MARKETING MANAGEMENT 12 th edition

Chapter 3 CONDUCTING MARKETING RESEARCH MARKETING MANAGEMENT12th edition Kotler Keller

Organizational Environment • Includes all elements existing outside the boundary of the organization that have the potential to affect the organization

Two Layers of theExternal Environment • Task environment • General environment

Organizational Environment General Environment Technological Task Environment Customers International Internal Environment Sociocultural Labor Market Employees Culture Competitors Management Suppliers Legal/Political Economic

Information Information related to: macro trends micro effects particular to their business environment is constantly presenting new opportunities and threats. Marketers should continue monitoring and adapting to that environment.

Responsibility falls to the company's marketers. trend trackers and opportunity seekers.

Evidence (s) Marketers also have extensive information about how consumption patterns vary across countries. the Swiss consume the most chocolate, the Greeks eat the most cheese, the Irish drink the most tea, and the Austrians smoke the most cigarettes

Why Information? Companies with superior information enjoy a competitive advantage. The company can : choose its markets better, develop better offerings, and execute better marketing planning

Paths and Channels 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 systems (MIS) to meet these needs.

MIS consists of: people, equipment, and procedures to gather, sort, analyze, evaluate, and distribute needed, timely, and accurate information to marketing decision makers.

MIS has three components • internal records system, which includes information on the order-to-payment cycle and sales reporting systems; • marketing intelligence system, a set of procedures and sources used by managers to obtain everyday information about pertinent developments in the marketing environment 3. marketing research system that allows for the systematic design, collection, analysis, and reporting of data and findings relevant to a specific marketing situation.

MIS Probes for Information • What decisions do you regularly make? • What information do you need to make these decisions? • What information do you regularly get? • What special studies do you periodically request? • What information would you want that you are not getting now? • What are the four most helpful improvements that could be made in the present marketing information system?

Internal Records • Marketing managers rely on internal reports on: • orders, • sales, • prices, • costs, • inventory levels, • receivables, • Payables • By analyzing this information, they can spot important opportunities and problems.

Internal Records Order-to-Payment Cycle Sales Information System Databases, Warehousing, Data mining Marketing Intelligence System 3-14

Order-to-Payment Cycle • Customers and sales representatives fax or e-mail their orders. • Computerized warehouses quickly fill these orders. • The billing department sends out invoices as quickly as possible. • using the Internet and extranets to improve the speed, accuracy, and efficiency of the order-to-payment cycle. 3-15

Internal Records Sales Information System Marketing managers need timely and accurate reports on current sales. Wal-Mart knows the sales of each product by store and total each evening. enables it to transmit nightly orders to suppliers for new shipments of replacement stock. Wal-Mart shares its sales data with its larger suppliers such as P&G and expects P&G to re-supply Wal-Mart stores in a timely manner. Wal-Mart has entrusted P&G with the management of its inventory. Outsourcing 3-16

Databases, Data Warehousing, and Data Mining Internal Records • companies organize their information in databases: • customer databases, • product databases, • salesperson databases • Organizations combine data from the different databases. 3-17

customer database customer database will contain every customer's: • name, • address, • past transactions, • demographics and • psychographics (activities, interests, and opinions) in some instances.

The PIZZA HUT Case Pizza Hut claims to have: the largest fast-food customer data warehouse in the world, with 40 million U.S. households—or between 40 and 50 percent of the U.S. market. The millions of customer records are gleaned from point-of-sale transactions at its restaurants. Pizza Hut can slice and dice data by: favorite toppings, date of last order, or by whether you order a salad with your pepperoni pizza. Using its data Warehouse Miner, Pizza Hut has not only been able to purge expensive duplicates from its direct-mail campaigns, but can also target its marketing to find the best coupon offers for each household and predict the success of campaigns

The Marketing Intelligence System is a set of procedures and sources managers use to obtain everyday information about developments in the marketing environment.

Sources of Information Marketing managers collect marketing intelligence by: • reading books, • newspapers, and trade publications; • talking to customers, suppliers, and distributors; and • meeting with other company managers.

Steps to Improve Marketing Intelligence • Train and motivate sales force • Motivate channel members to share intelligence • Network externally • Utilize customer advisory panel • Utilize government data resources • Purchase information • Collect customer feedback online

Analyzing the Macroenvironment • unmet needs and trends (affordable housing) • Within the rapidly changing global picture, the firm must monitor six major forces: demographic, economic, social-cultural, natural, technological, and political-legal.

Needs and Trends Fad "unpredictable, short-lived, and without social, economic, and political significance Trend is a direction or sequence of events Mega-trend large social, economic, political and technological changes [that] are slow to form, and once in place, they influence us for some time— between seven and ten years, or longer.

Aging boomers Delayed retirement Changing nature of work Greater educational attainment Labor shortages Increased immigration Rising Hispanic influence Shifting birth trends Widening geographic differences Changing age structure 10 Megatrends Shaping the Consumer Landscape

Environmental Forcesopportunities and threats • Demographic • Economic • Socio-Cultural • Natural • Technological • Political-Legal

Size Growth rate Age distribution Ethnic mix Educational levels Household patterns Regional characteristics Movement Population and Demographics

Economic Environment • Purchasing Power • Income Distribution • Savings Rate • Debt • Credit Availability

Types of Industrial Structures • Industrial economies • Industrializing economies • Raw-material exporting economies • Subsistence economies

Social-Cultural Environment • Views of themselves • Views of others • Views of organizations • Views of society • Views of nature • Views of the universe

Natural Environment • Shortage of raw materials • Increased energy costs • Anti-pollution pressures • Governmental protections

Technological Environment • Pace of change • Opportunities for innovation • Varying R&D budgets • Increased regulation of change

Melting Pot VS Salad Bowl According to the 2000 census: the U.S. population of 276.2 million was 72% white. African Americans constituted 13%, and Latinos 11%. The Latino population had been growing fast, with the largest subgroups of Mexican (5.4 percent), Puerto Rican (1.1 percent), and Cuban (0.4 percent) descent. Asian Americans constituted 3.8 percent of the U.S. population, with the Chinese as the largest group, followed by the Filipinos, Japanese, Asian Indians, and Koreans, in that order. Latino and Asian American consumers are concentrated in the far western and southern parts of the country, although some dispersal is taking place. Moreover, there were nearly 25 million people living in the United States—more than 9 percent of the population—who were born in another country.

Megatrend the increase in the percentage of Hispanics in the total population, represents a major shift in the nation's center of gravity. Hispanics made up half of all new workers in the past decade and will bump up to 25 percent of workers in two generations.

In addition to monitoring a changing marketing environment, marketers also need to develop specific knowledge about their particular markets. • Good marketers want information to help them interpret past performance as well as plan future activities. • Marketers need timely, accurate, and actionable information on consumers, competition, and their brands. • They need to make the best possible tactical decisions in the short run and strategic decisions in the long run. • Discovering a consumer insight and understanding its marketing implications can often lead to a successful product launch or spur the growth of a brand.

Build-A-Bear T-Louis-based Build-A-Bear Workshop has cleverly capitalized on the "kiddie-craft" trend in children's toys as well as the trend for interactive entertainment retailing. Instead of making pottery or play jewelry, the chain, with more than 160 stores in the United States, the United Kingdom, Japan, Denmark, and Korea, allows kids (and adults too) to design their own teddy bears and other stuffed animals, compete with clothing, shoes, and accessories. The chain boasts an average of over $500 per square foot in annual revenue, double the U.S. mall average, ten percent of sales in 2003 came from hosting nearly 100,000 parties at a cost to customers of approximately $250 for two hours, which includes a stuffed animal for each child. Build-A-Bear has created a database on 9 million kids and their households by inviting customers to register their bears:

By including a barcode inside the bear, the company can reunite the owner with the bear if it gets lost. The database allows Build-A-Bear to contact customers by surface and e-mail with gift certificates, promotions, and party reminders. Build-A-Bear 3-37

Marketing Research Definition Marketers request marketing research is systematic design, collection, analysis, and reporting of data and findings relevant to a specific marketing situation facing the company. Marketing research is now about a $16.5 billion industry

Who Is Responsible for Marketing Research Most large companies have their own marketing research departments. At much smaller companies, marketing research is often carried out by everyone in the company Business Organizations normally budget marketing research at 1 to 2 percent of company sales

Marketing research & firms Marketing research firms fall into three categories:

The Marketing Research Process six steps as shown in this Figure

Case Study: American Airlines (AA) American Airlines (AA) is constantly looking for new ways to serve its passengers; it was one of the first companies to install phone handsets. Now it is reviewing many new ideas, especially to cater to its first-class passengers on very long flights, many of whom are businesspeople whose high-priced tickets pay most of the freight. Among these ideas are: • to supply an Internet connection with limited access to Web pages and e-mail messaging; • (2) to offer 24 channels of satellite cable TV; and • (3) to offer a 50-CD audio system that lets each passenger create a customized play list of music and movies to enjoy during the flight. The marketing research manager was assigned to investigate how first-class passengers would rate these services and how much extra they would be willing to pay if a charge was made. He was asked to focus specifically on the Internet connection. One estimate says that airlines might realize revenues of $70 billion over the next decade from in-flight Internet access, if enough first-class passengers would be willing to pay $25 for it. AA could thus recover its costs in a reasonable time. Making the connection available would cost the airline $90,000 per plane.6 • FIG. 4.1 I The Marketing Research Process

Case Study: American Airlines (AA) The marketing research manager was assigned to investigate • how first-class passengers would rate these services and • how much extra they would be willing to pay if a charge was made. He was asked to focus specifically on the Internet connection. One estimate says that airlines might realize revenues of $70 billion over the next decade. if enough first-class passengers would be willing to pay $25 for it. AA could thus recover its costs in a reasonable time. Making the connection available would cost the airline $90,000 per plane.

Defining the Problem Will offering an in-flight Internet service create enough incremental preference and profit for American Airlines to justify its cost against other possible investments American might make?"

Research Objectives Research objectives: • What types of first-class passengers would respond most to using an in-flight Internet service? • How many first-class passengers are likely to use the Internet service at different price levels? • How many extra first-class passengers might choose American because of this new service? • How much long-term goodwill will this service add to American Airlines' image? • How important is Internet service to first-class passengers relative to providing other services such as a power plug, or enhanced entertainment?

Research Types Exploratory—research: its goal is to shed light on the real nature of the problem and to suggest possible solutions or new ideas. Descriptive—research: is it seeks to ascertain certain magnitudes, such as how many first-class passengers would purchase in-flight Internet service at $25. Causal—research: Its purpose is to test a cause-and-effect relationship.

Developing Research Plan Designing a research plan calls for decisions on the data sources, research approaches, research instruments, sampling plan, and contact methods

Data sources Data sources:Primary data can be collected in five main ways: Observation, Focus groups, Surveys, • behavioral data, Customers leave traces of their purchasing behavior in store scanning data, catalog purchases, and customer databases. Experiments.

Behavioral Data Customers leave traces of their purchasing behavior in store scanning data, catalog purchases, and customer databases.

Survey Research Companies undertake surveys to learn about people's knowledge, beliefs, preferences, and satisfaction, and to measure these magnitudes in the general population.

MARKETING MANAGEMENT 12 th edition