Chapter 5
Understanding Markets,
Market Demand, and the
Marketing Environment
PowerPoint by Karen E. James
Louisiana State University - Shreveport
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 0 in Chapter 5
Objectives
 Identify the major components of a
marketing system.
 Understand how marketers can
improve marketing decisions
through intelligence systems,
marketing research, and marketing
decision support systems.
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 1 in Chapter 5
Objectives
 Learn how demand can be more
accurately measured and
forecasted.
 Understand key demographic,
economic, natural, technological,
political-legal, and socio-cultural
developments.
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 2 in Chapter 5
Supporting Marketing Decisions
 A Marketing Information System
is defined as . . .
“people, equipment, and
procedures that gather, sort,
analyze, evaluate, and distribute
needed, timely, and accurate
information to marketing decision
makers.”
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 3 in Chapter 5
Supporting Marketing Decisions
 Marketing Information Systems
compile information from:
– Internal records systems
– Marketing intelligence systems
– Marketing research
– Marketing decision support analysis
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 4 in Chapter 5
Supporting Marketing Decisions
 Internal Records Systems
– Order-to-payment cycle is key
– Timely sales reports help to better
manage inventory
– Customer, product, salesperson and
other databases can be mined for
fresh insights
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 5 in Chapter 5
Supporting Marketing Decisions
 Improving the Quality of Marketing
Intelligence System Data Requires:
– Training and motivating sales force
to report developments
– Motivating channel members to share
important intelligence
– Collecting competitive intelligence
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 6 in Chapter 5
Supporting Marketing Decisions
 Improving the Quality of Marketing
Intelligence System Data Requires:
– Developing a customer advisory
panel
– Purchasing information from
commercial data sources
– Establishing a marketing information
center within the company
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 7 in Chapter 5
Supporting Marketing Decisions
 The Marketing Research Process:
– Defining the problem and research
objectives
– Developing the research plan
– Collecting the information
– Analyzing the information
– Presenting the findings
– Making the decision
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 8 in Chapter 5
Supporting Marketing Decisions
 Developing the Research Plan Involves:
– Gathering secondary and primary data
– Selecting one or more research
approaches for primary data collection
– Using the appropriate research instrument
– Developing a sampling plan
– Determining subject contact methods
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 9 in Chapter 5
Supporting Marketing Decisions
 Approaches for primary data
collection include:
– Observational research
– Focus-group research
– Survey research
– Behavioral data
– Experimental research
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 10 in Chapter 5
Supporting Marketing Decisions
 A Marketing Decision Support
System is defined as a . . .
“coordinated collection of data, systems,
tools, and techniques with supporting
software and hardware by which an
organization gathers and interprets
information from business and the
environment and turns it into a basis for
marketing action.”
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 11 in Chapter 5
Forecasting and
Demand Measurement
Essential Aspects
 Market
 Potential market
 The market
 Available market
 Market demand
 Target market
(served market)
 Company demand
and sales forecasts
 Current demand
 Qualified available
market
 Future demand
 Penetrated market
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 12 in Chapter 5
Forecasting and
Demand Measurement
Essential Aspects
 The market
 Measuring demand
 Company demand
and sales forecasts
 Current demand
 Future demand
©2003 Prentice Hall, Inc.
 Market demand
–
–
–
–
Market minimum
Market forecast
Market potential
Nonexpansible vs.
expansible markets
– Primary vs.
secondary demand
 Market forecast
 Market potential
To accompany A Framework for Marketing Management, 2nd Edition
Slide 13 in Chapter 5
Forecasting and
Demand Measurement
Essential Aspects
 Company demand
 The market
 Company sales
forecast
 Measuring demand
 Sales quota
 Company demand
and sales forecasts
 Sales budget
 Current demand
 Future demand
©2003 Prentice Hall, Inc.
 Company sales
potential
To accompany A Framework for Marketing Management, 2nd Edition
Slide 14 in Chapter 5
Forecasting and
Demand Measurement
Essential Aspects
 The market
 Measuring demand
 Company demand
and sales forecasts
 Current demand
 Total market
potential
 Area market
potential
– Market-buildup
method
 Future demand
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 15 in Chapter 5
Forecasting and
Demand Measurement
Essential Aspects
 The market
 Measuring demand
 Company demand
and sales forecasts
 Current demand
 Future demand
©2003 Prentice Hall, Inc.
 Many Forecasting
Methods:
– Buyer intentions
survey
– Composite of sales
force opinions
– Expert opinion
– Past-sales analysis
– Market-test method
To accompany A Framework for Marketing Management, 2nd Edition
Slide 16 in Chapter 5
Macroenvironmental
Trends and Forces
 Demographic Environment
– Worldwide population growth
– Population age mix
– Ethnic markets
– Educational groups
– Household patterns
– Geographic population shifts
– Rise of micromarkets
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 17 in Chapter 5
Macroenvironmental
Trends and Forces
 Economic Environment
– Income distribution
– Savings, debt, and credit
availability
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 18 in Chapter 5
Macroenvironmental
Trends and Forces
 Natural Environment
– Shortage of raw materials
– Increased energy costs
– Anti-pollution pressures
– Changing role of governments
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 19 in Chapter 5
Macroenvironmental
Trends and Forces
 Technological Environment
– Accelerating pace of technological
change
– Unlimited opportunities for
innovation
– Varying R&D budgets
– Increased regulation of
technological change
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 20 in Chapter 5
Macroenvironmental
Trends and Forces
 Political-Legal Environment
– Legislation regulating business
– Growth of special interest groups
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 21 in Chapter 5
Macroenvironmental
Trends and Forces
 Socio-Cultural Environment
– World views that consumers hold
of themselves, others, society,
organizations, nature, and the
universe
– High persistence of core values
– Existence of subcultures
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 22 in Chapter 5