CHAPTER 4

Marketing Intelligence and Creative Problem Solving

Lecture Notes/Annotated Chapter Outline

A. Marketing Management Decisions and Creative Problem Solving

1. Need for marketing intelligence in a changing world

A marketing intelligence system is designed to monitor a variety of sources to determine emerging trends or events in the external environment. This is necessary in order to take an innovative approach to managing in a time of rapid change. Stakeholders that can affect or be affected by decisions of the enterprise include customers, the community, and the organization (including everything on the opposite side of the customer and the community).

(Transparency 4B: “The Different Voices and Values of Organizational Stakeholders”)

2. Responsibility for marketing decisions

In a customer-oriented organization, personnel in all functional areas make marketing-related decisions; it is not just the responsibility of the marketing department.

(Transparency 4A: “Organizational Level and Information for Making Decisions”)

a. Organizational level—Information is needed for management decisions at each level of the firm. Corporate managers are more concerned with trends and events that affect long-term financial results, and divisional managers are more concerned with factors that affect their own SBUs or profit centers.

b. Functional area—Managers at the operating level must analyze all relevant information to determine the best marketing mix, personnel characteristics, accounting and financial position, production performance, and other factors. All employees should understand the market they serve.

3. How marketing decisions are made

In a more complex, fast-paced world, managers have fewer strategic and tactical options available to them. The ability to support marketing management decisions with high-quality market intelligence might include adequate time for high-quality research at a reasonable price, early determination of information on hand that is relevant to the problem and information still needed, management expertise, unambiguous results, and a feasible solution.

a. Routine versus complex decisions—Routine decisions are more “programmed” with predetermined policies and guidelines; complex decisions tend to involve new situations where there is little or no previous experience in making similar decisions and to involve higher levels of risk and investment.

b. Time factor—Complex decisions require more time for information gathering, analysis, and planning—underscoring the need for high-quality information and an efficient decision support system.

4. Creative problem solving

In addition to quantitative inputs, managers must also use qualitative inputs to fully understand situations with which they are faced. They must “step outside the box” to find creative solutions to business problems and opportunities. Stages in the analytical and creative problem-solving process are as follows:

(Transparency 4C: “Stages in the Creative Problem-Solving Process”)

Stage 1: Analyzing the environment—identifying problems and opportunities in order to respond quickly to change and resolve problems successfully.

Stage 2: Recognizing a problem—must be aware of a problem before it can be solved; awareness may come from formal or informal environmental scanning or just an intuitive “feeling.”

Stage 3: Identifying the problem—symptoms are separated from the real problem; both a rational and intuitive process to determine about past, present, and future situations.

Stage 4: Making assumptions—before generating alternatives, assumptions must be made about future conditions that are related to the problem situation (e.g., internal resources, external macro- and microenvironments, etc.).

Stage 5: Generating alternatives—involves both rational and intuitive thinking; take creative approach to identifying alternatives not already known; innovate and brainstorm.

Stage 6: Choosing among alternatives—each available alternative should be evaluated systematically to determine whether it meets criteria established in the problem identification stage.

Stage 7: Implementing the chosen solution—successful implementation requires constant attention to details and awareness of potential obstacles to the success of the plan.

Stage 8: Control—this stage of analysis provides feedback on whether the actions taken actually solved the problem and whether the plan was executed appropriately; things that work are also recognized at this stage so that they can be made to work even better; and deficiencies are recognized so the plan can be improved.

B. The Marketing Research Process

Creative problem solving and the marketing research process are closely related and both processes influence the quality of management decisions. General steps in the marketing research process are as follows:

(Transparency 4D: “Steps in the Marketing Research Process”)

Step 1: Recognize the need for research—be aware that unresolved problems or opportunities exist and that available information cannot provide satisfactory answers.

Step 2: Define the research problem and objectives (purpose)—determine the research question(s) and the related managerial decisions that must be made.

Step 3: Specify information and data requirements—determine the type of information needed for an informed decision; focus directly on the research problem identified earlier.

Step 4: Develop the research plan—determine data collection method, such as whether it will be obtained by primary research or from secondary sources.

Step 5: Design the method for collecting data—determine details of data collection; create questionnaire or other data-gathering instrument if needed; design sampling plan, etc,

Step 6: Perform the research—actual data collection occurs in this stage with an emphasis on listening to respondents and/or being objective in all aspects of data collection (whether from primary or secondary sources).

Step 7: Analyze the data and interpret the results—data are coded, prepared for analysis, tabulated, analyzed, and interpreted (objectively to avoid misinterpretation).

Step 8: Communicate findings—researcher prepares a final report and presents the findings and recommendations to those who will use the information for decision making.

C. Key Information for Marketing Decisions

Some of the more useful types of external and internal information are as follows:

1. External opportunities and threats

a. Market and buyer analysis—current market trends and anticipation of changes that may occur; requires first defining the firm’s market, market demand and potential, customer characteristics and buying habits, etc.

b. Competitive analysis—includes both direct (serves same target market and basic needs) and indirect competitors (from same or other industries, appeal with substitute products or other ways of doing business).

2. Internal strengths and weaknesses

a. Financial resources—internal databases include records of the firm’s assets and liabilities that can be used to calculate financial ratios for comparison with industry ratios; level of risk also should be included.

b. Human resources—personnel records and management reviews provide information about the ability of present personnel to satisfy customers profitably.

c. Technological resources—information technology can be used to monitor the market, gather customer data, and create a marketing information system; focus on available technological applications and how they can enhance performance and provide competitive advantage.

d. Marketing effectiveness—marketing research can be used to track the effectiveness of marketing programs, using methods such as the marketing audit.

D. Sources of Information

Marketing intelligence is obtained from a variety of sources by both formal and informal methods and consists of data and facts that are converted first into information, then into knowledge, and finally into (wise) management decisions.

1. Databases

Databases are created and maintained by successful marketing organizations to manage the wide range of information that comprises their marketing intelligence systems. The type, scope, and quality of data are varied.

a. Marketing information system (MIS)—formal complex of people, equipment, and procedures designed to gather, organize, structure, analyze, evaluate, and distribute timely, accurate, and meaningful information to marketing decision makers.

b. Marketing Decision Support System (MDSS)—coordinated collection of data, systems, models, analytic tools, and computing power by which information is gathered from the environment and turned into a basis for marketing action.

c. Types and uses of databases—types of databases include sales, credit, and inventory records, POS scanner data, reservation systems, and other databases that have a wide variety of uses for every purpose from product design to demand forecasting to relationship marketing.

2. Database design and creation

The design of a database is directly related to the quality of its components and usefulness. Communication and understanding between those who create the database and those who use it are essential.

(Transparency 4E: “Types and Uses of Databases”)

a. Internal records—routine data generated in the course of doing business (e.g., departmental and functional area records, order processing, sales, inventory status, customer accounts, etc.).

b. External marketing intelligence—obtained from either primary (answers to a specific marketing problem) or secondary (gathered for another purpose) sources; also strategic tracking studies, etc.

c. Information requirements—marketing manager must specify the types of decisions to be made and specific types of information needed to make decisions; must be communicated clearly to the information provider as a basis for system design and data collection methods (“law of the lens”).

3. Database management

Databases must be constantly evaluated for their currency and appropriateness for the types of decisions that must be made in a rapidly changing marketplace; danger of information overload with irrelevant data should be avoided. Remember that databases are only a tool for managers—they are not solutions in themselves.

4. Market measurement and forecasting demand

Databases such as the MDSS can be used to estimate the results of strategic or tactical decisions under competing scenarios and to provide essential information for estimating market demand, market size, market share, etc. for a given product or product category.

E. Issues in Marketing Information Acquisition and Use

(Transparency 4F: “Management Challenges in Market Research”)

1. In-house or outsource research task—assess advantages and disadvantages of obtaining information from internal or external information providers.

2. Extent/scope of research—to the extent possible, information obtained should be focused on that which is needed to solve the research problem.

3. Organizational resources—consider the following:

a. In-house expertise—ability of internal personnel to perform the research.

b. MDSS/MIS availability (and appropriateness/quality).

c. Financial resources—research can be costly and adequate funding should be provided for quality research.

d. Time available to make decision—deadlines may be determinant of research that can be conducted.

e. Managerial objectivity and ability to use or act on information—managers must remain unbiased throughout entire research process if marketing mistakes are to be avoided.

4. Research quality/quality of information—breaks down into three areas: quality of the research process, quality of the data and information obtained, and quality of the management decision process; implications for use of resources and implementation plans, etc.

5. International marketing research—more complex process than in international markets; valuable in spite of cultural and language differences, higher costs, etc.

6. Legal and ethical issues

a. Regulatory issues—government regulations, industry standards, legal guidelines provide challenges for marketing intelligence users and providers.

b. Privacy issues—problem may exist in gathering and manipulating marketing intelligence relative to customers and others if promises of anonymity are not maintained.

c. Ethical issues—research ethics include honesty throughout the research process; no manipulation, deception, fraudulent practices to achieve desired results, and respecting the rights of respondents and others.

d. Bias issues—avoid all sources of potential bias related to the researcher and the research process.