Learning objectives of this chapter are:
Ø Meaning and importance of information and
data
Ø Sources of information and data
Ø Meaning, feature and importance of
marketing information system
Ø Components of marketing information system
Ø Process and areas of marketing research
Ø Marketing information system in Nepal and
its use in marketing decisions
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Chapter
Preview: In this chapter, we will continue exploring how marketers gain customer
insights and manage marketing information for the purpose of making marketing
decisions. Our focus is to look at how companies develop and manage information
about important marketplace elements: customers, competitors, products, and
marketing programs. To succeed in today’s fast-changing marketplace, marketers
must first gain fresh, deep insights into what customers need and want. Such
insights come from good marketing information. As a result of the recent
explosion of marketing technology, companies can now obtain great quantities of
information, sometimes even too much. The challenge is to transform today’s
vast volume of consumer information into actionable customer and market
insights. This chapter, thus, attempts to explore how information can be taken
from markets (marketing research), and how to manage them in a way (marketing
information system) that helps a company to make marketing decisions
successfully.
Ø Meaning of information and data
In general, data is the raw facts or
statistics gathered by the researcher for analysis in their original form. When
the data is processed and transformed in such a way that it becomes useful to
the users, it is known as ‘information’. In other words, data is the raw facts
and figures whereas Information is data that is accurate and timely; specific
and organized for a purpose; presented within a context that gives it meaning
and relevance; and can lead to an increase in understanding and decrease in
uncertainty. Another way to look at information is as data that has been
interpreted and then presented in a more meaningful context that allows a
business organization to make decisions.
In the technical glossary, data means input,
used to generate output, i.e. information. Data are those facts and
descriptions from which information can be extracted. Data alone has no certain
meaning, i.e. until and unless the data is explained and interpreted, it is
just a collection of numbers, words and symbols. Unlike information, which does
not lack meaning, in fact, they can be understood by the users in a normal context.
For example, “data” can be illustrated by the
number of likes your company has on Facebook while “information” is represented
by a demographic analysis of the data — which age groups like you and where are
they? The basic
differences between data and information are shown in the following table.
Basis for
differences
|
Data
|
Information
|
Meaning &
Concept
|
Data is raw,
unorganized facts that need to be processed. Data can be something simple and seemingly random and useless until it is organized.
|
When data is processed,
organized, structured or presented in a given context so as to make it
useful, it is called information.
|
What is it?
|
It is just text
and numbers.
|
It is refined
data.
|
Based on
|
Records and
Observations
|
Analysis
|
Form
|
Unorganized
|
Organized
|
Useful
|
May or may not
be useful.
|
Always
|
Specific
|
No
|
Yes
|
Dependency
|
Does not depend
on information.
|
Without data,
information cannot be processed.
|
Data builds
information and information build strategic success. Without the first, you
can’t have the second or the third. A good business is built upon great market
research, which can gather and analyze all of the data that the company can
gather and separate the useful information from useless.
Ø Importance of Market Information and data
Market information and data are essential in
decision making; planning, implementation, controlling, environment adaption
and reducing risks and uncertainty of business. With the help of market
information, a company can analyze its strengths, weaknesses, opportunities,
and threats.
1. Understanding the marketplace and consumer
needs: The marketing process starts with a complete
understanding of the marketplace and consumer needs and wants. Thus, the
company needs sound information to produce superior value and satisfaction for
its customers. The company also requires information on competitors, resellers,
and other actors and forces in the marketplace.
2. Decision making: Increasingly, marketers are viewing
information and data not only as an input for making better decisions but also
as an important strategic asset and marketing tool. Reliable, complete and up-to-date
information can help the company in making quick and rational decisions.
3. Understanding the market opportunities and
threats: Having information and data about competitors, customers, suppliers,
intermediaries, salespersons, marketing mix and others helps the company to
understand the market opportunities and threats.
4. Planning, implementation and controlling: Market information
and data are essential for planning, implementing and controlling of different
marketing activities for the firms. Without market information, no firms can
make effective marketing plans, implementation and controlling. Thus, a firm
requires reliable, complete and up-to-date information for doing these
marketing functions.
5. Environment adaption: Marketing
environment is dynamic and complex so that macro environments such as
demographic, political-legal, economic, socio-cultural and technological
environments also change which requires a great deal of adaption. With the help
of market information, a marketing firm can adapt with such fast-changing
environments.
6. Reducing market risks and uncertainty: A market has a
full of risks and uncertainty as external factors change. When reliable,
complete and up-to-date market information is available, the level of risks and
uncertainty for any firms goes down. Thus, having the right market information and
data helps the company to reduce the risks and uncertainty of the markets.
Ø Sources of information and data:
Data collection begins with figuring out what
sort of data is needed, followed by the collection of a sample from a certain
section of the population. Next, you have to utilize a certain tool to gather
the data from the chosen sample. Information can be collected from primary
sources and secondary sources.
a)
Sources of primary information: Primary information is information that has been obtained the first hand, or
in original form. Such information can be collected through observation, internet
surveys or field surveys. Secondary data provide a good starting point for research and often help
to define research problems and objectives. In most cases, however, the company
must also collect primary data. Just as researchers must carefully evaluate the
quality of secondary information, they also must take great care when
collecting primary data. They need to make sure that it will be relevant,
accurate, current, and unbiased.
b)
Sources of Secondary information: Information that has been produced by somebody else is known as a secondary source. The sources of secondary information can be published books,
blogs, journals, articles, and newspapers. Researchers usually start by gathering secondary data. The company’s
internal database provides a good starting point. However, the company can also
tap into a wide assortment of external information sources, including
commercial data services and government sources. Secondary data can usually be obtained more
quickly and at a lower cost than primary data. Also, secondary sources can
sometimes provide data an individual company cannot collect on its
own—information that either is not directly available or would be too expensive
to collect.
Ø Meaning and Concept of marketing information system (MKIS)
Information is the processed data derived
through data analysis. An organization needs the information to respond to
environmental changes as well as to make a decision. In order to collect updated,
reliable information regularly, the organization needs to design and use an
effective marketing information system (MKIS). Thus, an MKIS is a unified system
of interrelated parts to provide information support to achieve marketing
objectives. It consists of input- processing- output and feedback components.
Fig: Simple Marketing Information System
The key components of simple marketing
information system are as follows:
i)
Input: It
consist of data generated from internal and external sources.
ii)
Processing: It consists of activities related
to data sorting, analysis, evaluation, storage, retrieval, and dissemination
iii)
Output: It
consist of regular and special report needed for marketing decision making.
iv)
Feedback: It provides information to redesign
input and processing to meet the changing need of marketing.
A marketing information system means to
collect, analyze, and supply marketing information to marketers. They use
information to make marketing decisions. It gives the regular flow of information
about competitors, customers, suppliers, intermediaries, salespeople, marketing
mix and other forces. It plays an important role in making marketing decisions
so it is considered as the life-blood of marketing. Thus, marketers cannot make the decision on any issue without MKIS. Some of the popular definitions given by different authors and scholars
are given below:
·
A marketing
information system (MIS) consists of people and
procedures for assessing information needs, developing the needed information,
and helping decision makers use the information to generate and validate
actionable customer and market insights.- Philip
Kotler
·
Marketing
information system is an ongoing, organize procedures to generate, analyze,
disseminate, store and retrieve information for use in making marketing
decisions.-William J. Stanton
·
A system in which,
marketing data is formally gathered, stored, analyzed, and distributed to
managers/marketers in accordance with their informational needs on a regular
basis. – Jobber
In conclusion, MKIS is an
ongoing organized procedure to generate, analyze, disseminate, store and
retrieve information for the purpose of making marketing decisions. It
regularly monitors the marketing environment in order to provide reliable, complete
and up-to-date information. This is the age of information technology so that MKIS
can be applied in areas of marketing decisions: operational, executive and
strategic decisions.
Features of Marketing Information System
The main features of marketing information
system are:
i) Inter-related components: MKIS is a set of inter-related
components which consist of people, equipment and procedures. Information and communication
technology is used to deliver it.
ii)
Continuous Process: It is continuous and never ending
process. It collects, processes, analyses, stores, retrieves, and disseminates
information for decision making and control in regular basis.
iii)
Timely: MKIS provides right information to right people at right time. If there
is no quickness in a decision, it becomes meaningless so it helps to make
marketing decisions in a timely manner.
iv)
Accurate, reliable and complete information: It provides accurate, reliable and complete
information for decision making.
v)
Consistent and accessible: It provides consistent information based on the same definition, assumption and time period. The information is easily
available to authorized person through communication technology.
Ø Importance of marketing information system
Importance of marketing information system
can be depicted in the following points:
1. Collection of information: MKIS is needed to collect complete, reliable
and up-to-date information from markets. It also helps to analyze information
to give certain meanings.
2. Marketing Plan: MKIS provides updated, reliable, and
accurate information which helps marketing to predetermine future courses of
action. It also helps to set objectives and standards of performance for marketing
planning. Marketing opportunities can be identified and strategies can be
formulated in order to achieve them.
3. Formulation, implementation, and control
of marketing programs: Success of a
firm depends on the effective formulation, implementation and control of
marketing programs. MKIS provides all information about markets, customers,
competitors, employees, suppliers, pressure groups and so on. MKIS also helps
to analyze information such as sales trends, stage of a product life cycle,
pricing and non-pricing strategies of competitors, changing preference of
consumer. Marketers design and implement marketing mix on the basis of such
information. MKIS facilitates continuous monitoring of marketing performance
for timely corrective action. The deviation between standard and actual
performance can be analyzed and corrected with the environmental dynamics.
4. Marketing decision making: Marketing decision making is based on
marketing information provided by MKIS. It helps them to understand the
problem, identify and evaluate alternatives and to make a choice, through which
the decision can be easily made.
5. Storage of information: MKIS is needed to store valuable information
for future reference. Marketers can retrieve information whenever and wherever
they are required. It maintains a database of employees, customers, competitors,
suppliers, civil societies, pressure groups, and so on, for future reference.
6. Market expansion/coverage: When MKIS provides complete, reliable, and
up-to-date information; such information can be used for expanding the markets,
from local to regional, regional to national and national to global markets.
Without such information, no market expansion can be done effectively.
7. Environmental Adaptation: The major function of MKIS is to provide information
about changing needs and preference, innovation and external changes. This
helps an organization to identify opportunities and face threats. New strategies
can be made to adapt to the changing environment.
Ø Components
of marketing information system
Marketing
Information System (MKIS) collects, analyzes, and supplies a lot of relevant
information to the marketing managers. It is a valuable tool for planning,
implementing and controlling the marketing activities. The role of MKIS is to
identify what sort of information is required by the marketing managers. It
then collects and analyzes the information. It supplies this information to the
marketing manager at the right time. MKIS collects the information through its
subsystems. These subsystems are called components of MKIS.
Fig: Components of
Marketing Information System (MKIS)
1) Internal Record System: A major component of marketing information
system is an internal record system. Every organization keeps records of all transactional
and non- transactional data such as: order, shipping, annual report, sales
trends, financial statement, etc. The system which keeps such internal record is
called internal record system. Marketers get different kinds of information
from the internal records of the company. Many companies maintain their
computerized internal records. Inside records help marketing managers to gain
faster access to reliable information. It consists of:
I) Customer-related records: It consists of customers’ profile, order
placement cycle, bills, invoices, shipping documents, inventory records,
payment records, and customer demands.
Ii) Sales related records: It
includes all the records related to sales such as total sales, sales returns, the discount, commission, market segment, sales trends, and so on.
Iii) Other records: Internal records also include annual
reports, financial statement, audit report, and other special reports as per
requirement which provides useful information for decision making.
2) Marketing Intelligence System: The second component of MKIS is ‘Marketing
Intelligence System’. It collects information from external sources. It
provides information about current marketing-environment and changing
conditions in the market. In other words, the marketing intelligence system is a
set of procedures and sources used by managers to obtain everyday information
about pertinent developments in the marketing environment. This information can
be easily gathered from external sources like; magazines, trade journals,
commercial press, so on. The information
derived from MIS is collected from the following sources:
i) Marketing Managers: They read books, newspaper, trade
publication and even talk with customers, suppliers, distributors to gather
information.
ii) Salesforce/salespeople: They find and report new development in the
market place and motivate the organization for marketing intelligence purpose.
iii) Middlemen/Intermediaries: They include agents, dealers, wholesalers,
and retailers. They handle several products and usually know in advance about
markets and competitors’ move. Thus, marketers should motivate them to get
information from them.
iv) Specialists/private agencies: A firm may also appoint specialists to
collect market information or may buy market information from private agencies.
Such specialists or agencies are skilled in collecting, analyzing, and
disseminating market information.
v) Outsourcing:
Commercial detectives are hired to gather specific information. Data
can be purchased from the research firm.
vi) Marketing Information section: It is a special section which scans the
environment and surf the internet to gather information.
3. Marketing Decision Support System: The third component of MIS is ‘Marketing
Decision Support System’. These are the tools which help the marketing managers
to analyze data and to take better marketing decisions. They include hardware,
i.e. computer and software programs. A computer helps the marketing manager to
analyze the marketing information. It also helps them to take better decisions.
In fact, today marketing managers cannot work without computers. There are many
software programs, which help the marketing manager to do market segmentation,
price fixing, advertising budgets, etc.
A DSS is a procedure that allows a manager to
interact with data and methods of analysis to gather, analyze, and interpret
information. It helps the marketing manager s to make a better decision. It does not
collect information rather it stores, analyses and synthesizes the collected
information. It has the following components:
i) Data Bank: A data bank is a store of data. It
stores different types of data collected from various sources such as internal
reports, market intelligence, and market research which are about customers,
competitors, environmental trends and organization’s performance.
ii) Method Bank: DSS consists of a set of different statistical
tools ranging from a simple procedure to sophisticated methods. They help managers
to analyze the information and make a decision. It includes statistical tools
such as average, percent, classification, tabulation, regression, co-relation,
survey, diagram, cluster analysis, factor analysis, etc.
iii) Model Bank: It consists of the interrelationship between different variables that help
decision makers to understand, predict and control marketing problems. Model
bank has different kinds of models and optimization routines such as Markov
model, Queuing Model, New product pretest Models, Sales Response Models, Differential
Calculus, Statistical Decision theory, Mathematical programming, Game theory
and so on.
4. Marketing Research System: The fourth important component of MKIS is
‘Marketing Research System’. It is the systematic design, collection, analysis,
and reporting of data and finding relevant to a specific marketing situation
facing the company. It is conducted to solve specific marketing problems of the
company. It collects data about the problem. This data is tabulated, analyzed
and conclusions are drawn. Then the recommendations are given for solving the
problem. The main purpose of marketing research is to provide reliable,
complete, and up-to-date information for decision making to the marketing
managers. However, this information is specific information. It can be used only
for a particular purpose. MKIS and marketing research are not substitutes of
each other. The scope of MKIS is very wide. It includes ‘marketing research’.
However, the scope of marketing research very narrow. The major aspects of
marketing research are as follows:
i) Product research: Product research is concerned with finding information
about products such as new product development, product improvement, brand
loyalty, product positioning, packaging, product life cycle and product
labeling etc.
ii) Price research: Price research is related to price mix of
marketing such as list price, method of pricing, pricing policies, strategies
of competitors.
iii) Place/Distribution research: Place research is concerned with warehouse,
transportation, distribution channels, channels structures, delivery costs and
so on.
iv) Promotion research: Promotion research is concerned with
advertising, public relations and publicity, personal selling, and sales
promotions etc.
Ø Concept and Meaning of Marketing Research
Marketing research is composed of two words: Marketing
and research. Marketing is an act of planning and executing the conception,
pricing, and distributing ideas, goods, and services to create exchanges that
satisfy individual and organizational objectives whereas research is s
systematic and complete study of a problem. Thus, it is clear that marketing
research is a systematic method of collecting, recording, and analyzing data,
which is used to resolve marketing problems. It is a tool for identifying
market opportunities and to minimize threats.
Some
of the popular definitions given by different authors and scholars are given
below that will help to understand the meaning of marketing research.
According to Philip Kotler-“Marketing research is the systematic
design, collection, analysis, and reporting of data and finding relevant to a specific
marketing situation facing the company.”
In the words of William J. Stanton-“Marketing research is the development,
interpretation, and communication of decision oriented information to be used
in the strategic marketing process.”
According to Dr. Sultan Freihat-“Marketing research is the process of
collecting and analyzing of data for the purposes of identifying and resolving
problems related to companies marketing services and marketing opportunities,
it’s a planned and managed activity on a scientific basis to ensure efficiency
in dealing with those problems and opportunities.”
The key features of marketing research are as
follows:
i) Systematic
process: Marketing
research is a systematic process which is properly planned and implemented.
ii) Continuous and
dynamic process: It is not one-time process. It should be repeated for making up-to-date
information if environmental changes take place in the markets.
iii) Scientific
Procedures: The main
objective of marketing research is collecting, analyzing, interpreting and
reporting of data which is based on scientific procedures.
iv)
Problem-oriented: It deals with specific marketing problems.
v) Decision
making: Marketing research ultimately aims at helping the marketing managers
for decision making.
In conclusion, marketing research is the
systematic gathering, recording, and analyzing of data about problems relating
to the marketing of products or services. It helps to solve these marketing
problems quickly, correctly, and systematically. Marketing research is mainly concerned
with various research related to the product, price, place, promotion, people,
process, the physical environment and so on.
Companies use marketing research in a wide
variety of situations. For example, marketing research gives marketers insights
into customer motivations, purchase behavior, and satisfaction. It can help
them to assess market potential and market share or measure the effectiveness
of pricing, product, distribution, and promotion activities. Some large
companies have their own research departments that work with marketing managers
on marketing research projects. This is how P&G, GE, and many other
corporate giants handle marketing research.
Ø Process of marketing research:
The marketing research process has four
steps: defining the problem and research objectives, developing the research
plan, implementing the research plan, and interpreting and reporting the
findings.
Fig: Stages of
Marketing Research Process
1. Defining the problem and research objectives:
Defining
the problems and research objectives are the first and probably the hardest step
of the marketing research process. This stage clearly determines the area or scope of
research. Marketing managers and
researchers must work together closely to define the problem and
agree on research objectives. The manager best understands the decision for
which information is needed, whereas the
researcher best understands marketing research and how to
obtain the information. If the definition of the problem becomes wrong, collection
of information, its analysis, conclusion, and report also become wrong. Thus, it
should be prepared carefully. Literature review, case study, experience survey,
and brainstorming methods can be used to define problems and research
objectives.
After the problem has
been defined carefully, the manager and the researcher must set the research
objectives. Marketing research can be either exploratory research (gathering
preliminary information that will help define the problem and suggest
hypotheses), or descriptive research (describing things, such as the market
potential for a product or the demographics and attitudes of consumers who buy
the products) or causal research (testing hypotheses about cause-and-effect
relationship).
2. Developing the research plan: Once the research problem and objectives
have been defined, researchers must determine the exact information needed,
develop a plan for gathering it efficiently, and present the plan to
management. The research plan outlines sources of existing data and spells out
the specific research approaches, contact methods, sampling plans, and
instruments to be used in collecting data. It is the main stage of research
methodology which describes research purposes, states problems, describes
research justification, and explains how it will be conducted. It is the
research methodology for gathering the needed information. It deals with the
decision on:
· Data Sources: It may be the primary and secondary data.
Secondary data are collected earlier for other purposes. It includes an internal
report of organization, book, government publication, etc. While primary data
refers to data collected for the first time for a specific purpose.
· Research
Methods: They are used
for collecting primary data: they are:
a. Survey: It involves direct questioning of
people to gather facts, opinion and other information.
b. Observation: It is the process of collecting
information by watching the action of people on setting.
c. Focus group research: It is the method of
collecting information by gathering of a small group of 6 to 10 people who are invited
to spend a few hours with a skilled moderator to discuss the research problem.
d. Experiment: It is the method of collecting
data by lab or field experiment.
e. Consumer panel: In such method, a panel of a group of people serves as the subject of the survey.
· Contact
Methods: This is the
method of contact to the respondent. The contact method of
marketing research can be mail, personal interview, telephone, email, fax, etc.
·
Sampling
Plan: Sampling is
the process of selecting small units from the total population for collecting
data. It includes a sampling unit, sample size, and sampling procedure.
·
Research
Instruments: Research instruments may be well-structured
questionnaire and interview.
· Analytical
tools: They include the
statistical tools such as mean, regression, correlation; variance for analyzing
information and so on.
3. Implementing the research plan: The third
stage of marketing research is implementing the research plan i.e. collecting
and analyzing the data. It is the execution phase of marketing research. In
this stage, the researcher next puts the marketing research plan into action.
This involves collecting, processing, and analyzing the information. Data
collection can be carried out by the company’s marketing research staff or
outside firms. Researchers should watch closely to make sure that the plan is
implemented correctly. They must guard against problems with interacting with
respondents, with the quality of participants’ response, and with interviewers
who make mistakes or take shortcuts. Researchers must also process and analyze
the collected data to isolate important information and insight. They need to
check data for accuracy and completeness and code it for analysis. The
researchers then tabulate the results and compute statistical measures. Data
analysis involves coding, tabulation and statistical analysis of data by
selecting proper tools by using computers, for example, SPSS.
4. Interpreting and reporting the findings: The last stage of marketing research is
interpreting and reporting the findings. Interpretation is the process of
assigning meaning to the collected information and determining the conclusions,
significance, and implications of the findings. The researcher must interpret
the findings, draw conclusions, and report them to the management. A marketing manager should not just give information with numbers and fancy statistical
techniques but also present important findings and insights that are useful in
the major decisions faced by management.
However, interpretation should not be left only to researchers. They are
often experts in research design and statistics, but the marketing manager knows
more about the problem and the decisions that must be made. The best research
means little if the manager blindly accepts faulty interpretations from the
researcher. Similarly, managers may be biased; they might tend to accept research results that show what they
expected and reject those that they did not expect or hope for. In many cases,
findings can be interpreted in different ways, and discussions between
researchers and managers will help point to the best interpretations. Thus,
managers and researchers must work together closely when interpreting research
results, and both must share responsibility for the research process and
resulting decisions.
Ø Areas of Marketing Research
The marketing research area is the scope of marketing research where marketing
research can be conducted. Some of the
major marketing areas related to market, product, price, place, and promotion
are listed as follows:
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Review/Important Questions
Brief Answer Questions:
1. What is market information? Why does it
necessary for firms to gather market information? Give two reasons.
2. What is marketing information system (MKIS)?
Write down its four components.
3. What is marketing research? Mention its
stages.
4. Differentiate between data and information
with suitable examples.
5. What is the marketing intelligence system?
Short Answer Questions
6. What is marketing research? Explain the
stages involved in the process of marketing research.
7. What is marketing information system (MKIS)?
Briefly explain the four major components of marketing Information System?
8. Explain the features and importance of
marketing information system.
9. What is marketing intelligence system? How
does it differ from the marketing research system?
Comprehensive Answer Questions
10. What is Marketing Information System? Explain
the various components of marketing information system.
THANK
YOU!
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