C HA P T E R VII

Marketing Research, Marketing Information System, Sales Forecasting

Learning Objectives

Definitions, importance, nature, objectives, scope &limitations of marketing

research.
Steps in formulating research projects. Marketing information system.
Sales forecasting, various methods for sales forecasting.

Structure
7.1 Definitions
7.2 Nature of Marketing Research
7.3 Objectives of Marketing Research
7.4 Importance of Marketing Research
7.5 Scope of marketing research
7.6 Obstacles in Acceptance of Marketing Research
7.7 Setting up & Implementation of Market Research Projects
7.8 Marketing Information System
7.9 Sales Forecasting
7.10 Summary

Introduction
The chapter deals with definitions of marketing research, nature & scope of marketing research;
importance and obstacles in acceptance of marketing research as major management tool.
Chapter also includes comparison of marketing research Vs marketing information system &
methods of sales forecasting.

7.1Definition
a) Marketing Research is a systematic & objective study of problems pertaining to the marketing of goods &
services. Marketing research is not restricted to any particular area of marketing but is applicable to all its
phases & aspects. The definition emphasizes on two requirements of good research - systematic search and
objectivity in collection & analysis of the data.

b) Marketing Research is a tool for a study to measure, evaluate & interpret the wants, attitudes &
behaviors of the various target markets.

We can evaluate this definition as follows- A management tool to measure needs, wants;
demands, evaluate attitudes & interpret behaviors of target customers. Thus it covers
comprehensive marketing areas.

c) Marketing research is the collection & interpretation of facts that help marketing management
to get products more efficiently into the hands of the customer. Marketing Research includes all
information pertinent to this task, all the necessary techniques.

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 This definition highlights role of marketing research in marketing, but it is a narrow definition,
since it fails to incorporate services.

d) Marketing research is the systematic gathering, recording & analyzing of data about problems
relating to the marketing of goods & services.

This definition is produced by American Marketing Association (AMA) and this definition is widely
used.

This definition deals with wider concept of marketing research as it includes goods & services,
emphasizing on systematic data collection so as to be representative. The indirect assumption is
objectivity in data collection. If marketing research is allowed to be influenced by personal views
& considerations, its utility will be zero. One objection is raised for this definition - it does not include
pre-research analysis exploratory research or exploratory analysis which is necessary to ascertain the
type of information that should be collected; recorded & analyzed.

e) Marketing research is the objective & the formal process of systematically obtaining, analyzing
& interpreting the marketing data for actionable decision making in marketing process.

Previous definitions do use objectivity, systematic data collection, etc. But thus definition highlights
on major issues - the solution provided by marketing research should be actionable means first
researcher should study the resources of employer, infrastructure available with employer & then
providesolution to the problem so that customer can implement it without any problem.

7.2 Nature of Marketing Research

To commercial management it may, perhaps, have overtones of pure academics research, such as
that conducted in a research laboratory under controlled conditions, divorced from 'reality &
perceived to be of little direct help in making difficult business decisions, however, this is not so for
marketing research, while adopting a scientific approach and using some of the well- tested
methodologies of scientific investigations, is nearer to the function of field intelligence than of the
research laboratory. Indeed, it would be more appropriate to consider marketing research as a
form of applied research which, while imposing on its practitioners the ragouts and discipline of
scientific inquiry, has a pragmatic purpose. Without this scientific orientation, marketing research
would have little validity; it would degenerate into subjective assessment of market behavior.

Marketing research is not an end in itself; it is a means to an end – the improvement of decision making. These
decisions may affect the nature and range of products, pricing policy, distribution strategy, and promotional activities and
so on; in fact, and virtually every aspect of serving customers or client's well-form the idea stage onwards.

7.3 Objectives of Marketing R e se a r c h

1. To link the consumer, customer and public & the marketer through information used to
identify and define marketing opportunities, problem.
2. To generate, refine and evaluate marketing action.
3. Monitor marketing p e r f o r m a n c e and improve understanding of marketing as a process.
4. To find out potential of market.
5. To stretch on original conception of the product to the final delivery tothe consumer.

7.4 Importance of Marketing Research

The most important task is to get the right product to the right person at the right place with also the
right price. Besides, it is also required to go back and ask the consumer whether he getting optimum
is satisfaction and thus continue to make changes in the marketing mix; so that, the consumer
remained loyal to the product forever. This entire task requires a new breed of professionals,
combining the expertise of the statistician and the marketer, thus resulting in the emergence of the
marketing researcher.

Marketing research thus can be described as an activity, the results of which are useful in
enhancing the decision – making ability of the marketer in the dynamic environment.

Areas of Marketing with Decision Focus for Research

1) Target Market – Choice, size, consumer behavior, lifestyle, and influence of the target
market.
2) Product/Services -Consumer satisfaction, product features, attributes etc.
3) Price - Affordable for consumer, competitive etc.
4) Distribution - Channel, channel members, competitors etc.
5) Promotion - Promotion Mix, Advertising, Publicity etc.

7.41 Benefits of Marketing Research

a) Uses or benefit to Business

i) Decision making in functional areas.

ii) Management planning in identifying marketing opportunities
iii) In sorting out or solving marketing related problems.
iv) Controlling marketing management to identify strength & weaknesses of management
decisions.
v) Determining whether economics of scale would suit the business
vi) Understanding needs, wants & demands of complex and dynamic markets within India &
abroad.
vii) To understand per capita consumption of same or similar products.
viii) To formulate exclusive pricing strategies & various types of marketing strategies.
ix) To formulate appropriate sales & distribution of strategies

b) User or benefits to Economy

I) Production - S suitable production functions are adopted to meet themarket
Demand
ii) Distribution - To find out suitable channel of distribution.
iii) Employment - If production is increased due to use of market research, it creates additional
employment.
iv) National Income - With the increase in production, distribution & marketing activities,
and the national income also increase.
v) Avoiding Recession by undertaking of marketing research by most of industries in the
country, recession can be either avoided or its duration can be minimized.

7.5 Scope of marketing research

The scope of marketing research could cover the business problems related to the
following:

i) Types of consumers that comprise present and potential markets.

ii) Buying habits and pattern of consumption.
iii) Size and location of different markets, not only in India but overseas also.
iv) The prospects for growth or contraction for the current markets being served.
v) New mantras of emerging segments.
vi) The marketing and manufacturing capabilities of competitors.
vii) Most suitable entry timing.
viii) The current and prospective competitive position w.r.t. price, quality, reputation etc.
ix) Chances of improvement of current channels.
x) Optimum use of promo – tools
xi) The macro environmental factors like changes in government regulations, effect of
technological innovations, urbanization etc. that will have any effect on the market for the
product under consideration.
7.6 Obstacles in Acceptance of Marketing Research
(1) Due to globalization, liberalization and privatization, many MNCs are jumping to India;
however MNC entering into marketing research area are very few. In organized sector around 10 - 12
companies are catering to more than 10,000 companies in India. The corporate India's sales
turnover could be few billion dollars, whereas the turnover of marketing research companies, both
organized & unorganized does not exceed more than R s. 750 C r. The big shots like HLL & ITC
spends hardly R s 25 C r. & R s. 20Cr annually on marketing research which indicate non-
popularity of it.

(2) Narrow conception: Marketing research is percept as only data collection activity. The
research agency fails in defining problem and purpose of the study Example – Times of India
&Indian Express conduct half yearly research to count readership without disclosing the purpose to
readers.

(3) Improper orientation of the investigators – Data collection work is usually entrusted to
(4) Undergraduates or DBM, MMS and first year MBA students, without importing any training
to them. As such these investigators, in enthusiasm, fill up the questionnaires themselves to meet
weekly quotes. Hence the finding or conclusions of the research could go wrong if many investigators
do like that.

(5) Late results – Normally well designed and planned research project might take 4-6 months for
nationwide survey. In the opinion of sponsors, it should be completed within maximum one month's
time, which is just impossible in case it is field research...

(6) Conditional findings – India's market conditions are volatile and dynamic due to uncertain
political atmosphere. Hence the findings by research agency could be conditional due to changing
environment which is not acceptable to corporates.

(7) C ostly affair – Field studies in marketing research are very costly. It could call for few lakhs of
rupees. Desk research is quiet economical, but its correctness is doubtful and hence the conclusion
derived from such findings is also doubtful.

7.7 Setting up & Implementation of Market Research Projects

STEPS INFORMUL ATING MA R K E TING R E S E A R C H PROJECTS

Any marketing research project can be formulated by following mentioned five steps.

Step 1 Step 2 Step 3 Step 4 Step 5

Defining the a) Presentation
problem & Developing Collecting Analysis of Of information
identifying Research the Information b) Presentation
research Plan Information of research
objectives Report

Fig 7.7 Steps in formulating marketing research project:

Step 1: Defining the problem and research objective

Management of a company faces lot of difficulties and it expects marketing research to address
solution to these problems. The correlation between management problems are for solving those
problem marketing research studies which areas is given below in tabular manner.
Management Problem Marketing Research study area
(1) Allocate ad-budget among Estimate awareness generated by each
various Media. media.
(2) Introduce a new health service Design a concept ‘Test through which
various Media. likely acceptance and use can be assessed
 (3) Increase the sales of a product Measure the current image of the product.

Step 2: Developing Research Plan / Research Methodology

This step is followed as follows:
a) Data Source: Primary/Secondary Data sources to be identified.
b) Research approach : Observation / Focus groups/ Experimental c) Research instrument
: Questionnaire, mechanical instrument
d) Sampling plan : Sampling unit, Sample size, sample procedure
e) Contact method : Mail, Telephone, personal Interviews

Step 3: Collecting the information

For the purpose you will have to set up a temporary organization within the organization as
follows.

 Project Leader
 Market Research officer
 Investigators

Market Research officer's responsibility is to select samples, draft questionnaire in consultation

with project leader and organizing training for market research assistant and investigators.

Investigator's responsibility is to visit samples on time, behave polity and collect the information
as per questionnaire and to record actual discussions & not to add his own judgment.
The temporary team so formed can collect secondary information from various sources like sponsors
own records, libraries, government publications and primary information from field interviews.

Step 4: Analyzing the information

Collected information is processed on computers and then tabulated in neat manner. The various
statistical methods are used for this purpose. SPSS software can also be used to process the data
fast.
Step 5:
a) Presenting the information –
The data which is analyzed is to be presented by using
(I) Tables
(II) Graphs
(III) Bar charts on pie charts
(IV) Pictograph
(V) Cartograph
b) Drafting Research Report
The research report normally has chapters like – synopsis, objectives, company profile,
product profile, research methodology, limitations, data analysis & interpretation,
finding s, conclusions,recommendations, references...

7.8 Marketing Information System

Definition
It is the system comprising of a structured, interacting, complex of persons,
machines and procedures designed to generate an orderly flow of pertinent
information, collected from both intra and extra firm sources, for use as the basis for
decision making in specified responsibility areas of marketing management.
 Sr. no Elements / Components Deals with
1. Internal accounting system Orders, sales, inventory, receivables
and payables.

2. Marketing Intelligence system Current information on market

developments in the macro and micro
environment.

3. Marketing research system Studies on specific marketing

problems.

4. Marketing management science Building models for better

system understanding and prediction and
Control of marketing processes.

Marketing Research Vs MIS

Marketing R e s e a r c h MIS
Emphasis is on handling external Handles internal and external
information. data...

Concerned with solving problems. Connected with preventing occurrence of

problems as well as problem solving.

Operates in fragmented manner on case Operates continuously as a system.

to case basis.

Tends to utilize past trends Tends to be future oriented.

May not be computer based Totally computer based.

It is one of the inputs used in MIS Includes other such systems besides
marketing research.

7.9 Sales Forecasting

Definition of Sales forecasting: It is the technique of estimating the sales value or volume in future
under particular marketing programme and assumed marketing environment.

Sales Forecast is the basis on which entire marketing plan of the company is developed. S ales
Forecast is a major management tool to realize the sales volume, growth, profits, market share,
distribution reach and customer reach.

A Large scale company prepares sales forecast in two steps; first steps
To prepare Draft or Rough forecast, circulate it, after get feedback and C E O's approval, prepare
Master forecast by incorporating the changes if any.

7.91 We shall discuss following methods used for Sales Forecasting.

(i) Time series Analysis (ii) Composite sales force opinion (iii) Experts opinion (IV ) Break even
method and (v) Product life cycle method.

(i) Time Series Analysis

The most commonly used methods of forecasting, which uses the pastsales data to predict the
future sales. The other factors like advertising expenditure, number of sales people,
competition, etc. is not takeninto account.

i) Uniform Demand ii) Trend: upward or downward

 2000 2001 2002 2003 1999 2 0 0 0 2 0 0 1 2002 2003

Time Time

E .g. Management Institutes e.g. consumer products sales Yearly revenue

iii) Trend cycle and seasonality IV) Erratic pattern

May J u n e July Aug Sept 94 95 96 97

Time Time

(ii) Composite sales force opinions

The sales people know their territory potentials, as well they are in constant touch with
actual and potential buyers, and intermediaries etc. as such the individual sales man is asked
to predict sales fig for coming year. Such figures from all salesmen is collected, compiled
and thus forms the forecast.

The dis-advantage could be, the salesman may not predict real potential, so as to claim
good amount of incentives.

(iii) Experts opinion

In case of new product, the past sales data is not available, nor will the potential buyer be in a
position to offer their opinion on usage pattern. In such cases, an opinion survey of the
experts in the field, social scientists, distributors etc. may help in formulating the forecast.
For a knows product and if the enterprise is small scale, the promoter of the enterprise decides
or say the sales forecast fig in adhoc manner and that becomes sales forecast for the
enterprise.

(iv) Break-even method

In this method, first minimum economic capacity for the operation is judged. Knowing the
breakeven level, then it will have to be seen whether the market under prevailing
conditions could absorb the forecasted figure. T his also gives guidelines for the marketing
efforts that are needed to reach the forecasted figure at break-even level.

(v) Product life cycle method

 In has been observed that different products display a certain pattern during their life cycle
as shown below. A product or service gives through typical stages like introduction, growth.

PLC
S ales

Growth Maturity Decline

Time
Introduction

Maturity and decl i ne . T his concept can ef f ect i vel y be used for forecasting. If the
PLC of a similar product is available, it can be used as an analogy for the new product.
The turning points in PLC can be identified from interviews and by applying proper
judgments; a new PLC can be drawn. F or example by watching PLC of a washing
machine, PLC for Dishwasher can be manipulated.

(vi) Exponential smoothing Method

This method is useful for short range sales forecasting. In this method, a moving average
which assigns different weights to past data is used. For example, next year’s sales = A [this
year’s sales] + (1-A) [This year’s forecast]
Where A is constant and lies between 0.3 to 0.7
Illustration: An enterprises this year’s sales in 10 Lacs, whereas the forecast was 15 lacs.
E estimate next year’s sales, assuming the value of constant i.e. A as 0.7
Next year’s sales = 0.7 [10] + (1-0.7) (15)
= 7+ 4.5
= 11.5 lacs
The sales figures for last 3 years for Hindustan Motor's Ambassador below. Compute this year's
sales forecast.

Year Car sales Fig (Quantities)

2003 20,000
2004 25,000
2005 40,000
2006 ?

The product is car and hence it is difficult to assume that same trend of year 2005 may continue.
D1 = (25,000 – 20,000) = 5000
D2 = (40,000 – 25,000) = 15,000
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D = 5,000 + 15,000 = 10,000

2
S ales Forecast for year 2006 = {40,000 + 10,000} = 50,000 alternatively

% change 2004 over 2003 = = 20%

% change 2005 over 2004 = = 37.5%
Averaging the % change = = 28.75%
S ales forecast for 2006 = = {40,000 +0.2875 x 40,000} = 51,500

7.92 Current Trends in Sales Forecasting

Gone those days when marketing manager used to prepare sales forecast for one year and just look
at it at the end of year to ensure matching of targets. Rather, now a days sales forecast is prepared
for long duration like one year but prepared for say one month or a quarter and so on. The forecasted
figs are monitored on every week's basis and any modification, if required, is done on spur and
communicated to respective Sales/Marketing Executive. This sea- change has occurred due to
impact of forces like market volatility, economy, societal changes, technology, business ethics and
politics.

We shall see some of the corporates, like Sona Koya steering Gears, how got set back due to
planning for one year and not monitoring it in-between for alterations.

A) Sona Koya Steering Gears

The company manufactures steering gears for all car manufacturers in India. The car sales during 98-99
jumped 37% over previous year. As such for the year 99-2000 Sona predicted car sales to jump 40%
over previous year. However in reality the car sales grew just by 10%. Hence the profitability of Sona fell
from R s 8.35 C r. To R s 1.78 C r. Sona did not take any lesson from this miss-happening. During the year
00-001, everybody thought GOI might reduce excise duty by 8% and hence car sales might jump by 15%.
However both things did not happen. Car industry managed to achieve last year's sales. Thus Sona's
forecasting again went wrong.

A) IT Industry

In July 2001, all IT companies like Infosys, i2 technologies got thrilled because NAS C OM
declared C.A.G.R 60% for software industry. Accordingly every software company planned
additional manpower not to miss the bus. However actual growth rate during 01-02 was 30% only.
Hence all IT companies either cancelled or deferred thousands of the job offers. IIM (A) received
highest set back. Infosys recruited almost 26 management students from IIM (A) & to all of them it
sent cancellation letters.

B) Polaris Software

The company used to prepare sales forecast based on total number of proposals submitted during
previous year. Due to market volatility, it used to miss the target by 30-50%. It attempted smart
way fore-casting sales forecasting' process as follows.

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 MA R K E TING MA NA GE ME NT
IT split S ales Process in 5 steps like

(i) Identifying client (ii) Establishing credibility (iii) Submitting proposal (IV )Negotiation (v)
Closing the deal.

For preparing sales forecast, the quotations/clients lying under step (IV) & (v) are only considered
as against total quotations. This reduced the swing from 30-50% to 10%, which is indication of
improvement of profitability.

C) L G Electronics

LG never prepares forecast for even a one month. It conducts TDR (Tier down Re-Engineering
Meeting) every Monday at its Head Quarters. Branch Manager from each city attends the meeting
every Monday. The objective is to anticipate consumer wants, demands and then break down sales
forecast on weekly basis.

So as against one time formulating sales forecast, LG does it 52 times. LG received the quick
benefits from TDR meetings. Till end of 2001, every flat TV manufactured (except LG) used to just
assemble the C KD kits in India. In one of TDR meetings, LG got the news that Sony Corporation
is likely to manufacture Flat TV in India. LG predicted that, due to overcrowding, the prices of Flat
TV might drop. Hence as a precautionary measure LG reduced Flat TV prices from R s 30,000 to
R s 18,000 for 21' C TV. During June 2002 Sony brought home made flat TV's to Indian markets
and as rightly predicted by LG the prices crashed from R s 30,000 to R s 17000.

E) Samsung Electronics
Samsung has gone one step ahead and LG. For preparing 4 weeks firm sales forecast, it shares the
selling plan with its vendors. Unless vendor’s confirm to manufacturing schedule, sales forecast is not
finalized. T his offers a lot of flexibility to Samsung. F or example during World Cricket Cup 1999
& 2003, demand for 14” C TV went higher than other sized C TVs. Due to continuous interaction
with vendors, Samsung could immediately switch over to 14”C TV from production lines of 25”&
21”C TVs and en-cashed the trend.

F) Arvind Mills
The marketing department. Prepare monthly sales forecast for each brand Ruff & Tough, Arrow,
Wrangler etc. the performance of each brand is monitored every week. If the sales of any brand for
any week are lower than 10-15% as compared to its forecast, the respective marketing head is
consulted immediately for alterations in selling plan.

G) Asian Brown Bovary ( A BB)

S ales forecast are prepared for one year and it is monitored on every day basis by President cum
MD Mr Ravi Uppal. The benefit is, though industrial marketer, able to achieve the targets years after
year.

Case Study 7.93: Hindustan Lever Ltd. (HL L) – Using research to obtain real-time consumer
data

In 2006, Hindustan Lever Ltd. (HLL) facilitated online research for its marketing managers by
offering real time consumer experiences across its various branches and offices. Cutting down on cost and
travel for managers, the company's market research department decided to invest in technology

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That brought 'live' research on the desktop screens for managers across the country. As part of the
consumers' windows program, HLL decided to get its consumers into the heart of the organization.
Managers can now obtain real time experience of their consumers without moving from their desks.

Groups of consumer’s identified as target groups are drawn in for their responses with the help
of a moderator at video screening programs. Marketing managers, based anywhere in India, can
view the proceedings on their desktops. They can watch their consumers drawn from all over.
HLL specifies the target consumers whom it wants to interact with. The market research
department of HLL coordinates with the MR Company that carries out the discussions with
consumers. HLL's field force networks with the MR Company to draw in the target group of
consumers for the discussion. The discussion is aided by a moderator of the MR Company.
Questions:
1) How &why market research is necessary for F MC G products of HLL
2) Visit website of Sunsilk (Ganga girls) &discuss how it functions &provide education to girls on
hair-care.

7.10 S UMMA RY
Marketing research is the careful analysis of market situations with the help of various statistical
applications. Marketing research process consist of- defining research problem identifying
research objectives, developing research plan, collecting the information, analysis of information,
presentationof information &presentation of research report.
Marketing information system helps firms provide crucial marketing information to managers
using internal record systems, marketing intelligence systems, marketing decision support systems,
etc.
Marketers need to forecast their sales in order to achieve their goals. Many methods are used to
forecast sales like – time series, expert's opinion, break even, etc.

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