What is Marketing information system?

The Marketing Information System refers to the systematic compilation, review, interpretation, storage and distribution of market information to marketers on a daily and continuous basis, both from internal and external sources.

The marketing information system distributes the related data to marketers who can make appropriate marketing decisions, such as pricing, packaging, production of new goods, delivery, media, promotion, etc.

Internal Records

With its internal records of sales data, customer database, product database, financial data, operational data, etc., the Organization will collect information. A comprehensive explanation of the internal data sources is given below :

Information may be obtained from records such as invoices, copies, billing documents prepared by businesses upon receipt of the order for products and services from consumers, distributors or sales representative.

The latest sales information that acts as an assistant to the Marketing Information System should be maintained on a regular basis. Present sales and inventory level reports help managers decide on their objectives, and marketer may use this data to design their potential sales strategy.

Companies maintain many databases, such as the Consumer Database, in which the full information on the name, address, phone number, purchasing frequency, financial status, etc. of the customer is kept.

Product Database–in which full information about the price, features, variations, of the product is stored.

Salesperson database, wherein the complete information about the salesperson, his name, address, phone number, sales target, etc. is save In the data warehouse, the companies store their data from where the data can be retrieved whenever the need arises.

When the data is stored, it is mined by statistical experts by applying many computer software and techniques to turn it into usable meaningful information that offers facts and figures.

Marketing Intelligence System

The marketing intelligence system provides data on market events, i. e. marketing environment–related data that is external to the organisation. It includes information on changing market trends, the pricing strategy of the competitor, changes in the tastes and preferences of the customer.

New products launched on the market, the competitor’s promotion strategy, etc. In order to have an effective marketing information system, companies should work aggressively by taking the following steps to enhance the marketing intelligence system.

• Providing the right training and encouraging the sales force to keep track of market trends, i. e. changing customer tastes and preferences, and providing suggestions for improvements, if any.
  
  

• Motivating the partners of the channel, i. e. dealers, distributors, distributors in the real market to provide the appropriate and required customer and competitor details.
  
  

• Companies can also strengthen their system of marketing intelligence by having more and more competitor knowledge. This can be achieved either by buying the product of the competitor, visiting trade shows, reading the written papers of the competitor in magazines, journals, financial reports.
  

• By including loyal customers in the customer advisory panel who can share their insights and provide advice to new potential customers, through this businesses can provide an effective marketing information system.
  
  

• In order to enhance the marketing information system, businesses should make use of government data. The data can relate to population patterns, demographic characteristics, agricultural production, etc., which allow a business to plan its marketing activities accordingly.
  
  

• Companies may also buy knowledge about the marketing landscape from research firms that carry out research on all industry participants.
  
  

• The Marketing Intelligence framework can be further strengthened by specifically asking customer about their product or service experience through feedback forms that can be filled out online.
  

Marketing Research

The Marketing Research is the systematic collection, organization, analysis and interpretation of the primary or the secondary data to find out the solutions to the marketing problems. By applying various statistical instruments, businesses perform marketing research, including shifts in the tastes and desires of the client, competitor tactics, the reach of new product launch, etc.

The data, which can be either primary data (first–hand data) or secondary data(second–hand data, available in books, magazines, research reports, journals, etc. ), must be obtained in order to perform market research.

Marketing Decision Support System

It requires many software programmers that can be used to evaluate the information gathered so far by marketers to make better marketing decisions. The marking managers can save the huge data in a tabular form with the use of computers and can apply statistical programmers to evaluate the data and make decisions in line with the results.

Therefore, marketers need to check the marketing environment, i. e. both the internal (within the organisation) and the external (without the organisation), so that it is possible to plan marketing practices, processes, strategies accordingly.

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Marketing Environment

Marketing Research and Marketing Intelligence System are used by the marketer to scan the environment to gather relevant information. Marketer shall adapt to environmental changes in order to prepare new marketing strategies to meet the challenges and opportunities.

Marketing Environment is the combination of external and internal factors and forces which affect the company’s ability to establish a relationship and serve its customers. The marketing environment of a business consists of an internal and an external environment.

• The internal environment is company–specific and includes owners, workers, machines, materials etc.
  
  
• The external environment is further divided into two components : micro & macro.
  
  

The micro or the task environment is also specific to the business but is external. It consists of factors engaged in producing, distributing, and promoting the offering.The macro or the broad environment includes larger societal forces which affect society as a whole.

It is made up of six components : demographic, economic, physical, technological, political–legal, and social– cultural environment

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Component of Marketing Environment

There are two major parts pertaining to the environment

• The mega/macro environment and
  
  

• The environment that is specific to the business firm is engaged in.
  

ply we can say there are two kinds of environment i. e. Internal and External. Internal can be controlled by the business but the external environment cannot be controlled by the business.

Let’s us discuss the component in detail.

Mega/Macro Environment

The sequence of the PEST is reversed to TSEP. TSEP better reflects the components in the contemporary context. Technology has today become the prime component of the macro–environment.

Technological Environment

The technological environment constitutes innovation, research and development in technology, technological alternatives, innovation inducements also technological barriers to smooth operation. Technology is one of the biggest sources of threats and opportunities for the organization and it is very dynamic.

In the corporate sphere, production controls, logistics, communication, information processing all have been revolutionized by technology. Technology affects not only its final products but also its raw materials, processes operations and customer segments of the business.

Marketer should keep an eye on the new trends available in the technology, the government enforcement in technology and the technology environment. Then select technologies that will be appropriate for the firm and the given product market situation.

Socio–Cultural Environment : Socio culture has two main parts

a. Culture
b. Social Class :

Culture

It is the combined result of factors like religion, language, education and upbringing. In any given society, some of the cultural values are deep–rooted; they do not change easily and are termed as core cultural values. There are other values, which are known as secondary values, which can be changed and manipulated relatively more easily.

Social Class

It is another important concept in socio–cultural environment. Social class is determined by income, occupation, location of residence, etc. of its members. Each class has its own standards with respect to lifestyle, behavior etc.

These are known as class values or class norms. The values/norms have a strong bearing on the consumption pattern and buying behavior of the members of the class. Shift in class values do take place over time owing to several factors.

Economic Environment

Market requires people who have buying power. The economic environment consists of the various factors that affect buying and spending pattern of the consumer. Factors to be covered under economic environment are General Economic Conditions, Economic conditions of different segments of the population; their disposable income, purchasing power, etc.

Rate of growth of the economy, rate of growth of each sector of the economy (agriculture, industry, consumer goods, capital goods, services, infrastructure, imports, exports, Income, price, and consumption expenditure(size and patterns), Credit availability and interest rates, saving rate/capital formation, inflation rate, behavior of capital markets, foreign exchange reserves.

Exchange rates, tax rates, price of important materials Energy outlook (cost, availability, etc), Labour represetation (cost, skill availability, etc.). If there is change in economic policies like change in interest rate, business cycle, changes in income levels etc. are important factors affecting marketing.

Political Environment

Mostly marketing decisions are affected by the political environment, stability and the type of government. The political environment consists of laws, government agencies and pressure groups that influence or limit various organizations and individuals in a given society. Various laws are enacted in order to protect business, consumers, society from unfair trade practices.

Natural Environment

It serves as a raw material for the production of different products. For the production of its goods, every organization consumes natural resources. Organizations are aware of the problem of resource depletion and try their best to use these resources judiciously.

Therefore, some companies have indulged in de–marketing their products. For example, Indian Oil Corporation (IOC) tries to reduce the demand for its products by promoting advertisements, such as Save Oil, Save India.

Demographic Environment

In terms of elements, such as age, gender, education, employment, income, and location, the demographic environment is the scientific study of the human population. It also includes women and technology’s increasing role. Such components are also known as demographic variables.

A marketer collects the data before marketing a product to find the appropriate market for the product. The demographic environment is responsible for the variation in individual tastes and preferences and purchasing patterns. An organization is persuaded by changes in the demographic environment to modify marketing strategies to address customers’ changing needs.

Legal Environment

From time to time, legislative changes occur. The business environment is affected by many of these modifications. For example, if a regulatory body establishes a regulation for industries, that law would have an effect on industries and business. Therefore, companies should also analyze the legal developments in their respective settings.

Some legal factors you need to be aware of :

• Product regulations
  
  

• Employment regulations
  
  

• Competitive regulations
  
  

• Patent infringements
  
  

• Health and safety regulations

Environment Components specific to the business concerned

The different elements related to mega–environments that need to be studied as part of environmental science have been explored in depth. Now, lets us turn to the environmental factors that are unique to the business concerned.

Market/Demand

It is the first in this category, The aspects to be studied here include.

• Nature of the Demand
  
  

• Size of the Demand, present, potential
  
  

• Changes taking place in demand
  
  

• Invasion of substitute products
  
  

• Changes taking place in consumption pattern/buying habits.
  

In all its particulars, a business must first track demand in its sector. It must collect valuable clues on aspects such as demand existence, demand scale, consumption trends, purchase habits, substitute product invasion, etc. In fact, those specifics are the ones that show the industry’s attractiveness.

All business decisions such as entry into the sector, expansion, divestment etc. and marketing plan decisions require demand–related information. Fortunately, this is an area where data support is commonly accessible to an organisation via the routine demand assessment process(demand measurement) and sales forecasting.

Consumer

The effective business strategy requires the design of goods and marketing campaigns that integrate attributes, which provide value to consumers according to their perceptions. Companies can perform their business/marketing planning effectively only by researching consumer– related factors. Consumer tastes and desires in many sectors continue to fluctuate.

And consumer brand loyalty continues to evolve, too. Customers today may want a cheaper version of a given product, but tomorrow they may be more concerned with quality and may therefore go after certain particular brands. Examples include sectors such as cosmetics, personal care goods, garments, and entertainment products.

Therefore, a perpetual customer research process is required to make marketing planning efficient. Changes in client preferences can sound the death knell of a company if left unmonitored. At the same time, they also end up as enticing business opportunities, if properly monitored. Only by keeping track of changing consumer requirements can one catch the environmental opportunities that are emerging.

Factors to be monitored are

• Who are the consumers of the firm ? (number, location, etc.)
  

• According to the firm, what is the basic need its product serves ?
  

• According to the consumer, what need does it serves ?
  

• Is there a gap in these two perceptions ?
  

• What benefits do the consumers look for in the product ?
  

• Of the many benefits they look for, what are their preferences,priorities/ranking ?
  

• What is their assessment of the value of the company’s offer ?
  

• Purchasing power of the consumers.
  

• Buying behaviour, buying motives, buying habits
  

• Personality traits/attributes
  

• Lifestyle and needs–present position and trends Brand loyalty
  

• Reasons/motives for customer patronage of specific brands.

Industry and Competition

Another big component under the head is business and competition. In order to build a marketing strategy, knowledge of business and competition is a fundamental prerequisite. Building a competitive advantage often relies on a proper understanding of the position of the industry and competition.

Government Policies

The way company works is substantially influenced by government policies. In addition to impacting the environment, government policies have a profound effect on the particular industry/business environment. This is especially true of economies that are regulated to a significant degree.

Government policies are a significant factor even in market economies, although their restrictive effect is comparatively less. Government do play roles which have a bearing on the functioning of firms,

For Example

• Government are often large purchasers of goods and services
  

• Government subsidies select firms and industries
  

• Governments ban fresh entry in select industries
  

• Governments ban off and on, certain technologies and products
  

• In some cases, governments happen to be producers, and therefore,function as competitors.

Supplier related factors

Another essential component of this environment is suppliers. In every market, suppliers constitute one of the five forces shaping competition. They have their own negotiating power; they control a company’s cost of raw materials and other inputs, and thereby affect the company’s profits.

It is in this sense that the trade– off between integration vs. outsourcing of supplies assumes significance. The decision on this has both cost and quality consequences. In their products, procedures and business practises, manufacturers often continue to make regular improvements.

Suppliers often unexpectedly become direct competitors to a business, becoming the end–product producers on their own. Companies obviously have to closely track the world of suppliers.

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Forecasting and Demand Management

Meaning and Important : Every company is curious to know the existing status of its product, prospects and during the specific time period who is there customer, whether there are chances to increase the sales and market share in the market.

Sales forecast can be defined as an estimate for sales in terms of monetary and volume, for a specific period, with a selected marketing plan, under an envisaged economic and marketing environment. Sales forecasting serves as the starting point for all business activities of a company. Based on sales forecasting following decisions are taken.

• Number of Salesmen required in achieving sales quotas or objective.
  
  

• Allocation of sales quota to each salesman.
  
  

• Determinations of sales force compensation plan.
  
  

• Determination of sales territories based on market potential
  
  

• Advertising and sales promotion programmes
  
  

• Physical distribution and channel selection.
  
  

• Pricing decisions and strategy
  
  

• Production plan
  
  

• Inventory control and purchasing
  
  

• Estimating standard costs
  
  

• Budgeting and controlling expenses
  
  

• Planning Requirements

Marketing mix revolves around the sales forecasts made by the company for its product.

Measure for Market Demand

Sales forecast can be based on market demand. According to Kotler, Kevin and Keller, 90 different type of demand estimates could be prepared by a company for its products. A company can measure demand for six different product levels, five different space levels and three different time levels.

Each serves a specific purpose. A company might forecast short–run demand, plan production, borrow cash and also forecast regional demand. Market is dynamic and forecasts depend on the type of market. The market could be broken down in many productive ways.

• The potential market is the set of consumers who have interest in a market offer; but their interest is not enough to define the market unless they acquire sufficient income and access to the product.
  
  

• The available market is the set of consumes who have interest, income, and access to a particular offer.
  
  

• The qualified available market is the set of consumers who have interest, income, access and qualification for the market offer.
  
  

• The target market is the part of qualified available market the company decides to pursue.
  
  

• The penetrated market is the set of consumers who are buying the company’s product.

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Concept for Demand Measurement

Market Demand

In order to find the Total market demand, Marketer needs to evaluate the opportunities available in market. Market demand for the product is the volume that would be bought by a target group of customers in a target geographical area in a specific time period in a specified marketing environment under a specific marketing programme.

Market Forecast

Only small amount of marketing expenditure and efforts will actually occur. The market demand corresponding to this level is called the market forecast.

Market Potential

Market potential is the highest limit approached by market demand as industry marketing expenditures approach infinity for a given marketing environment.

Company Demand

Company demand is the company’s estimated share of market demand at alternative levels of company marketing efforts in a given time period. This share will depend on how its products, services, prices, communications, etc. are perceived by consumers relative to the competitors.

Company Sales Forecast

This is the expected level of company sales based on a chosen marketing plan and an assumed marketing environment. Related to the company sales forecasts, there are two additional concepts involved. First is a “sales quota, ” which is the sales goals set for a product line, company division, or sales officer.

Generally, sales quotas are set slightly higher than estimated sales to stretch the sales forces’ effort. Second is a “sales budget”, which is a conservative estimate of the expected volume of sales and is used for making current purchasing, production, and cash flow decisions. The Sales budget is based on the sales forecast and the need to avoid excessive risk. Sales budgets are generally set slightly lower than the sales forecast.

Company Sales Potential

This is the sales limit approached by company demand as the company’s marketing efforts increases relative to that of competitors. The absolute limit of company demand is, of course, the market potential. For estimating current demand, companies estimate total market potential, then analyses and determine the area market potential (territory– wise), industry sales and market shares.

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Concept for Demand Measurement

Opinion of Executives

This is one of the oldest methods where executive in charge of the business makes assumptions for future sales based on the personal knowledge based on market information, through customer contacts or by reading published data. Weakness of this method is that it lacks of scientific validity and subjectivity.

Sales Force Composite Method

Many organisations make their sales forecast on the basis of the estimate given by salesmen. Sales manager prepares the consolidated sheet territory or region wise according to the estimate given by each sales person. As sales persons are in direct contact with the customers they can provide first–hand information.

Customer’s Expectations(or survey of buyer’s intentions)

Customers can be requested to communicate their buying intentions in a coming period. This is suitable for businesses selling products to a few key customers (like in industrial marketing). If the customers’ expectations are accurate, sales forecasts will also be accurate.

Statistical Sampling

Sampling can be used to get total sales estimate. Based on sample survey done in representative sub–groups of territories, data can be extended or generalized to get total sales forecast.

Time Series Analysis

This is the mathematical projection of future sales. It involves projection of past sales trends into the future (trend extrapolation). To predict future sales, an analysis of four kinds of historical sales variations is done.

• .Seasonal Variations
  
  

• Business Cyclical variations (depression, boom, slump, etc.)
  
  

• Long term trends of sales
  
  

• Irregular or unexplained variations
  
  

• By isolating variations in sales, an analyst can estimate with accuracthe sales forecast

Correlation Analysis

When there is a close relationship between sales volume and a well–known economic indicator or index, a correlation study can be done. A high correlation means that the extrapolated index values will indicate future sales volume. E. g. : Sales of petrol are related to automobiles sales.

The Delphi Method

This is also a form of expert opinion method used especially for working out broad–based, futuristic estimates rather than sales forecast. In this method, a panel of experts in the field is interviewed with the help of questionnaire and their reactions and opinions recorded.

An analysis of the result gives the final estimates. Since no single sales forecasting method is perfect, companies and marketers generally use a combination of forecasting methods to ensure that they get reliable estimates.

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FAQ