Chapter 17Marketing Information SystemsMarketing Information Systems

MANAGEMENT INFORMATION SYSTEMS 8/ERaymond McLeod, Jr. and George Schell

Copyright 2001 Prentice-Hall, Inc.17-1

ObjectivesObjectivesRecognize the high Recognize the high level of interest that marketing has shown inlevel of interest that marketing has shown infunctional Information System and functional Information System and appreciate how their appreciate how their theoreticaltheoreticalmodels benefit other functional areas as wellmodels benefit other functional areas as wellVisualize a functional Information System as a group of input andVisualize a functional Information System as a group of input andoutput subsystems connected by a databaseoutput subsystems connected by a databaseUnderstand how the input subsystems gather data and informationUnderstand how the input subsystems gather data and informationboth internally and from the both internally and from the enviromentenviromentRecognize that the output subsystems include various types ofRecognize that the output subsystems include various types ofsoftware that transform data into information describing thesoftware that transform data into information describing thefunctional areafunctional areaHave an awareness of how information technology has beenHave an awareness of how information technology has beenincorporated into marketing research and the gathering ofincorporated into marketing research and the gathering ofmarketting marketting intelligenceintelligenceBe familiar with some of the programs in the software library, whichBe familiar with some of the programs in the software library, whichsupport decisions relating to product, place, promotion, price and thesupport decisions relating to product, place, promotion, price and theintegrated mixintegrated mix

IntroductionIntroduction

Marketing was the first functional area toMarketing was the first functional area toexhibit an interest in MISexhibit an interest in MISThe marketing information system has threeThe marketing information system has threesubsystems; the accounting informationsubsystems; the accounting informationsystem (AIS), marketing research, andsystem (AIS), marketing research, andmarketing intelligencemarketing intelligenceFunctional information systems: theFunctional information systems: theconceptual systems should be "mirrorconceptual systems should be "mirrorimages" of the physical systemsimages" of the physical systems

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Functional information systemsFunctional information systems

Marketinginformation

system

Manufacturinginformation

system

Financeinformation

system

Human resourceinformation

system

Marketingfunction

Manufacturingfunction

Financefunction

Humanresourcesfunction

Physical system of the firmPhysical system of the firm

Functional Information Systems RepresentFunctional Information Systems Represent Functional Physical Systems Functional Physical Systems

Informationresource

informationsystem

InformationServicesfunction

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Marketing PrinciplesMarketing Principles

Marketing mixMarketing mix–– ProductProduct–– PromotionPromotion–– PlacePlace–– PricePrice

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The Marketing InformationThe Marketing InformationSystem (MKIS)System (MKIS)

Kotler'sKotler's marketing nerve center marketing nerve center3 information flows3 information flows–– InternalInternal

»» Gathered in firmGathered in firm

–– IntelligenceIntelligence»» From environmentFrom environment

–– CommunicationsCommunications»» To environmentTo environment

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Firm Environ-ment

Marketing intelligence

Marketing communications

Internalmarketinginformation

Kotler’sKotler’s Information Flows Information Flows

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Marketing Information SystemMarketing Information System(MKIS) Definition(MKIS) Definition

A computer-based system that works inconjunction with other functionalinformation systems to support the firm'smanagement in solving problems that relateto marketing the firm's products.

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An MKIS ModelAn MKIS ModelOutputOutput–– ProductProduct–– PlacePlace–– PromotionPromotion–– PricePrice–– Integrated mixIntegrated mix

DatabaseDatabaseInputInput–– AISAIS–– Marketing researchMarketing research–– Marketing intelligenceMarketing intelligence

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Inputsubsystems

Output subsystems

DD

AA

TT

AA

BB

AA

SS

EE

Accountinginformation

system

Marketingresearch

subsystem

Marketingintelligencesubsystem

Internal sources

Environmental sources

Productsubsystem

Placesubsystem

Promotionsubsystem

Pricesubsystem

Integrated-mix

subsystem

Users

DataData InformationInformationMKIS ModelMKIS Model

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Accounting Information SystemAccounting Information System

Sales order data is input.Sales order data is input.AIS provides data forAIS provides data for–– Periodic reportsPeriodic reports–– Special reportsSpecial reports–– Mathematical models and knowledge-basedMathematical models and knowledge-based

modelsmodels

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Marketing Research SubsystemMarketing Research Subsystem

Managers use marketing research to gatherManagers use marketing research to gatherinformationinformation–– Gathered from customers and prospectsGathered from customers and prospects–– Purchased or procured from other organizationsPurchased or procured from other organizations

Processed using marketing researchProcessed using marketing researchsubsystemsubsystem

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Primary and Secondary DataPrimary and Secondary Data

Used by marketing research subsystemUsed by marketing research subsystemPrimary data are collected by the firmPrimary data are collected by the firmExamples of primary dataExamples of primary data–– SurveySurvey–– In-depth interviewIn-depth interview–– ObservationObservation–– Controlled experimentControlled experiment

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Primary and SecondaryPrimary and SecondaryData Data [cont.][cont.]

Secondary dataSecondary data–– Mailing listsMailing lists–– Retail sales statisticsRetail sales statistics–– Video retrieval systemsVideo retrieval systems

Some secondary must be bought and someSome secondary must be bought and someis freeis free

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Marketing Research SoftwareMarketing Research Software

Graphics packages (print maps)Graphics packages (print maps)Makes market research a reality for allMakes market research a reality for allfirmsfirmsStatistical analysisStatistical analysisExpertise to interpret software outputs is theExpertise to interpret software outputs is thekey to successful use of these toolskey to successful use of these tools

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Marketing IntelligenceMarketing IntelligenceSubsystemSubsystem

Ethical activities aimed at gatheringEthical activities aimed at gatheringinformation about competitorsinformation about competitorsNot to be confused with industrialNot to be confused with industrialespionageespionageEach functional information system has anEach functional information system has anintelligence responsibilityintelligence responsibility

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Product SubsystemProduct Subsystem

Product life cycle supported through:Product life cycle supported through:1) Introduction1) Introduction2) Growth2) Growth3) Maturity3) Maturity4) Decline4) Decline

Information answers 3 key questions:Information answers 3 key questions:1) Introduce?1) Introduce?2) Change strategy?2) Change strategy?3) Delete?3) Delete?

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SalesSalesVolumeVolume

STAGESIntroduction Growth Maturity Decline

Should theproduct beintroduced

Should the product strategy be changed

Should theproduct be

deleted

The Product Life Cycle and Related DecisionsThe Product Life Cycle and Related Decisions

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New Product Evaluation ModelNew Product Evaluation Model

Another part of the product subsystemAnother part of the product subsystemNew product committeeNew product committeeExplicitly considers production as well asExplicitly considers production as well asmarketingmarketingLists decision criteria and their weightLists decision criteria and their weight

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Place SubsystemPlace Subsystem

Channel of distribution may be short or longChannel of distribution may be short or longMaterial, money, and information flowMaterial, money, and information flowthrough the distribution channelthrough the distribution channel–– Resource flowsResource flows–– FeedbackFeedback

»» Flows in direction opposite to the material flowFlows in direction opposite to the material flow

–– FeedforwardFeedforward information information»» Flow of information to customerFlow of information to customer

–– EDIEDI17-20

Material, Money, and Information FlowMaterial, Money, and Information Flow

Two-way information flow

SupplierSupplierManuManu--

facturerfacturerWhole-Whole-salersaler RetailerRetailer ConsumerConsumerMaterial MaterialMaterialMaterial

MoneyMoney MoneyMoneyMoneyMoneyMoneyMoney

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Promotion Subsystem Includes:Promotion Subsystem Includes:

(1) advertising(1) advertising

(2) personal selling(2) personal selling

(3) sales promotion(3) sales promotion

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Difficult Area to ComputerizeDifficult Area to Computerize

Successful examplesSuccessful examples1. Sales promotion --OCR scanning of barcodes1. Sales promotion --OCR scanning of barcodes

on couponson coupons2. Personal selling --laptops2. Personal selling --laptops

A. Order entryA. Order entryB. Customer call reportsB. Customer call reports

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Pricing SubsystemPricing SubsystemTwo Basic ApproachesTwo Basic Approaches

1. Cost based (AIS provides the basis)1. Cost based (AIS provides the basis)

2. Demand-based (use what-if model)2. Demand-based (use what-if model)

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Integrated-Mix SubsystemIntegrated-Mix Subsystem

BRANDAID ModelBRANDAID Model–– Solid arrows: influencesSolid arrows: influences–– Dashed arrows: responsesDashed arrows: responses

Environmental and retailer influence on theEnvironmental and retailer influence on theconsumerconsumer–– Individual influencesIndividual influences–– Combined influencesCombined influences

Unexpected influencesUnexpected influences17-25

Product Product Price Price Advertising Advertising Promotion Promotion Price-off coupons Price-off coupons

Premiums Premiums Samplings Samplings Package: Package: Graphics & Graphics &

function function Assortment Assortment

Sales Sales

Availability Availability

Price Price Promotion Promotion Advertising Advertising

Product Product Price Price Advertising Advertising Promotion Promotion Price-off coupons Price-off coupons

Premiums Premiums Sampling Sampling Package:Package: Graphics & Graphics &

function function Assortment Assortment

SeasonalSeasonaltrendtrend

ManufacturerManufacturer

RetailerRetailer

CompetitorCompetitor EnvironmentEnvironment

ConsumerConsumer

BRANDAID BRANDAID

SalesSalesDistributionDistribution

PricePriceTrade promotionTrade promotion

SalespersonsSalespersonsPackage assortmentPackage assortment

PricePriceTrade promotionTrade promotion

SalespersonsSalespersonsPackage assortmentPackage assortment

SalesSalesDistributionDistribution

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-20

-15

-10

-5

0

5

10

15

20

25

30

Actual Model

0 12 24

Months

Months

SSAALLEESS

Influence of Four Variables, Taken TogetherInfluence of Four Variables, Taken Together

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SalesSales

MonthsMonths

New PackageNew Package

ModelActual

A Model Cannot Cope with Unexpected EventsA Model Cannot Cope with Unexpected Events

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The MKIS in Fortune 500 FirmsThe MKIS in Fortune 500 FirmsPreprocessed information 71% of 1990Preprocessed information 71% of 1990firmsfirmsMathematical modelingMathematical modeling–– Generally downGenerally down–– Reason is unknownReason is unknown–– Except for production deletion and advertisingExcept for production deletion and advertising

media selectionmedia selection

Model use is becoming more balancedModel use is becoming more balanced

Studies conducted by Li, McLeod, and Rogers17-29

The MKIS in FortuneThe MKIS in Fortune500 Firms 500 Firms [cont.][cont.]

Support for management levelsSupport for management levels–– ModelsModels–– OverallOverall

Support for management functionsSupport for management functionsSupport for the marketing mixSupport for the marketing mix

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7 5 7 5

6 15 6

5 1

4 0

9 2

5 4

7 7

6 4

3 0

1 4

5 7

4 8

4 1

0

2 0

4 0

6 0

8 0

1 0 0

R e tr ie v in g d a ta S to r in g d a ta P r o c e s s in g d a ta

Perc

ent o

f com

pute

r use

rs

1 9 8 01 9 9 0

N.A. N.A. N.A.

Purposes of Computer UsagePurposes of Computer Usage

19801980

19901990

Retrieving DataRetrieving Data Storing DataStoring Data Processing DataProcessing Data

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1980 1990

Strategic planninglevel .17

Strategicplanninglevel .30

Management control

level.70

Management control

level.54

Operational controllevel .13

Operational controllevel .16

Note: The percentages are based on the number of respondentsranking the particular management levels first.

Model Use Is Becoming More BalancedModel Use Is Becoming More Balanced

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Overall Support from the Marketing InformationOverall Support from the Marketing InformationSystem Is Becoming More BalancedSystem Is Becoming More Balanced

Strategic planninglevel.25

Management controllevel.57

Operational controllevel .17

Strategic planninglevel.28

Management controllevel.40

Operational Controllevel .31

Note: The percentages are based on the number of respondentsranking the particular management levels first.

1980 1990

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The 1990 Managers Placed More Emphasis onThe 1990 Managers Placed More Emphasis onPlanning and Less on Directing Than DidPlanning and Less on Directing Than Did

Their 1980 CounterpartsTheir 1980 Counterparts

19801980 19901990

Planning .37

Organizing .03

Directing .25

Controlling .34

Planning .51

Organizing .06

Directing .07

Controlling .36

Staffing .01

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Note: The percentages are based on the number ofNote: The percentages are based on the number ofrespondents ranking the particular mix functions first.respondents ranking the particular mix functions first.

Marketing Managers Are Using the Computer MoreMarketing Managers Are Using the Computer Morefor Making the Difficult Price and Promotion Decisionsfor Making the Difficult Price and Promotion Decisions

19801980 19901990

Product .49

Price .27

Place .16

Promotion .08

Product .32

Price .39

Place .15

Promotion .13

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How Managers Use the MKISHow Managers Use the MKIS

IntegratedProduct Place Promotion Price Mix

VP of marketing X X X X XOther executives X X X X XBrand managers X X X X XSales manager X XAdvertising manager X XManager mktg resrch X X X X XManager of product planning XManager of physical distribution XOther managers X X X X X

Subsystem

Subsystem

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MKIS Use by ManagersMKIS Use by Managers

Industry giants are using the computer as aIndustry giants are using the computer as amarketing toolmarketing tool–– To learn about consumer needs and wantsTo learn about consumer needs and wants–– To formulate the marketing mixTo formulate the marketing mix–– To follow-up on how well mix is received byTo follow-up on how well mix is received by

the consumersthe consumers

MKIS information output used across theMKIS information output used across thefirmfirm

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SummarySummary

MKISMKIS–– Input subsystemsInput subsystems

»» AIS, Marketing Research, Marketing IntelligenceAIS, Marketing Research, Marketing Intelligence

–– Output subsystemsOutput subsystems»» Product, Place, Promotion, Price, Integrated MixProduct, Place, Promotion, Price, Integrated Mix

Operational Operational MKISs MKISs consider managementconsider managementand marketing conceptsand marketing concepts–– Planning is the keyPlanning is the key

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Case StudyCase Study1. In a marketing research subsystem, primary data is

A) collected by the firm B) collected by an entity other than the firm

2. Which of the marketing subsystems has proven the most difficult in terms of applying computer-based information system aid?

A) product subsystem B) place subsystem C) promotion subsystem D) price subsystem