14 Marketing Information System

Kulbhushan Chandel

   1. Learning outcome:

 

After completing this module the student will be able to:

  • Define the concept of marketing information system.
  • Explain various components of marketing information system.
  • Explain how the data mining applications are used in marketing?
  • Explain marketing information sub-systems.
  • Explain the concept of decision support system.

   2. Introduction

 

Management perform five distinct functions, viz., planning, organising, co-ordinating, deciding and controlling and each function require support from an information system. Marketing Information System is proposed to support such management decision making. Three levels of decision-making can be distinguished from one another; strategic, control and operational. Marketing information system supports each level. Strategic decisions have inferences for changing structure of an organisation and therefore, the marketing information system must provide the precise and accurate information. Control decisions call for the information to observe the implementation of plans and operations to assess performance as well as to take corrective actions whenever needed. Operational decisions concern the management of the company’s marketing mix. A marketing information system is intended to carry together dissimilar items of data into a logical body of information. Every company should systematize and channelize a continuous flow of market-related information to its marketing managers, to help them to understand the changes happening in the marketing environment, changes in buyer behaviour, preferences, consumption patterns, competitors’ activities, etc. Support of a good marketing information system will be a competitive advantage for a company.

    According to Philip Kotler,

 

“A Marketing Information System consists of people, equipment, and procedures to gather, sort, analyse, evaluate and distribute needed, timely, and accurate information to marketing decision makers.”

 

A marketing information system is developed from internal reporting systems, marketing research systems and marketing intelligence systems.

 

3. Components of Marketing Information System

 

The major components of Marketing Information System, viz. Marketing environment, its components and the types of decisions which the marketing information system helps are as follows:

 

A. Marketing Environment: It covers markets, channels, competitors, political, legal economic and technological factors.

B. Components: It covers internal reporting system, marketing research systems, marketing intelligence systems and marketing models.

C. Types of decisions: It covers strategic decisions, control decisions and operational decisions.

 

3.1 Internal Reporting System: Every company will have a lot of information to be stored in internal reporting system on its sales, orders, inventory, receivables and other sales invoices. These can be sources of valuable information to marketing managers. They can examine the reports and identify the opportunities as well as threats. For example, some of the information that could be derived from sales invoices is as follows:

  • Product type, size and pack type by territory.
  • Product type, size and pack type by account.
  • Product type, size and pack type by industry.
  • Product type, size and pack type by customers.

  A company can determine the degree to which it is giving a satisfactory level of customer service by comparing orders received with the sales invoices. Similarly, the company can ascertain whether its stocks are in line with the present demand patterns by comparing stockholding records with the orders received. Big stores and super markets determine sales in the way by comparing the each and every product store-wise and total for the company every evening so that the supplier can provide the delivery of replacement stocks.

 

3.2 Marketing Research System: Marketing research is a practical search for information. Such study aims to solve supposed marketing problem that can be defined and solved within the course of the study. Marketing research is the systematic design, collection, analysis and reporting of the data relevant to a precise marketing situation facing an organisation. It focuses on practical research, which are conducted to answer questions about explicit marketing problems or to make decisions about the particular courses of action, strategies or policies. Firm must have timely admittance to the market information so that the competitive pressure, the cost of making a strategic mistake and intricacy of domestic and foreign markets.

 

3.3 Marketing Intelligence Systems: A marketing intelligence systems is a set of methods and data sources used by marketing managers to transfer information from the environment that can be used in their decision-making. Marketing intelligence can be collected by reading books, newspapers, and journals and by captivating information from the customers, suppliers and distributors.

 

3.4 Marketing Models: A good marketing information system should have the means of interpreting information to make possible by giving direction to decision making. This will consist of marketing models, which could be computerised or manual. Some useful information marketing models are Time series sales models, Brand switching models, Linear programming, Elasticity models like price, demand, supply, income, Regression and correlation models, Analysis of variance models, Sensitivity analysis models, Discounted cash flow and Spreadsheet models. These are related mathematical, statistical, economic and financial models that are analytical subsystem of the marketing information system, computers provide a great help for this analysis. Some of these models used are stochastic means that including probabilistic element, whereas others are deterministic models where chance plays no part. Brand switching models are stochastic models since these eloquent choices in the probabilities where as linear programming is deterministic in that the relationship between variables is expressed in the mathematical terms.

 

4. Database Marketing

 

The marketing information system necessitates a large amount of data on various aspects of the marketing functions which are collected from numerous sources both internal and external sources. Then the data collected is accumulated, organised, stored and updated in a computer. The updating of compiled, organised data relevant to specified areas such as customers, market segments, competitors or modification and manipulation of information from a database. A database system is a collection of programmes which permit storage, modification and manipulation of information form a database. This ability to acquire, timely data and managing data efficiency is important in database management. Any information system should have accurate data, which will be useful for decision making. The data should be timely available as if the data is not available on time then it is of no use. The timeliness of data is of prime importance for the success of any information system.

 

The organisations use the database management system for managing the data in the database. A database management system (DBMS) is an incorporated set of programmes used to define databases, perform transactions that update databases, retrieve data from databases and establish database efficiency. Some DBMSs for personal computers can be used directly by end users to set up small information systems while other DBMSs are much more complex and require professional programming. DBMSs embrace an enquiry language that allows end users to retrieve data. DBMSs make data more of a resource and facilitate programming work, thereby making accesses to data more consistent and vigorous.

 

4.1 Customer Relationship Management is an important function of marketing management. For better understanding a customer, the company must collect information about its customers and store it in database and perform database marketing. According to Kotler, a customer database is an organised collection of complete information about the individual customers or prospects that is current, accessible and actionable for such marketing purpose as lead generation, lead qualification, sale of product or service, or maintenance of customer relationships.

 

4.2 Database Marketing is the process of building, maintaining and using customer database and other database (products, suppliers, resellers) for the purpose of contacting, transacting, and building customer relationships. A customer database is totally diverse from customer mailing list. A customer mailing list is simply a set of names, addresses and contact telephone numbers of customers. A customer database contains much more information, collected by accumulated through many customer transactions, registration, telephone or online queries, warranty cards and every customer contact. A good customer base should contain the customer’s past purchase history, demographics, psychographics, media graphics and other useful information.

 

4.3 Evaluation of Data as a Resource

 

The use of DBMS is a method for making data more of a resource. The usefulness of the information is determined by the user and the way business processes are organised. The three main factors related to the information usefulness are as follows:

  • Information quality: it tells how good the information is and on what basis is it based on accuracy, precision, completeness, timeliness and source.
  • Information accessibility: it tells how easy it is obtain and manipulate the information regardless of how good it is.
  • Information presentation: it tells the level of summarisation and format for presentation to the use, regardless of how good the information is and how available it is.

    4.4 Methods of Accessing the Data in a Computer System

 

A computer system finds stored data either by knowing its exact location or by searching for the data. Different DBMSs contain different internal methods for storing and retrieving the data. The following are the three methods that can be used:

  • Sequential access: this is the earliest computerised data processing used sequential access in which the individual records within the single file are processed in sequence until all records have been processed or until the processing is terminated for some other reason. Sequential access is the only methods for data stored on tape, but it can also be used for data on direct access devices such as disk. Sequential processing makes it unnecessary to know the exact location of each data item because the data are processed according to the other in which they are sorted.
  • Direct Access: processing events as they occur requires direct access, the ability to find an individual item in a file immediately. Magnetic disk storage was developed to provide this capability. Example: a person needs phone number of Sameer Sharma. Then the user needing Sameer Sharma’s telephone number enters the name into a computer system. The program uses a mathematical procedure to calculate the approximate location on the hard disk where Sameer Sharma’s phone number is stored. Another program instructs the read head to move to that location to find the data. Using the same logic to change the number of Rahul Khanna, one program calculates a location for phone number and another program directs the read head to store the new data in that location.
  • Indexed access: third method of finding data is indexed access. An index is a table used to find the location of data. The index indicated where alphabetical groups of names are stored. The user enters a name which he is searching; the program uses the index to decide where to start searching for the phone numbers. Using indexes makes it possible to perform both sequential processing and direct access efficiently. Therefore, access to data using such indexes is often called the indexed sequential access method. To perform a sequential processing task, such as listing the phone directory in alphabetical order, a program reads each index entry in turn and then reads all of the data pointed to by that index entry. If the index entries and the data pointed to by the index entries are in alphabetical order, the listing will also be in alphabetical order.

    5. Data Mining

 

Data mining is the process during which the marketing managers extort the useful information about individual customers, trends in the market and market segments from the mass of data. Data mining comprises of the use of sophisticated statistical and mathematical techniques like cluster analysis, predictive modelling, neutral networking, decision trees, etc. Data mining is the exploration and analysis of large quantities of data in order to discover meaningful patterns and rules. Data mining needs substantial computing power. Companies are inserting high emphasis on building second customer relationships, and for good sales. Companies desire to understand how they can sell more to existing customers. They also desire to determine of their customers will prove to be prove to be of long-term value to them. Companies need to determine any existing natural classifications among their customers so that each class could be properly targeted with products and services. Data mining enables companies to find answers and discover patterns in their customer data. Competitive considerations also appraise heavily on companies to get into data mining.

 

6. Data Mining Applications in Marketing

 

Data mining technology includes a rich collection of confirmed techniques that cover a wide range of applications in marketing decision areas. In some cases, multiple techniques are used, back to back, to greater advantage. For example, a cluster of customers can be followed by a predictive algorithm applied to some of the recognized clusters to discover the expected behaviour of the customers in those clients.

  • Customer segmentation: this is one of the most widespread applications. Companies use data mining to understand their customers better. Cluster detection algorithms discover sharing the same characteristics.
  • Market based analysis: this is very useful applications for the organised retail business. Association rule algorithms uncover sympathy between products that are bought as assortment together.
  • Risk management: insurance companies and mortgage businesses use mining to uncover risks associated with potential customers.
  • Fraud detection: credit card companies use data mining to discover abnormal spending patterns of customers, such patterns can expose fraudulent use of the cards.
  • Demand prediction: organisation retail and other businesses use data mining to match demand and supply trends to forecast for specific products.

    7. Decision Support System

 

The Decision support system is an interactive information system which provides information, models, and data manipulation tools to help to make decisions in semi structured and unstructured situations where no one knows exactly what decision to be made. The traditional decision support system approach includes interactive problem solving, direct use of models and user-controllable methods for displaying and analysing data, formulating and analysing the alternative decisions. This approach emerged due to limitations of TPS and MIS. TPS only focused on the record keeping and control of repetitive clerical errors. MIS provided the inflexible reports for the management and was unable to produce information in such a manner which was flexible and desirable by the managers. DSS was intended to support managers and professionals doing largely analytical work in less structured situations with unclear criteria for success.

 

8. Marketing Information Sub-Systems

 

Marketing Information System in most companies with multiple consumer products and multiple product lines will comprise of following sub-systems:

  1. The sales information system
  2. The market research and intelligence information system
  3. Promotion and advertising information system
  4. New product development information system
  5. Sales forecasting information system
  6. Product planning information system
  7. Product pricing information system
  8. Distribution information system
  9. Budget/ Expenditure control information system

    These sub-systems help the company to certify the identification and evaluation potentially profitable sales opportunities, react speedily to changes in market situation, establish profit maximisation product prices, control marketing cost, organize sales personnel most effectively and assist in allocating budget for advertising and other forms of promotion.

 

Computerised information systems automate the collection, maintenance and reporting of information connecting the following activities:

  1. The sales of goods and services to customers.
  2. Customer support following these initial sales.
  3. The initiation of customer contacts and potential markets.
  4. Sales forecast
  5. Sales performance of marketing personnel
  6. Marketing research
  7. Advertising and promotions

   Strategic, tactical and operational information systems facilitate marketing managers in product planning, pricing, decisions, advertising, sales promotion strategies and forecasting decisions.

 

9. Summary

 

Marketing Information System is intended to support such management decision making. Three levels of decision making can be distinguished from one another; strategic, control and operational. Marketing information system supports each level. Strategic decisions have implications for changing structure of an organisation and therefore, the marketing information system must provide the precise and accurate information. Control decisions call for the information to monitor the implementation of plans and operations to assess performance as well as to take corrective actions whenever needed. Operational decisions concern the management of the company’s marketing mix. A marketing information system is intended to bring together dissimilar items of data into a logical body of information. A marketing information system is developed from internal reporting systems, marketing research systems and marketing intelligence systems. Every company will have a wealth of internal reporting system on sales, orders received, inventory levels, sales proceeds receivable and sales invoices. These can be sources of valuable information to marketing managers. They can analyse these reports and identify the opportunities as well as threats. Marketing research is a proactive search for information. Such study aims to solve perceived marketing problem which can be defined and solved within the course of the study. Marketing research is the systematic design, collection, analysis and reporting of the data relevant to a specific marketing situation facing an organisation. It focuses on applied research which are conducted to answer questions about specific marketing problems or to make decisions about the particular courses of action, strategies or policies. The marketing information system requires a large amount of data on various aspects of the marketing functions which are collected from numerous sources both internal and external sources. Then the data collected is compiled, organised, stored and updated in a computer. The updating of compiled, organised data relevant to specified areas such as customers, market segments, competitors or modification and manipulation of information from a database. A database system is a collection of programmes which allows storage, modification and manipulation of information form a database. Database Marketing is the process of building, maintaining and using customer database and other database (products, suppliers, resellers) for the purpose of contacting, transacting, and building customer relationships. A customer database is totally different from customer mailing list. A customer mailing list is simply a set of names, addresses and contact telephone numbers of customers. A customer database contains much more information, collected by accumulated through many customer transactions, registration, telephone or online queries, warranty cards and every customer contact. A good customer base should contain the customer’s past purchase history, demographics, psychographics, media graphics and other useful information. Data mining is the process through which the marketing managers extract the useful information about individual customers, trends in the market and market segments from the mass of data. Data mining involves the use of sophisticated statistical and mathematical techniques like cluster analysis, predictive modelling, neural networking, decision trees, etc. Data mining is the exploration and analysis of large quantities of data in order to discover meaningful patterns and rules.

 

Suggested Readings (Books and Websites)

  1. Ghosh PK, Sales Management- Text and Cases, Himalaya Publishing House, 2010.
  2. Jobber David and Lancester Geoff, Selling and Sales Management, Pearson Education, Sixth Edition.
  3. McCarthy, Jerome E. (1964). Basic Marketing. A Managerial Approach. Homewood, IL: Irwin.
  4. Needham, Dave (1996). Business for Higher Awards. Oxford, England: Heinemann.
  5. Kotler, Philip (2012). Marketing Management. Pearson Education. Kotler, P. and Keller, K. (2006), Marketing and Management, Pearson Prentice Hall, Upper Saddle River, NJ, USA
  6. McCarthy, Jerome  E.  (1975)”Basic  Marketing:  A  Managerial  Approach,”  fifth  edition, Richard D. Irwin
  7. Alter Steven, Information Systems, Pearson Education, fourth edition