中国经济管理大学 Mini-MBA《营销管理学》：Collecting Information and Forecasting Demand
Collecting Information and Forecasting Demand
中国经济管理大学/中國經濟管理大學
Chapter Overview/Objectives/Outline
A. Overview
Knowledge of various forms of marketing information and the marketing environment are critical elements in effective marketing management and strategy. The transition from a marketing focus on buyer needs to buyer wants, and the transition from price to non-price competition are important aspects of this process. Most successful firms operate with some form of marketing information system and evaluation of the marketing environment, but the system varies greatly with the size and level of sophistication. In many cases, information is not readily available, comes too late, or cannot be trusted. Many companies are learning in the challenging environment of the 21st century that they lack an appropriate information system, lack access to appropriate information, or they do not know what information they lack or need to know to compete effectively.
A well-designed market information and marketing environment assessment system consists of four sub-systems. The first is the internal records system, which provides current data on sales, costs, inventories, cash flows, and accounts receivable and payable. Many companies have developed advanced computer-based internal report systems to allow for speedier and more comprehensive information.
The second market information subsystem is the marketing intelligence system, supplying marketing managers with everyday information about developments in the external marketing environment. Here a well-trained sales force, detailed awareness of activities in the distribution channel, competitive intelligence, purchased data from syndicated sources, and development of a corporate marketing intelligence office to provide information throughout the firm will enhance the firm’s marketing efforts.
The third subsystem, marketing research, involves collecting information that is relevant to specific marketing problems facing the company. The scientific method, creativity, multiple methodologies, model building, and cost/benefit measures of the value of effective decision-making information characterize good marketing research. The marketing research process generally consists of six steps: defining the problem and research objectives; developing the research plan; collecting information; analyzing the information; presenting the findings; and making a decision based on the research .
The fourth system in the research process is the marketing decision support system (MDSS). The MDSS consists of statistical and decision tools to assist marketing managers in making better decisions. MDSS is a coordinated collection of data, systems, tools, and techniques with supporting software and hardware. Using MDSS software and decision models, the organization gathers and interprets relevant information from the business and the environment and turns it into a basis for marketing action. MDSS experts use descriptive or decision models, and verbal, graphical, or mathematical models, to perform analysis on a wide variety of marketing problems.
To carry out their responsibilities, marketing managers need estimates of current and future demand. Quantitative measurements are essential for market opportunity, planning marketing programs, and controlling the marketing effort. The firm prepares several types of demand estimates, depending in the level of product aggregation, the time dimension, and the space dimension.
A market consists of the set of actual and potential consumers and the market offer. The size of the market depends on how many people have interest, income, and access to the market offer. Marketers also must know how to distinguish between the potential market, available market, qualified available market, served market, and the penetrated market. Marketers must also distinguish between market demand and company demand, and within these parameters, also to distinguish between potentials and forecasts. Market demand is a function, not a single number, and as such is highly dependent on the level of other variables.
A major marketing research task is to estimate current demand. Total demand can be estimated through the chain ratio method, which involves multiplying a base number by successive percentages. Area market demand is estimated by the market-buildup method (for business markets) and the multiple-factor index method (for consumer markets). In the latter case, geodemographic coding systems are proving a boon to marketers. Estimating industry sales requires identifying the relevant competitors and estimating their individual sales, in order to judge their relative performance.
To estimate future demand, the firm can use several major forecasting methods: expert opinion, market tests, time-series analysis, and statistical demand analysis. The appropriate method will vary with the purpose of the forecast, the type of product, and the availability and reliability of data.
Change in the macro environment is a primary basis for market opportunity. Organizations and firms must start the search for opportunities and possible threats with their macro environment. The macro environment consists of all the actors and forces that affect the organization’s operations and performance. They need to understand the trends and mega trends characterizing the current macro environment. This is critical to identify and respond to unmet needs and trends in the marketplace.
The macro environment consists of six major forces: demographic, economic, natural, technological, political/legal, and social/cultural. The demographic environment shows a worldwide explosive population growth; a changing age, ethnic, and educational mix; new types of households; geographical shifts in population; and the splintering of a mass market into micro-markets. The economic environment shows an emphasis on global income distribution issues, low savings, and high debt, and changing consumer-expenditure patterns. The natural environment shows potential shortages of certain raw materials, unstable cost of energy, increased pollution levels, and the changing role of governments in environmental protection.
The technological environment exhibits accelerating technological change, unlimited opportunities for innovation, varying R&D budgets, and increased regulation of technological change. The political/legal environment shows substantial business regulation and the growth of special interest groups. The social/cultural environment shows individuals are changing their views of themselves, others, and the world around them. Despite this, there is a continuing trend toward self-fulfillment, immediate gratification, and secularism. Also of interest to marketers is the high persistence of core cultural values, the existence of subcultures, and rapidly changing secondary cultural values.
B. Learning Objectives
· Understand demand measurement terminology.
· Know the methods of estimating current demand.
· Know the methods of estimating future demand.
· Understand some of the major forces impacting an organization or firm’s macro environment.
· Know the major trends influencing marketing decisions in the macro environment.
C. Outline
I. Introduction
A. Considerable expansion of detailed buyer wants, preferences, and behavior, in real-time mode, but still many gaps
B. Shifts in the environment (global) and growing non-price competition, along with technology, forcing many changes
C. Information needs changing rapidly and requires equally rapid knowledge of what works and does not work with consumers
II. Marketing Information, Intelligence, and Research - The more information the firm has available, the better the opportunity to gain and hold competitive advantage. This requires an MIS (Marketing Information System)
A. Internal Records and Database Systems
1. The Order-to-Payment Cycle - The heart of the internal records system
2. Sales Information Systems - Technology has allowed sales reps to have immediate access to information about their prospects and customers. Salesforce.com is one of the most popular software tools.
3. Marketing databases facilitate datamining efforts which provide customer and prospect insights.
a) Data-warehouse usually contains all customer and prospect data, all marketing mix information by time periods, competitive information, macro environment data and other relevant information. Design strategy is to hold all data. Retrieval is not easy. Data extracts from Data-warehouse are input to Data Marts.
b) Operational Data stores are databases designed for quick read/write access but hold limited information, ie.e information necessary for customer interaction as well as channel interaction. Feeds updates to Data-warehouse
c) Data Marts are subsets of the Data-warehouse. Marketers use specific software to access Data Marts. But data mart can be as simple as an Excel Spreadsheet. Most data-mining efforts acces Data Marts
B. Marketing Intelligence
1. A set of procedures for managers to obtain everyday information about pertinent developments in the marketing environment
2. Internal records systems supplies “results” data, and the marketing intelligence system supplies “happenings” data
3. Steps for improving marketing intelligence (refer to table 3.1):
a) Train sales force to observe and report new developments
b) Motivate channel members and others to share intelligence
c) Network externally to collect intelligence on competitors
d) Develop customer advisory panels
e) Purchase information from outside suppliers
f) Gather customer feedback on competition
III. Marketing Research System
A. Marketing Research
1. Defined - Systematic design, collection, analysis, and reporting of data and findings relevant to a specific marketing situation facing the company
2. Suppliers of Marketing Research - Can be achieved through an in-house department, an outside marketing research firm, or a variety of other cost efficient ways. Increasing amounts of information available via the Internet
B. The marketing research process (6 steps defined in Figure 3.1)
1. Step 1 -Define the problem and research objectives
2. Step 2 - Developing the Research Plan - Decisions on data sources, research approaches, research instruments, sampling plan, and contact methods
a) Data sources - primary and secondary data
b) Research approaches
(1) Observational
(2) Focus groups
(3) Survey research
(4) Analyze customer behavioral data – transaction data provides the most accurate information on customer behavior
(5) Experimental research p- capture cause and effect
c) Research instruments
(1) Questionnaires
(2) Qualitative measures
(3) Technical devices – e.g. galvanometers, neuromarketing
d) Sampling plan
(1) Sampling unit - who is to be surveyed?
(2) Sample size
(3) Sampling procedure – method of chosing respondents
e) Contact methods - mail, telephone, personal, online (refer to table 3.2)
3. Step 3 - Collect the Information - Phase most expensive and prone to error
4. Step 4 - Analyze the Information - extract pertinent findings from the collected data
5. Step 5 - Present the Findings - pertinent to the major marketing decisions facing management
6. Step 6 - Make the decision.
IV. Forecasting and Demand Measurement
A. Which market to measure? - potential market, available market, target market (served), penetrated market
B. Market Demand Function
1. Market demand – a function of stated conditions (refer to Figure 3.2a)
2. Market minimum and potential
a) Expansible (much affected by level of industry marketing spending), nonexpansible (not much affected by the level of industry market spending) Also refer to market demand function curves in Figure 3.2a
b) Primary demand, selective demand (market share)
c) Market forecast
d) Market potential (refer to market demand function in figure 3.2b)
3. Company demand and sales forecast
a). Sales forecast - expected level of sales based on plan and
.. environment
b) Sales quota - sales goals set for product line, specific business
entity
c) Sales budget - conservative sales representative estimate of expected
sales volume to be used for making current purchasing, production
and cash flow decisions
d) Company sales potential – sales limit approached by the company
demand as company marketing effort increases relative to that of
competitors...................................................................................
C. Estimating current demand
1. Total market potential – maximum sales available to all firms for a
specific period of time, under a a given level of industry marketing effort
and environmental conditions.
2. Area market potential
a). Market-buildup method (B-to-B markets)
b). Multiple-factor index method (consumer markets)
3. Industry Sales and Market Shares – evaluate performance against industry
D. Estimating future demand
1. Three stages of forecasting
2. Macroeconomic forecast, industry forecast, company sales forecast
3. Sales forecast based on company assumption of market share
Methods: survey of buyers’ intentions, composite of sales-force opinion;
expert opinion; past-sales analysis; market test method (Table 3.3)
V. Macro environmental Trends and Forces
A. Introduction - identify trends (sequence of events with momentum and durablility) and fads (unpredictable and short lived occurrences) in macroenvironment. Refer to table 3.4 for a Global Profile of Extremes
B. Demographic environment
1. Worldwide population growth – source of concern for two reasons
a) Resources are required to support vast growth
b) Growth is highest in areas that can least afford it
c) Refer to Marketing Insight “Finding gold at the Bottom of the Pyramid”
2. Population age mix - a strong determinant of needs. Cohorts are groups of individuals born in the same time period who share experiences which influence their values, preferences and buying behavior.
3. Diversity within markets - each ethnic population group has specific wants and buying habits. Diversity goes beyond ethnc groups, e.g. disability.
4. Educational groups - from illiterates to those with professional degrees
5. Household patterns - traditional household is no longer the dominant pattern. Non-traditional households are growing quickly and have special needs
C. Economic Environment
1. Consumer Psychology – identify consumer spending patterns
2. Income distribution - four types of industrial structures
a)........ Subsistence economies - few marketing opportunities
a) Raw-material exporting economies
b) Industrializing economies - new rich class and growing middle class
c) Industrial economies - rich markets
Five different income distribution patterns
a)........ Very low incomes
b)........ Mostly low incomes
c) Very low and very high incomes
d) Low, medium, high incomes
e)........ Mostly medium incomes
3......... Income, Savings, Debt, and Credibility –
........... a) high debt-to-income ratio for
b) Off shore outsourcing is contributing to
D. Social-cultural environment - society shapes beliefs, values, and norms
1. People have views of themselves, others, organizations, society, nature, and the universe
2. High persistence of core values
a) ...... Core beliefs and values passed on from parents to children and
........... reinforced by social institutions (difficult for marketers to change)
b) ...... Secondary beliefs more open to change by marketers
3. Existence of subcultures - Shifts of secondary cultural values through time
E. Natural Environment - current deterioration is a major global concern and corporations recognize the importance and incorporate environmental issues into their strategic plans. Four environmental trends:
1. Resources are either infinite, finite renewable or finite nonrenewable. The latter provides opportunities for firms to create substitutes
2. Corporations are being forced to view alternative operational and manufacturing strategies in lieu of diminishing resources
3. Anti-pollution pressures requiring altrernative production and packaging strategies including emerging reverse value chain oportunities of recycling and disposal
4. Governments pressured by citizens shortage to take active role but face financial pressures.
5. Many companies adopting a “green” strategy in which they publicize their environmental conservation efforts.
D. Technological environment
1. Accelerating pace of technological change
2. Unlimited opportunities for innovation
3. Varying R&D budgets
4. Increased regulation of technological change
E. Political environment
1. Increase in business legislation (EU has been very progressive and a leader in protecting the consumer and the environment. The U.S. has formal policies and structures in place to do the same.)
a) protect firms from unfair competition
b) protect consumers from unfair business practices
c) protect society from unbridled business behavior
2. Growth of special-interest groups (PACs, increased general public pressure via Blogs). Recently major pressure from Privacy advocates
VI. Summary
Lectures
A. “Marketing Research and Measurement”
The focus in this discussion is the development of information for marketing management. It is important to keep the examples current so that students will be able to identify readily with this concept based on their general knowledge of the techniques, companies, and products.
Teaching Objectives
· Learn about establishment of the role of marketing research and information systems in development of overall marketing strategies.
· Discuss and learn specific marketing research considerations and principles.
· Introduce some of the more important concepts in contemporary marketing research.
Discussion
Introduction
Marketing research and measurement long have been areas of great difficulty and opportunity for the marketer, not just because they provide more complex and precise responses, but also because training, analytical and communication requirements are substantial. Measurement in some areas has been much easier than in others. For example, it is much more difficult to measure directly the results of advertising expenditures than to learn about the attitudes of prospective buyers toward a product or service. Between an advertisement and the actual purchase of goods or services there are lag effects, multiple distribution channels, and other intervening variables. With the exception of direct marketing, it is very difficult to relate marketing efforts directly to sales.
However, the other side of the equation relates to what we are able to do with an area of marketing research “marketing research” where there is more certainty. Marketers increasingly utilize marketing research to improve product and service value to current customers and find new customers.
Marketing research is used in the contemporary environment to provide more information on the customer, the market, and the channels of distribution. Among the more important information is that which relates to the factors influencing sales. This can be done in many ways, ranging from population sampling to one-on-one personal interviews and a range of options in between.
Purposeful Marketing Research
However, before we can do any of this we need to determine what we want to ask and why, and recognize that every marketing research tool has a different purpose. With all the new technologies available and some very sophisticated interpretation tools, the research and analysis process is much easier than it was just a few years ago. However, most managers still have difficulty in determining which tools are right for their needs, especially whether qualitative or quantitative information is most important and which type of research technique will provide the best value for the money.
Quantitative research deals with numbers and answers questions about how many, how much, or how often. Quantitative-oriented survey research generally relies on close-ended questions—questions that can be answered briefly, often with a “yes,” a “no,” or a number.
Qualitative research deals primarily with the feelings and attitudes that drive behaviors. Open-ended questions that cannot be answered in one word encourage respondents to describe their feelings, opinions, attitudes, and values.
In some situations a telephone survey may be the best way to talk to consumers about the product, but in other situations focus groups may provide a better result. One of the more important questions is whether the company can or should attempt to perform independent research project or buy into a syndicated or omnibus study.
This choice is important because the cost in terms of time, money, and effort can throw the strategy and planning effort for the firm into the wrong gear or, worse yet, into the wrong direction. Further, if the firm is not entirely clear on the research needs and process, it must decide whether or not to use a professional researcher versus pay for information from existing sources.
One of the best methods for getting good quantitative research data is to use scanner information. This information has become much more flexible and usable. Effective use of tools such as Behavior Scan and InfoScan, both products of Information Resources, Inc., (IRI) has added substantial depth to efforts to understand the buying process.
This is not project information, but rather it is available on a continuous weekly basis, usually contracted on a multi-year basis to provide sufficient information over a period of time. This powerful capability enables firms to micro-market effectively and plan down to the individual store level. Data on the factors influencing product sales, such as client and competitor advertising, and other promotional activities, can be effectively assessed. In addition, the capability now exists to obtain information on a specific store or all the stores in a system, enabling not only enhanced data-checking capabilities but also rapid and effective comparisons at various local, regional, and national levels.
While such information by itself cannot provide predictions of the future, it can and does provide the means to evaluate various trends and make it possible to apply an expert system in the analysis process to forecast more precisely than in the past.
On the qualitative side of the equation, there are other methods such as the static panel, a sample of households in the United States. An example is Simmons Market Research Bureau (SMRB), which has a 13,000+ household panel that is representative of the national census in terms of the significant demographics. Conducted frequently over a year or more, the panel provides a means to measure relatively small changes in household purchases and product usage.
Another method is the consumer diary. Diaries are especially appropriate for answering questions on brand penetration and loyalty. This approach indicates what factors influence purchasing behaviors, such as price and advertising, and where purchases are made—supermarkets, warehouse outlets, and drugstores. This method appeals to a wide range of clients in packaged goods, apparel, home furnishings, financial services, travel, and entertainment.
An area of less measurement, advertising impact measurement, remains the activity where research efforts have been less successful. Until recent years the result is that most marketers of consumer products have developed mass marketing programs rather than target more narrowly. This has been by necessity. Without sufficient consumer purchase or usage information that could be tied directly to the advertising/promotion effort they could not do otherwise. Since marketers have not been able to gauge the results of advertising and various other forms of marketing communication directly, they instead surveyed the psychological impact of the communications programs on customers and prospects.
Advertisers and agencies have been able to evaluate consumer attitudes toward the product, plus awareness and knowledge levels about their advertising and marketing communications program. Much of this research was based on testing the ability of the consumer to recall advertising messages or state how seeing or hearing advertising messages might, could, or in fact had changed their attitudes toward the product or their inclination to either buy or continue buying it.
Thus, mass marketing in the past has operated on the assumption that attitudes lead to behavior. That may be true, but it is just as likely true that behavior leads to attitudes. If you see an ad on TV, form a favorable impression of a product, try it out, and decide you hate it, then your new attitude is a result of your purchase behavior. So perhaps there is more going on in a purchase decision than the linear model suggests.
A more central difficulty with the mass marketing model is the measurable surrogates or substitutes that we have used to stand in for unmeasurable purchase behavior. Recall does not necessarily equal sales or even favorable recall: Does anyone really miss “Ring Around the Collar”, or did “The Heartbeat of America” ever really cause someone to buy an automobile? Likewise, brand awareness does not guarantee success. The IBM brand is recognized by 90 percent of its potential customers around the world, yet the company still has some substantial marketing and sales problems.
There have been efforts to measure the effects of marketing communications on sales even less directly, for example, by looking at incremental units sold after a promotion. But by and large, incremental units have measured sales stolen from a competitor for a short period of time or that we have cannibalized from our own future business.
Database Marketing And The Future
Database marketing eliminates much of the need for surrogates. With cheap computing power and the ability to capture, store, and manipulate massive amounts of data, new methods of marketing communications and planning are possible. For example, with what is called single-source data, marketers can identify specific customers and users of products and services, measure their actual purchase behavior and relate it to specific brand and product categories.
Up to now, database-centered advertising and marketing communications research for the most part has been conducted with consumers who shop in supermarkets, drugstore chains, and mass-merchandising outlets. This is because these retailer categories have been the pioneers in various forms of electronic data capture and storage. The technology is rapidly diffusing, and it is likely that during the early years of the next century almost all types of retail vendors will be able to gather, conduct, and evaluate this type of customer information. As a result of working with retailers and market research groups, increasing numbers of manufacturers, brand managers, etc., will be able to capture and use purchase data on their brand customers and prospects.
To a large extent, the contemporary database marketing approach makes obsolete many existing statistical research and analysis techniques. In the past, researchers took a sample, projected it to the whole world, and hoped they had it right. With database marketing, when the researcher deals with real-world data, he or she begins to understand that quite often traditional statistical techniques do not make any sense.
Normal curves are generally irrelevant in database-derived marketing because all the interesting things are happening at the tails of the distribution, not in the middle. And, with the ability to capture longitudinal data (collected on the same person over a period of time) on individual customers, you can actually look at your customer’s behavior over time and thereby reach much more meaningful conclusions concerning attitudes and buying behavior.
The old linear model of consumer behavior was built on a one-way process, but the new direction is research built on two-way communication between marketer and customer. The marketer receives feedback from the customer, both explicitly (through survey responses, warranty cards, etc.) and implicitly (through purchase behavior tracked in the database). The dialogue between marketer and customer is always evolving. While mass marketing treats every customer as a new prospect, integrated marketing creates individual dialogues and even changes its message as marketer and customer get to know each other. This provides the basis for the one-to-one marketing process that is at the center of contemporary consumer marketing activities.
B. “Demographic Data Analysis”
Emphasis is on the development of marketing environment information for marketing decision-making. This is based on examples of particular approaches in developing demographic-based market research and leads into a discussion of the implications for the introduction of other research opportunities to the firm and the industry.
Teaching Objectives
Highlight the role of demographic analysis in marketing decision-making.
Stimulate thinking concerning the critical issues in utilizing demographic analysis.
Consider the steps in proceeding with a demographic analysis.
Discussion
Introduction
For virtually every product or service, demographic data is an important element in the marketing equation. Demographics can help marketers learn more about the current and potential customers, where they live, and how many are likely to buy the product or service based on prior consumption of various products and services. Demographic analysis also helps marketers serve their customers better by enabling them to adjust to their changing needs.
There are four primary steps in the demographic analysis process:
· Identify the population or household characteristics that most accurately differentiate potential customers from those not likely to buy.
· Find the geographic areas with the highest concentrations of potential customers.
· Analyze the purchase behavior of the potential customers to establish some understanding of the cause and effect behind their purchasing patterns.
· Determine media preferences in order to find the most efficient way to reach the potential market with an advertising message.
In a mass marketing approach there is one message communicated via the media: newspapers, radio, and broadcast television. The assumption is that the message will reach everyone. No special effort is made to ensure that the message will appeal to or reach the most likely customers.
The result of mass marketing efforts is that substantial resources are expended on marketing products and services to groups in the population that did not want or need them. For example, a motorcycle company expending advertising budget on prime-time television also would reach housebound elderly as well as the young adult target market. Likewise, a swimsuit manufacturer placing ads in a national magazine would reach potential consumers in Alaska as well as Florida. The obvious point is that a “shotgun” approach is not the most efficient use of marketing resources.
Target marketing clearly has replaced mass marketing. The guiding principle is “Know Thy Customers.” It is essential to obtain answers to a number of important questions about your target market: How old are they? Where do they live? What are their interests, concerns, and aspirations? The answers to these questions provides the basis to determine the specific advertising media and/or marketing approaches most likely to appeal to those customers and whether you are targeting the right customers. It is also possible that the firm will have more than one group of target markets. Research shows, for example, that young women purchase low-fat frozen dinners for obvious diet purposes, but retired people also purchase the product because they only want a light meal.
The principle also applies in the situation where a firm knows that its customers are predominantly college graduates, and that the firm also knows the zip codes of the existing customers. This information can be utilized as follows:
· First, obtain a tabulation of the number of college graduates by zip code, available through various research organizations and information providers such as the American Demographics Directory of Marketing Information or the U.S. Census Bureau.
· Second, for any metropolitan area, establish the percentage of all college graduates in the metropolitan area who reside in each zip code. The process is:
o Calculate the percentage of existing customers who reside in each zip code.
o Divide the percent of college graduates in each zip code by the percentage of customers in the zip code (and multiplying by 100). This provides an index of penetration for each zip code.
o If the index of penetration is 100 or above, the market likely is adequately served. If it is below 100, there is more potential that can be developed through direct mail to the specific zip codes.
This analysis is conducted using any group of geographic areas that sum to a total market area, such as counties within a state or metropolitan areas within a region. The object is to compare the percent of customers developed from each sub-market area against the percent actually there. The resulting indexes essentially measure marketing performance and potential, by specific area.
Demographic information is now readily available for various personal computer systems and formats. Demographic statistics are obtained on CD-ROM or via the Internet, complete with software for accessing the data. The software for highly sophisticated analysis of the data is also readily available.
While it is possible to analyze the data to provide customized market analysis, such as how many pairs of shoes people own and how often they shop for new ones, there are limits to what the basic census data can provide the marketer. Census demographics can provide basic information to help determine the market, the size of the market, and where they live, but it cannot tell you how many times a week people use diet sodas, dishwashing liquid, and/or pizza.
Customized Marketing Forecasting, Based On Demographic And Lifestyle Data
With the proper analysis techniques and capabilities, it is possible to merge primary census data with more detailed customer data to form a clearer picture of the market and its potential. This could involve the following:
· A detailed lifestyle analysis as well as demographic data.
· A determination of whether the product or service will be sold to an individual or a household.
Refrigerators, for example, are household products, and most households have only one or two refrigerators. On the other hand, everyone within the household has his/her own toothbrush and dozens of other personal-care products. To demonstrate the complexity of this question:
· There are more than 280 million individuals in the United States and over 100 million households.
· Those classified as “family households” include married couples with children (26 percent), married couples without children (29 percent), single parents living with their children (9 percent), and brothers and sisters or other related family members who live together (7 percent). “Non-family households” include people who live alone (24 percent) and cohabiting couples and other unrelated roommates (5 percent).
· Different types of households are more prevalent among certain age groups. For instance, the majority of women who live alone are over age 65, while the majority of men who live alone are under age 45.
· Household types differ between generations as well. Younger people today are much more likely to live in the “other” type of non-family household because they may move out of their parents’ homes before marriage and live with friends or lovers.
Everyone in the United States (except for the homeless) lives in either a household or group quarters. Many businesses ignore group-quarter populations, reasoning that nursing-home patients and prison inmates probably do not engage in much shopping. However, if the market is computers, beer, pizza, or any number of products that appeal to young adults or military personnel, marketers cannot afford to overlook these populations. This is especially important when marketing a product in an area where a college or military base is present. People who live in these situations may have different wants and needs than those who live in households. In addition, the area may have a much higher rate of population turnover than other locations.
Once the firm determines whether it wishes to market to households or individuals, the next step is to determine which household segment or market segment would be most likely need the product or service. Demographic analysis enables the firm to refine the market definition, the potential market, and how it likely will change over time.
In general, forecasting the U.S. market or that of a specific state is easier to estimate accurately than populations for small areas, such as neighborhoods, which often experience greater population fluctuations. In addition, with shorter time periods, projections tend to be more accurate because there is less time for dramatic changes to take place. We cannot make assumptions for what a market will look like in 15 years because it is not possible to recognize all the possible changes in the marketplace.
However, the firm can have some confidence in educated guesses about the future if researchers in the firm understand past and present population trends, especially with major trends such as the baby boom and baby bust cycle. Accordingly, it is important to understand the differences between a generation and a cohort. The events for which generations are named occur when their members are too young to remember much about them (i.e., the Depression generation includes people born during the 1930s). Cohort groups provide classifications that are more useful for marketers because they provide an insight into events that occurred during the entire lifetimes of the people in question.
Baby Boomers
To illustrate, consider baby boomers born between 1946 and 1965. In their youth they experienced a growing economy, but they also dealt with competition and crowding in schools and jobs due to the sheer numbers in the cohort. Their lives were shaped by events such as the civil rights movement, the Vietnam War, the women’s movement, and the Watergate scandal. Baby boomers witnessed increasing diversity and technology and are living longer, healthier lives than prior cohorts. However, they also have not witnessed the level of U.S. and global adversity and conflict of prior cohorts, deeply affecting their view of the world and the challenge of survival in a world changing dramatically in the 21st century.
All these factors combine to make baby boomers a very different cohort than the 32-51 year- olds of 20 years ago. Traditional ideas concerning the preferences of those aged 50 versus 30 no longer are accurate. Beliefs concerning certain consumption patterns, such as “coffee consumption increases with age”, and “younger people drink cola,” no longer are as valid as they once were because people who grew up on cola often continue to drink it. The same is true for ethnic foods and a host of other products.
The received wisdom will have to change constantly to reflect new sets of preferences and life experiences. For example, baby boomers remember when the idea of careers for women was considered radical. Not so for Generation X women; most of them work as a matter of course, just like their own mothers. As a result, ideas about marriage, family, and jobs are changing and will continue to change.
If the firm is marketing a product to a certain age range, it should be aware that the people who will be in that age range in five or ten years will not be the same as the ones who are there now. A strategy that has worked for years should be rethought as one cohort leaves an age range and another takes its place.
Therein lies the challenge in contemporary marketing. It is no longer advisable to treat a market as an undifferentiated mass of people with similar fixed tastes, interests, and needs. In the age of target marketing, it is imperative to know whom the customers are and how to reach them. When the customer’s needs change, it is essential to know that the firm must adjust its marketing efforts accordingly. In sum, a working knowledge of demographics and analytical tools for demographics is important for a firm if it wishes to remain as a contender in the market of the next cohort and the next generation.
Background Articles
Issue: Marketing Research in the Online Environment
Source: “P&G Puts Spin On Web Coupons,” Brandmarketing, October 2001, p. 6.
Details of Procter & Gamble’s Consumer-Specific Marketing Strategies
Online coupons and samples are enabling the Procter & Gamble Co. (P&G) to build on its consumer-specific marketing efforts. Information from consumers helped the firm develop better target offers.
Online promotions are an integral part of two of P&G’s big online multibrand endeavors, Home Made Simple and S -magazine. Both are being marketed to consumers in the form of e-mail newsletters that include content, coupons, and samples. Last month’s Home Made Simple newsletter, for instance, offered decorative painting techniques, packaged lunch ideas, and gardening suggestions. It also included a 50-cent coupon for Mr. Clean Wipe-Ups. Home Made Simple is designed to “simplify, organize, beautify, and inspire.” It focuses on P&G’s home-care brands, including Cascade, Dawn, and Mr. Clean.
The purpose of S-magazine, at smag.com, is to “simplify everyday living.” Its brand slogan is “We’re the S in Simplicity.” Featured brands rotate on a monthly basis and cut across multiple P&G business units. In an innovative move, P&G is also using S-magazine to highlight external brands. For instance, a current issue featured Rosie and Spiegel magazines, as well as Iams pet food. Other issues have offered discounts for Betty Crocker and Eddie Bauer.
P&G has aggressive plans for S-magazine , saying it wants to more than double the magazine’s current 3 million subscriber list by the end of the gear, according to one of the brand managers.
P&G is backing the program strongly due to the many benefits of online sampling and couponing, which can drive purchase intent, get people to sample a product, spread word-of-mouth support, and, ultimately, boost sales. It’s one of the most effective ways of assuring any kind of repeat behavior.
While Home Made Simple (www.homemadesimple.com) has been operating for nearly one year, P&G recently strengthened its couponing and sampling features by partnering with FreeSamples.com, San Francisco, an online targeted marketing solution. FreeSamples takes the sampling orders, fulfills them, and provides P&G with information on the consumer who requested them.
S-magazine is a data-collection tool as well only the sampling engine powered by P&G itself, not by a third party like FreeSamples. Consumers who opt-in to receive a sample, coupon or discount are asked a series of questions. For instance, visitors recently were offered a sample of an Olay Total Effect Cleansing Cloth. To get the sample, they were asked about their household income, number of pets and children in household, facial cleanser use, and brand preference, among other areas. P&G uses the responses to tailor future copies of S-magazine to each consumer’s needs. They learn as much as possible so that they can get as targeted as possible.
Along with its multibrand sites, P&G also uses samples and coupons at several of its brand-specific sites, including Tide.com. Under a new promotion launched in conjunction with FreeSamples, consumers can register to receive a free sample of Tide Kick, a pre-treating and measuring device designed in conjunction with Tide Deep Clean formula. Along with the sample, consumers receive a 50-cent coupon for Tide Deep Clean.
P&G decided to work with FreeSamples to tap into the company’s large consumer database to do much more target marketing via the Web. For certain brands and categories, P&G truly understands the value of consumer-specific marketing.
Issue: Brand Paring in a Changing Economy
Source: “Sears to Cut More Brands,” DNR, October 29, 2001, p. 3.
Sears Roebuck will reduce the number of career merchandise lines, focus on better casual lines, and also has plans to remodel 580 of its largest full-line stores. Plans also include introduction of a private-label “mega-brand ” and to put more focus on classifications
Acknowledging that the apparel strategy it has pursued for much of the last decade has had “a very poor financial outcome,” Sears Roebuck & Co. Chief Executive Alan J. Lacy announced an array of new apparel initiatives as part of a larger, three-year restructuring. The plan includes laying-off about 4,900 salaried employees—or 22 percent of the total salaried work force—and reconfiguring both the selling floor and the store’s legendarily complicated chain of command.
The apparel initiatives include significantly cutting back on career merchandise and refocusing the assortment on better casual lines. In addition, the store, while continuing to split the apparel assortment more or less equally between national brands and private label, will significantly decrease the number of brands it carries.
The store also plans to introduce a private-label “mega brand” across men’s, women’s , and children’s that will replace most of Sears’ casual private-label brands and focus more on classifications than on collections. “We’ve tried to be a moderately priced department store,” said Lacy. “We don’t want to be that anymore.” What Sears wants to be, however, is less clear. “We’re not a discounter and we’re not a department store,” said the Chairman.” To clarify, the division head of the 860 full line stores commented that: “We want to be Sears.” She also noted that the store is looking long and hard at Kohl’s as a model for its soft-lines business.
Lacy also acknowledged that the company considered dumping its $9 billion soft-lines business entirely last spring and becoming a hard-lines-only store, but decided the business—while a chronic drag on the bottom line—has the potential to become a meaningful player in the apparel world.
Lacy said the changes were necessary due to shifts in the market over the last few years, adding that “the discounters have gotten better and the department stores have gotten more promotional. We need to address these changes.”
Specifically, he said Sears’ margins and expenses are out of whack, meaning that the store has to compete with discounters and other low-margin, big-box specialty merchants on price at the same time that its overhead, such as the rents it pays as a mall-based retailer, is more reflective of department stores. The plan for correcting this situation includes beefing up opening price points in hard lines while raising many price points in apparel.
On the selling floor, Sears plans to remodel 580 of its largest full-line stores over the next five years and reduce the number of fixtures it currently uses from 132 to 11. The store will also offer centralized checkouts in many stores while continuing to have cashiers in certain departments.
Sears currently has 860 full-line stores around the country and total annual sales of more than $25 billion. According to Lacy, about 250 of those are smaller locations of 65,000 square feet or less. In the future, these small stores will focus primarily on hard lines and some may also be closed.
In terms of the chain of command, the store is flattening hierarchies in some areas and simplifying and combining management levels at the stores. Currently, a typical store manager has 11 people reporting directly to him or her. In the future, that number will be five. What this means is fewer salaried employees overall and greater reliance on hourly workers, a setup more typical of discount stores than department stores.
Lacy said the changes will result in savings of $600 million and a 50 percent improvement in earnings to $1 billion by 2004.
Case:
“Talbots – A Classic”
HBS Case: 500-082 TN: 5-502-060
Teaching Perspectives
Talbots has recently recovered from a disastrous year that saw earnings fall from $1.91 per share to $0.18 per share in 1997, after the company tried to attract a younger customer segment. This case traces why the $1 billion women’s clothing retailer decided to attract younger customers, what went wrong, and the actions taken to recover. By the end of 1999, the company has reestablished itself and faces several growth opportunities and must decide on the best course of action. The case illustrates the challenges of repositioning a store concept.
The case traces the decisions that led to the strategy of attracting a younger customer segment, the reaction from the customer base, and the decisions taken by management to remedy the situation. Additionally, the case provides considerable information on the Talbots customer, store operations, and the Talbot supply chain, enabling students to make recommendations on expansion strategies for future growth.
Students gain a perspective on how a strategy can go awry. They assess whether the problem lay in strategy formulation or its implementation. Further, they gain insight into senior management’s response to the problem and the steps they have undertaken to avoid its future recurrence. Students get an opportunity to develop potential concepts for Talbots—testing them for their fit with the customer, with the organization, and with the market.
By the close of 1999, senior management at Talbots breathed a sigh of relief. Poor decisions related to attracting a younger customer segment had resulted in net income falling from $63.6 million for the year-ended February 1, 1997, to $5.8 million for the year-ended January 31, 1998. Faced with these disastrous results, Talbots, an upscale women’s apparel retailer with 673 stores worldwide, re-focused efforts on its ‘classic’ clothing for middle-aged customers, and by January 30, 1999, income had rebounded to $36.7 million. Having solidified its core positioning, Talbots’ senior management was focused on a strategy for future growth. Talbots believed that there were several venues for growth including new stores within the current Talbots concepts, the development of new concepts, and the expansion of new channels (such as the Internet). Given its recent poor performance, however, senior management also knew that it needed to make the right choices — an unforgiving marketplace would not allow another failure.
Traditionally, Talbots had been a high quality, higher end retailer of classic women’s clothing. The company had a very loyal customer base, but over time, customer research showed, Talbots had an increasingly difficult problem attracting new customers. In 1997, this lack of growth in new customers had led to the development of a more fashion-forward merchandise line. Not only did the clothing fail to attract the desired new customers, it also alienated the core customer base. Compounding the problem was Talbots’ position as a private label retailer (98% of goods in stores were sold under the Talbots label). The company, known as a full price retailer with limited sales events, owned the merchandise. And in 1997, in an unprecedented action, it was forced to take markdowns and write-offs to clear the merchandise from the stores.
A full analysis of the case should include an investigation of what happened in 1997, an analysis of the Talbots customer and the internal processes designed to support that customer, and recommendations for the future growth of the company.
Questions
1. What went wrong in 1997? Was it flawed strategy or execution?
2. Who is Talbots’ customer? How does Talbots’ store operations and supply chain support that customer?
3. How should Talbots grow in the future?
中国经济管理大学|中国经济管理大学|中国经济管理大学|中国经济管理大学培训|MBA实战|中国经济管理大学|MBA培训|硕士研究生|职业资格|管理培训
中国经济管理大学 官网 ：www.eauc.hk 中国经济管理大学MBA公益课堂
中國經濟管理大學版權所有
