Kotler Summary – Chapter 04: Managing & Marketing Information and Measuring Market Demand


Chapter notes for the famous marketing textbook by Kotler
Subject: Marketing

Three developments that create need:

  1. From local to national to global marketing
  2. From buyer needs to buyer wants
  3. From price to non-price competition

Most important advancement: computerized data capture systems

Marketing Information System: consists of people, equipment, & procedures to gather, sort, analyze, evaluate & distribute needed, timely & accurate information to marketing decision makers.

Internal Records System: reports on orders, sales, prices, inventory levels, etc.

  • Order-to-Payment cycle – must perform quickly & accurately; customers favor those firms that deliver on time; bills should go out promptly
  • Sales Reporting System – managers need up to date information on current sales

Marketing Intelligence System: set of procedures & sources used by managers to obtain their everyday information about pertinent developments in the marketing environment.

Five things to improve marketing intelligence:

  1. Sales force to spot & report new developments
  2. Motivate distributors, retailers, & other intermediaries to pass along important intelligence
  3. Appoint specialists to gather marketing intelligence
  4. Purchase information from A.C. Neilsen or IRI
  5. Establish internal marketing information center

Marketing Research System:
Marketing Research – systematic design, collection, analysis & reporting of data & findings relevant to a specific marketing situation facing the company.

Suppliers of Marketing Research:

  • Grad student projects
  • Online information sources
  • Check out rivals
  • Syndicated-service firms
  • Custom marketing firms
  • Specialty marketing research firms

The Marketing Research Process

Step 1: Define the problem & agree on research objectives

  • Required level of detail, how specific? Order of magnitude?
  • Competitive issues: how easily copied by competitors, etc.

Step 2: Develop research plan

  • What is most efficient plan to obtain information.

Step 3: Data sources

  • Secondary data – collected for other purpose & already exist
  • Primary data – collected for specific purpose or project
    • Marketing Database – collection of data about customers, prospects, leads, etc. that is actionable for marketing purposes
  • Research approaches:
    • Observational Research: watch relevant actors & settings
    • Focus group: people invited to discuss/try product
    • Surveys: questionnaire
    • Experimental Research: controlled environment; subjecting groups to a variety of treatments
  • Research Instruments:
    • Questionnaires: closed end & open-end questions
    • Mechanical Testing Instruments
  • Sampling plan:
    • Who is to be surveyed?
    • Sample size, how many people?
    • Procedure, how to choose people?
  • Contact Methods:
    • Mail questionnaire
    • Telephone interviewing
    • Personal interviewing – arranged or intercept people (i.e. the mall)

Step 4: Collect the Information

  • Scanners, computers, data entry

Step 5: Analyze the Information – averages, measures of dispersion

Step 6: Present the Findings to relevant parties

The Characteristics of Good Marketing Research

  • Scientific Method – careful observation, generate hypothesis, prediction, testing
  • Research creativity – innovative ways to solve problems
  • Multiple Methods – shy away from any one method
  • Interdependence of models & data – data interpreted from underlying models
  • Value & cost of information – value/cost considerations
  • Healthy skepticism – skepticism of assumptions
  • Ethical Marketing – learn about customers needs to better serve them

Overcoming barriers to the Use of Marketing Research:

  • Narrow conception – many managers see it as only a fact finding mission
  • Uneven caliber of marketing researchers – perceived as clerical activity
  • Late & erroneous findings
  • Personality & presentational differences

Marketing Decision Support System (MDSS) – is a coordinated collection of data, system, tools, & techniques with supporting software & hardware by which an organization gathers and interprets relevant information from business & environment & turns it into a basis for marketing action.

  • Models for managers to simulate marketing situations
  • A variety of analysis tools (see pg. 128 for list)
  • Neural Networks – “Artificial intelligence system” imitates human mind

An Overview of Forecasting & Demand Measurement

  • Measures of market demand
    • Product levels: all, industry, company, product line, product form, product item sales
    • Space levels: World, USA, Region, Territory, Customer
    • Time levels: Short run, Medium run, Long run
  • Which market to measure
    Market – set of all actual & potential customers

    • Potential market: profess sufficient level of interest in a defined market offer
    • Available: consumers who have interest, income, & access to offer
    • Qualified available: have interest, income, access, & qualifications for offer
    • Target: part of qualified market the company decides to serve
    • Penetrated market: set of consumers who have already purchased the product

A Vocabulary for Demand Measurement

  • Market demand – 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
  • Demand is not a fixed number, rather a function
  • Market minimum – sales with no stimulation
  • Market sensitivity of demand
  • Expansible market – affected by level of industry expenditures
  • Non-expansible market – not affected by level of industry expenditures
  • Market Forecast – market demand corresponding to company marketing expenditures
  • Market potential – max demand as industry expenditures approach infinity
  • Company demand – estimated share of market demand at alternative levels of company marketing effort
  • Company sales forecast – expected level of company sales based on a chosen marketing plan & an assumed marketing environment
  • Sales quota – sales goal set for a product line, company division, or sales representative
  • Sales budget – is a conservative estimate of the expected volume of sale & is used primarily for making current purchasing, production, & cash-flow decisions
  • Company sales potential – sales limit approached by company demand as company marketing effort increases relative to competitors
  • Total market potential – max amount of sales that might be available to all the firms in an industry during a given period under a given level of industry marketing effort & given environmental conditions

Area market potential – select best territories

  • Market build-up method – identifying all the potential buyers in each market & estimating their potential purchases

Industry & Market Shares

  • Company needs to know actual industry sales taking place in its market

Estimating Future Demand

  • Three stage procedure to prepare sales forecast
    • macroeconomic forecast
    • industry forecast
    • company sales forecast
  • Small firms can buy macroeconomic forecasts from
    • marketing research firms
    • specialized forecasting firms
    • futurist research firms
  • All forecasts based on: what people say, what people do, what people have done

Survey of buyer’s intention:

  • Anticipate what buyers will do
  • Purchase probability scale

Composite of Sales Force Opinions

  • Have sales force estimate future sales, then make adjustments

Expert Opinion can give forecasts

Market test method – test forecast directly in market

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