing power: National income data can give per capita income figures, disposable income figures. Ability to pay can play an important role in case of durable goods. E.g. T.V., A.C., etc 4. Estimate of willingness to Spend as a function of planned marketing effort: Willingness to spend is governed by psychological factors and buying motives. It can be influence by marketing effort more specifically by an advertisements. 5. Estimate of Rate of purchase and Product usage: There may be three types of buyers. Big users, Light users, and medium users. All will have different consumption habits. 6. Total Market Potential: We can multiply the total estimated number of consuming units by the rate of purchase and product usage and the sum is the total market potential. Area Potential: Companies are facing the problem in selecting the best territory among all the territories where they can put all their marketing effort. Therefore, they need to estimate the market potential of different towns, districts, cities, states, etc 1. Market - Buildup Method: it identifies all the potential buyers in each market and estimating their potential purchase. This method produces accurate results if we have list of all the potential buyers. Unfortunately, this information to gather is not always easy. Example: In a city like Surat, if marketer of Lux is identify 1000 buyers of Lux bathing soap. If there rate

pf purchase and product usage is known to marketer then easily calculate the area potential for Surat city. With the help of research marketer came to know that average of 1 soap required in one week. So, 4 soaps per month and 48 soaps per year. Total users are 1000 so it requires 48,000 Lux soaps in Surat city. This is known as area potential. 2. Multiple Factor Index Method: Companies can develop their own indices for markets based on certain assumptions. For example, Marketer for Lux can assume that potential for Lux in a Surat city may be function of 1. Population of the area 2. Per capita Income 3. Total Sales The Lux buying index for say, Surat = (a * Population of Surat) + (b * Per capita Income) + (c * Total Sales) Note: a, b and c are determined using past data. In this method it is not considering the single factor in calculating area potential but considering more than one factor which has an impact on area potential of the particular product. It will provide more accurate answer and help in achieving nearest accurate judgement in business decision making.