Ch. 5: Gathering Information
and Measuring Market Demand
Marketing Management
Warin Chotekorakul
Ch.5 Gathering information and
measuring marketing demand
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Outline:
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Marketing Information System
Marketing Research
Marketing Decision Support System
Forecasting and Demand Measurement
Marketing Information System
(MIS)
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Usefulness of MIS: Examples
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The Coca-Cola Company knows that we put 3.2
ice cubes in a glass, see 69 of its commercials
every year, and prefer cans to pop out of vending
machines at a temperature of 35 degrees.
Hoover learned that we spend about 35 mins each
week vacuuming, sucking up about 8 pounds of
dust each year and using 6 bags to do so.
Marketing Information System
(MIS) --2
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Consists of people, equipment, and
procedures to gather, sort, analyze, evaluate
and distribute needed, timely and accurate
information to marketing decision makers.
MIS is developed from internal company
records, marketing intelligence activities,
marketing research, and marketing decision
support system.
Internal Records System
Supplying results data, internal records
system includes reports on orders, sales,
prices, costs, inventory levels, receivables,
payables.
Marketing Intelligence System
Supplying happenings data to the marketers,
marketing intelligence system is a set of
procedures and sources used by manager to
obtain everyday information about
developments in the marketing environment.
Marketing Intelligence System (2)
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How to collect marketing intelligence:
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Reading books, newspapers, and trade
publications
Talking to customers, suppliers, and
distributors
Meeting with other company managers
Marketing Research system
is the systematic design, collection,
analysis and reporting of data and
findings relevant to a specific marketing
situation facing the company.
Suppliers of Marketing Research
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Set up research department
Engage students or professor to carry out project
Using the Internet
Checking out rivals: visiting competitors
Buying information from:
1. Syndicated-service research firm
2. Custom marketing research firms
3. Specialty-line marketing research firms
The Marketing Research Process
Step 1:
Step 2:
Step 3:
Step 4:
Step 5:
Step 6:
Define the problem
Develop the research plan
Collect the information
Analyze the information
Present the findings
Make the decision
Step 1 : Define the problem
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Exploratory: to gather preliminary data to
shed light on the real nature of the problem
and possibly suggest some hypotheses or
new ideas.
Descriptive: to describe certain magnitudes
Causal: to test a cause-effect relationship
Step 2: Develop the research plan
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Data sources
Research approaches
Research instruments
Sampling plan
Contact methods
Data sources
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Primary data
Secondary data
1. Internal sources
2. Government publications
3. Periodical and books
4. Commercial data
Research approaches
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Observation research
Focus-group research: b4 designing large-scale
survey
Survey research
Behavioral data
Experimental research
Research Instruments
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Questionnaires
1. Closed-end questions --- dichotomous,
multiple choice, Likert scale, semantic
differential, importance, rating scale, intention-tobuy scale
2. Open-end questions --- completely
unstructured, word association, sentence
completion, story completion, picture, thematic
apperception test (TAT)
Mechanical instruments:Lie-detecting tools, eye
camera, audiometer,etc.
Research Instruments (2)
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Psychological tools: to probe a buyer’s deeper
beliefs and feelings using psychological tool e.g.,
laddering techniques, depth interviews.
Qualitative measures: e.g., sending handheld
videocameras into consumers’ homes
Sampling plan
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Sampling unit: Who is to be surveyed?
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Individual, or Industrial Org, or Household ???
Sample size: How many people?
Sampling procedure: How should the respondents
be chosen?
1. Probability sampling --- Simple random,
Stratified random, and Cluster samples
2. Non-probability sampling ---Convenience,
Judgment, and Quota samples
Contact method
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Mail questionnaire
Telephone interview
Personal interview: arranged interviews, and
intercept interviews
On-line interviewing
Step 3: Collect the information
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This stage is most expensive and most
prone to error.
Beware of 4 problems:
1. Not-at-home
2. Refusal to co-operate
3. Biased or dishonest answers of
interviewee.
4. Biased or dishonest interviewer.
Step 4: Analyze the information
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Extract findings from collected data.
Tabulate the data and develop
frequency distribution.
Step 5: Present the findings
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Data presented to relevant parties.
Findings must be presented in a way which is
relevant to the major marketing decision
Step 6: Make the decision
Marketing Decision Support
System (MDSS)
A coordinated collection of data, systems, tools, and
techniques with supporting software and hardware
by which an organization gathers and interprets
relevant information from business and environment
and turns it into a basis for marketing action.
An Overview of Forecasting and
Demand Measurement
90 different types of demand estimates
1. Product level (all sales, industry sales,
company sales, product line sales, product
form sales, product item sales)
2. Space level (customer, territory, region,
country, world)
3. Time level (short run, medium run, long
run)
Why study those three levels?
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They help you make your sales (demand)
estimates. For example,
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NOKIA may want to forecast the sales level
of NOKIA 7650 (Product level) worldwide
(Space level) in 2 years ahead (Time level).
Definitions
(Which market to measure?)
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Market is the set of all actual and potential
buyers of a market offer.
Potential market is the set of consumers who
profess a sufficient level of interest in a market
offer( and may have enough income).
Available market is the set of consumers who
have interest, income and access to a particular
offer.
(continued)
Definitions 2
(Which market to measure?)
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Qualified available market is the set of
consumers who have interest, income, access and
qualifications for the particular market offer.
Target market (served market) is the part of the
qualified available market the company decides
to pursue.
Penetrated market is the set of consumers who
have already bought the company’s product.
(continued)
Definitions
(Vocabs for DD measurement)
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Market demand is the 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.
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Market DD is not a fixed number but rather a
function of the stated conditions.
(continued)
Market Demand Functions
Mkt DD
Mkt DD
Mkt Poten
(Pros)
Mkt Poten
Prosperity
Mkt Poten
Mkt Fore
Planned
Mkt Min
(Rec)
Recession
Expenditures
Industry Mkting Expenditures
Industry Mkting Expenditures
Questions
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Why does market potential curve become
straight?
What does it mean by the market minimum?
Market Demand Functions (2)
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Market potential is the limit approached by
market demand as industry marketing
expenditures approach infinity, for a given
environment.
Base sales is the market minimum.
Market sensitivity of DD is the distance
between the market minimum and the
market potential.
Vocabs 2
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Expansible market: affected much by the level of
mkting expenditures
Non-expansible market: not affected much by the
level of mkting expenditures
Primary demand --- demand for product class
Selective demand --- demand for particular brand
Company demand --- company’s estimated share of
market demand at alternative levels of company
marketing effort in a given time period.
Vocabs 3
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Company demand --- company’s estimated
share of market demand at alternative levels
of company marketing effort in a given time
period.
 QA = sAQ
 QA = company A’s demand
 sA = company A’s market share
 Q = total market demand
Vocabs 4
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Company sales forecast --- expected level of
company sales based on a chosen marketing
plan and an assumed marketing environment.
 Sales quota --- is the sales goal set for a
product line, company division, or sales
representative.
 Sales budget --- conservative estimate of the
expected volume of sales.
Vocabs 5
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Company sales potential --- sales limit
approached by company demand.
Total market potential --- maximum
amount of sales available to all firms in an
industry.
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Q = nqp
Question
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When does the market potential equal to a
company potential?
Current Demand Estimation
Methods
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Chain-ratio method
Market-buildup method
Multiple-factor index method
Brand development index (BDI)
1. Chain Ratio Method
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Starting from the entire population (macro
point of view) in a study area and multiply
by ratios that discard non-using segment.
Example of Chain Ratio Method
Suppose we are estimating the demand for organically grown vegetables in Bangkok,
assuming the price of organic vegetables is 30% higher than ordinary
vegetables.
Thus, the target group must have income a little higher than the average.
Demand for organically
Grown vegetables in
Bangkok
=
Number of Population in Bangkok x Percentage
population in Bangkok with income more
than B15,000 per month x Personal discretionary
income per capita x Avg percentage of discretionary
income spent on food x Avg Percentage of food
budget spent on vegetables x Avg Percentage of the
amount spent on organic vegetables
2. Market Build-Up Method
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Identifying all the potential buyers in each
market and estimating their potential
purchases.
Starting from the particular area to the
entire market.
Example of Market Build-Up Method
Suppose you are selling metal-sheet punching and cutting machine, there are 2 markets
which you can sell to:
1.
Electrical switchboard manufacturing sector
2.
Metal furniture Sector
Each electrical switchboard manufacturing factory which has sales volume of less than 50
million baht per year would need one machine but that which has sales volume more than 50
million baht per year would need 2 machines.
For metal furniture sector. The metal-furniture factory which has sales volume of less than 50
million baht per year would need 3 machines and those with more than 50 million of sales per year
would need 5 machine.
Find the total market potential.
Sector
Annual sales
in million
No. of Firms
Potential
Number of
Machine Sold
per 1 Customer
Market
Potential
Switchboard
< 50
>50
<50
>50
3
6
6
12
1
2
3
5
3
12
18
60
93
Furniture
Total
3. Multiple-Factor Index
Buying power Index is the function of:
W1 * market’s percent of segment’s effective
buying income
+ W2 * market’s percent of segment’s retail sales
+ W3 *percent of Thai population in the segment
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Method of finding buying power
index by using multiple factors
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An area is selected to find the buying power.
3 factors are involved:
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Number of population
Disposable personal income
Amount of retail sales
Each factors will be assigned a weight.
Multiply the weight of each factor with the
percentage of the factors in the whole country.
Example of Multiple-Index Method
Province
%of Population
(0.20)
%of Retail Spending
(0.35)
%of Disposable
Income (0.45)
A
B
0.08
0.02
0.04
0.05
0.02
0.03
What is the buying power index of provinces A and B ?
BPI of A
=
(0.2x0.08)+(0.35x0.04)+(0.45x0.02)
BPI of B
=
(0.2x0.02)+(0.35x0.05)+(0.45x0.03)
=0.039 or 3.9%
=0.035 or 3.5%
If the expected market potential in Thailand is 250 million baht, based on the BPI, what
Will be the potential sales in provinces A and B ?
Potential sales in Province A is = 0.039x250million = 9.75 million baht
Potential sales in Province B is = 0.035x 250million = 8.75 million baht
4. BDI
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Category development index (primary demand
gap) = percentage of a product category
sales(shampoo) in a market to the percentage of
the population in the same market..
Brand development index (selective demand
gap) = percentage of a particular branded product
(Sunsilk) sales in a market to the percentage of
the population in the same market.
Formulae for CDI and BDI
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CDI
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CDI
= Category development index (used to
measure the potential of product category)
= %of product category total Thailand’s sales in that market x 100
% of total Thailand’s population in that market
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BDI
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BDI
= Brand development index (used
to measure the potential of a
particular brand)
= %of Brand Total Thailand’s sales in that market x 100
% of total Thailand’s population in that market
Example of BDI and CDI
Look at the BDI in Chiangmai.
The number of Thailand’s population is 60 million and the population of Chiangmai
is assumed to be 6 million.
Suppose there are 3 brands of shampoo in Thailand's market: 1. Sunsilk 2. Pantene
3. Clairol
The sales of Sunsilk in Thailand is 600 million baht, out of which 30 million baht comes from
sales in Chiangmai.
The sales of Pantene in Thailand is 400 million baht out of whch 20 million baht comes from
sales in Chiangmai.
The sales of Clairol in Thailand is 200 million baht out of which 50 million baht comes from
sales in Chiangmai.
What is CDI in Chiangmai?
CDI
= %of product category total Thailand’s sales in that market
% of total Thailand’s population in that market
= (30+20+50) / (600+400+200)
(6/ 60)
= 0.833 or 83.33%
What is BDI of Sunsilk in Chiangmai ?
BDI
= %of brand total Thailand’s sales in that market
%of total Thailand’s population in that market
= (30/ 600)
(6/ 60)
= 0. 5 or 50%
Other Points Regarding BDI
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Taking the percent of segment’s particular
branded sales divided by the total percent
of segment’s category sales *100
If the result (BDI) is less than 100,the
brand is underdeveloped in the particular
area.
If the result (BDI) is more than 100, the
brand is more developed than the category.
Estimating future demand
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Survey of buyer’s intentions
Composite of sales force opinions
Expert opinion
Past-sales analysis
Market-test method