Market Information & Analysis

Lecture 5Karen Knibbs

Marketing Practice – U14210 S2 07/08

Lecture Objectives

By the end of the lecture, you should be able to:

Identify the typical types of information which marketers would use

Understand a range of methods of collecting & measuring information

Evaluate the significance of MR data to marketing decision making

Consider the case of Tesco’s use of information

2

‘Information is the competitive advantage that drives success…just so long as the

information is appropriate and adequate and we know how to use that information!

Competitors can copy and better equipment, processes and products but they can’t

replicate the company’s information and intellectual capital.’

Kotler & Keller (2006)

3

MR in the Marketing Processfrom last week…

MR information needed at all stages: new product idea generation and

product development marketing testing launch implementation brand performance management positioning and repositioning etc

4

Why the need for metrics?

Corporate demand for accountabilityAttempts to curb spiralling costs, long-

range budgeting• spend in advance of return (ROI) - ROM• Legitimacy and credibility for marketers in

the eyes of senior managers

Discontent with traditional measures Enhanced availability of data due to

new technology and internet infrastructure

5

The value of intangible assets

“Today intangible assets are worth, on average, 69% of the firm’s total market value as compared to 17% in

1978 (Sawhney & Zabin, 2002). If marketing expenditures are an investment, and the creation of marketing are assets, then it is of utmost concern

that their assets be valued by metrics in use.”

Seggie, Cavusgil & Phelan (2007)

6

Typical marketing data

How tangible are these data and how are they collected / measured?

Market share Market growth Brand value ROI in M/ ROM: marketing

productivity Competitive Advantage

7

Demand estimation

Estimation of market demand is essential for effective marketing and as illustrated below, demand is measured on a number of levels.

Kotler & Keller (2006): Ninety types of demand measurement (6 5 3)

Types of market

Potential market• Consumers have some stated interest in a product or service.

Available market• Set of consumers who have the interest, income and access to the product

or services. Qualified available market

• Set of consumers who have the interest, income, access and qualifications for a particular product or service.

Served or ‘target’ market• Part of the qualified market that the company decides to pursue.

Penetrated market• Set of consumers that have already bought a particular product or service.

9

Measuring market demand

“The total market demand is the total volume of a product or service that

would be bought by a defined consumer group in a defined

geographic area, in a defined time period in a defined marketing

environment under a defined level and mix of industry marketing effort.”

Kotler & Keller (2006)

10

Measuring market demand

Kotler & Keller (2006): Market demand

11

Types of demand The primary demand is the total

demand for all brands of product and services (e.g. music downloads, MP3 players, mobile phones, laptops)

The selective demand is a specific demand for a given brand of product (e.g. iTunes, iPod, iPhone, iMac etc.)

12

Estimating market demand

Q= n x q x pWhere

• Q = total market demand• n = number of buyers in the market• q = quantity purchased by an average buyer

per year• p = price of an average unit

13

Forecasting future demand Environmental forecast

Inflation, Unemployment, Interest rates, Consumer spending and saving, Business investment, Government expenditure.

Industry forecast What is currently happening?

Company sales forecast Buyers’ intentions, Composite of sales force

opinions, Expert opinion. Test market method. Time series analysis, Leading indicators, Statistical

demand analysis, Information analysis.

14

Qualitative & Quantitative data

Accounting (tangible) dataBased on actual, financial, quantifiable ‘fact’Typical historical then future projections /

forecasts / benchmarkingIf these are inaccurate, planning is futile

Non-accounting (intangible) dataTend to be qualitative & subjective in natureConsiders long-run wealth creation & future

development

15

Intangible metrics

Accounting measures: Customer contribution EVA (economic value

added) Stewart 1993 Where expenditures are

seen as future investments instead of only current costs

• But financial measures must also consider impact of competitive actions

Non-accounting measures:Balanced scorecard

(Kaplan & Norton, 1992)CE: customer equity

(Blatberg & Deighton 1996, Zeithaml & Lemon 2000)

CLV: customer lifetime value (Jackson 1989, Jain & Singh 2002)

16

Balanced Scorecard

17

“Intangible assets”

Seggie, Cavusgil & Phelan (2007) Competitive advantage Knowledge, Networks Innovative capability Equity (brand-financial, brand-psychological,

relational & customer)Plus:

USP/differentiation, Positioning, Perception Customer satisfaction, WOM recommendation Behavioural intent, loyalty, perception

18

What to measure?: Products

Competitive advantage: “sustained differentiation from rivals” (Barney 1991; Wernerfelt 1984)

Declines over time Is context specific: to competitors and

uncontrollable environmental forces (PESTLE)• For one company, could be in the form of price

premium, e.g. Jaguar, Ipod, Bang & Olufsen, Gucci• Which can be used as a “measure of brand health &

brand equity” (Alawadi, Neslin & Lehmann 2003)

19

What to measure?: Services

Tend to involve subjective measures E.g. Customer satisfaction, loyalty, perception But informational power of the Internet is making

objective attributes (i.e. company history, customer recommendations etc., which appear as “factual”) increasingly important, and brand loyalty is declining (Bennett & Rundle-Thiele 2005)

Brand equity is now measured on future expectations and “what have you done for me lately” consumer philosophy, reducing brand halo effect

• E.g. Bank, Mobile network provider, Utilities, Fitness centre

20

Collection methods

Data capture (passive) ECR: electronic cash registers Databases: data mining &

warehousing CRM: micro monitoring of

customers ERP software Online purchases, accounts &

direct contact/feedback Profit per customer interaction &

CLV

Data collection (active) Online surveys Consumer (internet)

panelsShoppers upload info on purchases

Mystery shoppers

Looking through existing

customers?

Identifying potential customers?

21

Forecasting future demand

Kotler & Keller (2006) Common sales forecasting techniques

23

Tesco’s – how much do they know about you?

24

Why are Tesco’s so nosey?

Identification of segmentation profiles of various target markets

Above added to typical purchase frequency, channel choice (store or online), value of orders, best/worst performing products/services (for category management decisions), utilisation of sales promotions and responses to direct communications (past performance)

Identify opportunities to cross-sell, make changes (future performance)

25

Global research

Business globalisation is increasing the demand for accurate local and regional information on the new markets to be entered.

Research needs to cover everything from cultural issues to consumer behaviour and competitive activity.

26

Marketing research in small businesses and non-profit organisations

Often limited by budgetary constraints, but the following can be accomplished:Observation of market, competitors and

industrySecondary data collectionSurveys Experiments

27

Summary

Accurate information enables intelligent decision making in pursuit of organisational objectives

Information must be continuously collected, monitored, analysed and communicated all around the organisation (via a MIS)

More information is necessarily helpful, but better use and understanding of it to drive marketing decision making is imperative

The internet is becoming a key information source for businesses and consumers alike, but all must be wary of the reliability and credibility of the data

28

Further reading suggestions

Kotler & Keller (2006) chapter 4, as per unit handbook.

Chisnall (2004), Marketing Research, (7th Ed.), McGraw Hill. Doyle, P (2000), Value Based Marketing, John Wiley. Seggie, S., Cavusgil, E. & Phelan, S. (2007). Measurement of

return on marketing investment: A conceptual framework and the future of marketing metrics. Industrial marketing management. 36, 843-841.

29