Marketing Information System

Demand Forecasting

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 Chapter Questions
• What are the components of a modern marketing information system?
• What are useful internal records?
• What is involved in a marketing intelligence system?
• What constitutes good marketing research?
• How can companies more accurately measure and forecast demand?

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 Information

• Meaning of information
• Need & Importance of marketing information

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 Marketing Information System

A marketing information system consists of people, equipment,

and procedures to gather, sort, analyze, evaluate, and distribute
needed, timely, and accurate information to marketing decision
makers.

The role of the MIS is to assess the managers’ information needs,

develop the needed information, and distribute that information in a
timely manner.

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•Internal information system
•External information system
 Marketing Information System

•Internal records in the company

•Marketing Intelligence System
•Marketing Research System

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 Internal Records

• Order & payment

• Sales reporting & information system
• CRM & Data management

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 Marketing Intelligence

• A set of sources, procedures & systems that offer

information to the managers to map relevant market
happenings in the marketing environment on daily basis.
• Informal/ Formal Search

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 Marketing Intelligence- Sources
• Literature & publications
• Customers/ suppliers/ distributors/ other outsiders
• Company officials
• Sales force
• Channel members
• Specialists
• Outside suppliers
• Internal marketing information centre

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• Government data
• Marketing intelligence from internet
Marketing Research System

Marketing research is the systematic design,

collection, analysis, and reporting of data and
findings relevant to a specific marketing situation
facing the company.

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Types of Marketing Research Firms

• Syndicated service research firms : These firms gather consumer

and trade information, which they sell for a fee.

• Custom marketing research firms: These firms are hired to carry out
specific projects. They design the study and report the findings.

• Specialty-line marketing research firms: These firms provide

specialized research services.

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 Marketing Research Process

• Identification of management decision problem

• Definition of market research problems & research objective
• Research plan formulation
• Fieldwork or data collection
• Data preparation and analysis
• Report preparation and presentation
• Decision making

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Problem…..

Research Problem : A difficulty either of theoretical or practical nature

which an individual or organisation faces and wishes to find solution
for.

Management Decision Problem : Asks what is required to be done

on the part of decision maker.

Market Research Problem: Determines what information is needed.

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 Management Decision Problem (MDP) and
Marketing Research Problem (MRP)

MDP MRP
• Should price be cut in response to • Determine the buyer behaviour at
price cut by a competitor? various price levels

• Should the product X be introduced in • Assess the probable market size and
the market? share for product X

• What should be done to increase the • Determine the Strengths and

relative market share of product Y? weaknesses of product Y vis-à-vis
those of the competitors

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Defining the Problem:
Tasks Involved

• Secondary Data Analysis

• Discussion with Decision Maker
• Interviews with Experts
• Qualitative Research

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Research Plan Formulation

Data Sources Primary, Secondary

Research Approaches Survey, Observation, Experiments
Research Instrument Questionnaire, Qualitative Measures,
Technological devices
Sampling Plan Universe, Population, Sample size,
Sampling technique
Contact Methods Telephone, Mail, Personal contacts,
Online contacts

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 Data Sources

• Primary data are originated by a researcher for the

specific purpose of addressing the problem at hand.
The collection of primary data involves all the steps
of the marketing research process

• Secondary data are data that have already been

collected for purposes other than the problem at
hand. These data can be located quickly and

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inexpensively
 Research Approaches

• Survey
• Observation
• Experimentation

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 Research Instruments
• Questionnaires Technological Devices
– Structured Traffic Counters
– Unstructured Turnstiles
On Site Cameras
Tachistoscope
• Qualitative Measures
Physiological Measurement
– Depth Interviews
• EEG, ECG
(one-on-one interviews), (Laddering)
• GSR (psycho galvanometer)
– Internet- Blogs, Forums, social networks,
• Pupilometer
Twitter, Youtube
• Voice Pitch Analysis
– Focus Groups Opinion & Behaviour Measurement
– Projective Techniques • RAMS (Response Latency)
• Peoplemeter & Audimeter
• Technological Devices • People Reader
• Eye Tracking Monitors (Oculometers,
Eye Cameras, Eye view monitors)

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Cognition Studies
Scanner Based Research
• Laser Scanner (UPC)
• Behaviour Scan (ID cards)
 Qualitative Vs.
Quantitative Research
Qualitative Research Quantitative Research

Objective To gain a qualitative To quantify the data and

understanding of the generalize the results from the
underlying reasons and sample to the population of
motivations interest

Sample Small number of non- Large number of representative

representative cases cases

Data Collection Unstructured Structured

Data Analysis Non-statistical Statistical

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Outcome Develop an initial Recommend a final course of
understanding action
Questionnaire

(i) Open ended questions ( Unstructured questions)

(a) Free Response

(b) Probing
( c) Projective Techniques

(ii) Close ended questions (Structured questions)

(a) Dichotomous questions

(b) Ranking Questions
(c) Multiple Choice questions

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(d) Checklist questions
(e) Scaling questions
 Completely Unstructured

What is your opinion of American Airlines?

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 Closed Ended Questions

(i) Dichotomous questions

e.g. Do you own the house in which you live?

Yes____ No____

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(ii) Ranking Questions

Please rank each of the following factors from most important (1) to least
important (5) to you for buying Santro car.

Great looks ___

Comfortable seating ___
Reasonable cost ___
Low Maintenance ___
High Mileage ___

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(iii) Multiple Choice questions

How many children do you have?

one __
two __
three __
More than three __

Concept of order or position bias

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(iv) Checklist questions

What do you do in your spare time?

Read magazines _____
Watch TV _____
Play games _____
Visit market _____
Any other ( Please specify) _____

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(v) Scaling questions

Give your agreement to the following statement

I like pizza

SA A NAND D SD

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• Likert Scale (Summated Scale) : 5-point agreement/ disagreement scale
Ex: How strongly you agree to the following statement:
Petrol prices will touch Rs. 100 per litre in next 2 years
Strongly agree agree Indifferent Disagree Strongly disagree

• Semantic Differential Scale: 7-point scale with end-points associated with bipolar labels
My Brother is :
Careful _ _ _ _ _ _ _ Careless

• Stapel Scale: Scale with 10 categories without neutral point

My brother is +5
+4
+3
+2

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+1
Careful
-1
-2
-3
-4
-5
• Purchase Intent Scale
– What is chance of your buying brand X next time you
purchase this product?
• Definitely Buy
• Probably Buy
• Might or Might Not Buy
• Probably Not Buy
• Definitely Not Buy

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 Sampling Plan
• Population: The target population is the collection of elements or objects that possess the
information sought by the researcher and about which inferences are to be made
Who is to be surveyed?

• Sample size: How many people should be surveyed?

• Sampling technique: How should the respondents be chosen?

– Probability sampling
– Non-probability sampling

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 Marketing Decision Support
System (MDSS)

A marketing decision support system is a

coordinated collection of data, systems, tools,
and techniques with supporting hardware and
software by which an organization gathers and
interprets relevant information from business
and environment and turns it into a basis for
marketing action.

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Market Measurement and Forecasting

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 Questions!

• What are main concepts in demand measurement & forecasting?

• How can current demand be estimated?

• How can future demand be estimated?

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 Introduction

• Market measurement and forecasting relates to measurement and forecast of size,

growth, and profit potential of each market opportunity.

• It is used as basis for decision making by marketing management.

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Levels of Market Measurement
• A company might forecast short-run
demand to order raw materials, plan
production, and borrow cash, or
long-run demand to plan expansion
& technology upgradation .

• It might forecast regional demand to

decide whether to set up regional
distribution or customer level
demand to target different segments
of customers & offer them
customized products.

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 Markets to be Measured
• Market is set of all actual & potential
buyers of a product.
• Potential market is the set of consumers
with a sufficient level of interest in a market
offer and enough income to afford it.
• Available market is the set of consumers
who have interest, income, and access to
a particular market offer.
• Qualified available market is the set of
consumers who have interest, income,
access and qualifications for a particular
market offer.
• Served (Target) market is the part of the
qualified available market the company

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decides to pursue.
• Penetrated market is the set of
consumers who have already bought the
company’s product.
 Demand Measurement-
concepts

• What is demand?
• How to measure demand?
• Market demand?
• Market forecast?
• Market potential?
• Company demand?
• Company (sales) forecast?

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• Company (sales) potential?

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.
Market demand is not a fixed
number rather a function of
stated conditions called market
demand functions.
Market demand increases with
demand stimulating
expenditures upto maximum
level of Q2 i.e. Market potential.
Market Level
Market Forecast : Only one
level of the marketing
expenditure will occur and the
market demand forecast for
corresponding marketing
expenditure is market forecast.
Market Potential : It is the
limit approached by market
demand as industry marketing
expenditure approaches
infinity for a given market
environment.
Here, for a given market
environment means that it is
different in different market
environments. For example, it
will be higher in prosperity
than in recession.
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Market Demand Functions

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 Company Level
Company demand : It is the
company’s estimated share of
market demand at alternative
levels of company marketing
effort in given time period.
It depends on how company’s
products, services, prices are
perceived relative to
competitors.
If the above are equal, then
company’s demand will depend
upon the relative scale and
effectiveness of its marketing
expenditure.
Company (sale) forecast : It Company (sale) potential : It
is the expected level of is the sales limit approached
company sales based on a by company demand as
chosen marketing plan and an marketing efforts increases
assumed marketing relative to that of competitors.
environment.
Sales quota is the sales goal set for Absolute limit of company is
a product line, company division or equal to market potential.
sales representative. It is primarily
managerial device and are set
generally on higher side. Sale
budget is a conservative estimate
of expected volume of sales,
primarily for making current
purchasing, production and cash
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flow decision. It is generally set
slightly on the lower side.
Estimating Current Demand

• Total market potential

• Area market potential
• Total industry sales and market shares

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 Total Market Potential
Basic method : Involves a calculation of the
total number of buyers, the average quantity
purchased per time period and the average price
of the product for the same time period.
The calculation is expressed in the following
formula:
Q=nxqxp
Q = total market demand
n = total number of buyers in the market (most
difficult)
q = average quantity purchased by a buyer per
time period
p = average price of the product per time period
Chain Ratio Method : The chain ratio method
involves a series of successive calculations to
a base quantity. The percentage calculations
can be obtained from marketing research or
reliable secondary sources. This method
usually involves a percentage calculation of the
number of people who are expected to buy the
product in the future. This is called buying
intention. Suppose a brewery is interested in
estimating the market potential for a new light
beer. An estimate can be made by the
following calculation:
Demand for the new light beer = Population x
personal discretionary income per capita x average
percentage of discretionary income spent on food x
average percentage of amount spent on food that is
spent on beverages x average percentage of amount
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spent on beverages that is spent on alcoholic
beverages x average percentage of amount spent on
alcoholic beverages that is spent on beer x expected
percentage of amount spent on beer that will be
spent on light beer.
 Area Market Potential
Market-Buildup Method : Identifying all the
potential buyers in each market and estimating
their potential purchases. It produces accurate
results if we have a list of all potential buyers
and a good estimate of what each will buy.
Unfortunately, this information is not always easy
to gather.
Multiple Factor Index Method: The method is
based on a statistical index calculated from the
number of potential buyers that form part of a
specific market and should be used as a relative
measure.
A market index can then be calculated from the
various applicable indices for that particular
region or market. The indices used to calculate
the market index are weighted according to their
relative contribution to the final measurement.
For example, suppose Chandigarh has 3.00
percent of the India’s disposable personal
income, 1.50 percent of India’s car sales, and 1
percent of India’s population, and the respective
weights are 0.8, 0.4, and 0.3. The buying-power
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index for Chandigarh would be 2.9= [0.8(3.00) +
0.4(1.50) + 0.3(1.0)]. Thus 2.9 percent of the
nation’s car sales might be expected to take
place in Chandigarh.
 Market Share

• Market share indicates the relationship of an organisation's sales to the sales of all
participants (competitors) in the same market.

• Market share can be expressed in volume as well as monetary terms.

• It must be noted that these two measures of market share can differ for the same
company .

• The industry trade association or market research firms often collect and publish
total industry sales, although it usually does not list individual company sales
separately. With this information, each company can evaluate its performance
against the whole industry.

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• Suppose a company's sales are increasing by 5 percent a year, and industry sales
are increasing by 10 percent. This company is actually losing its relative standing in
the industry.
Estimating Future Demand
(Demand Forecasting)
• Demand forecasting means estimation of the demand for the good in
the forecast period.
• Why is it important to forecast demand??

Qualitative Methods Quantitative Methods

Management Judgment Market Testing

Survey of Buyer’s Intentions
Composite of Salesforce Opinions
Expert Opinion
Group-discussion
Pooling of individual estimates
Time Series Analysis
Exponential Smoothening
Regression Analysis
Leading Indicator Method

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Delphi Technique