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Credit Sprint's Guide to Marketing Unit 3: Marketing Environment, Research and Information

CLEP® weight 9%

Firms control their marketing mix but not the world around it. Scanning the environment and gathering good information turn uncertainty into decisions. This unit covers the uncontrollable environment, competition, the marketing information system and the marketing research process.

The marketing research processDefine the problemPlan the researchCollect dataAnalyze dataPresent findingsFollow upSecondary data first (cheap, fast), then primary data if needed

What you need to know

  • The marketing environment has controllable factors (the 4 Ps) and uncontrollable ones: demographic, economic, sociocultural, technological, political and legal, and competitive (and natural). Environmental scanning watches these for trends.
  • Demographics describe populations: age, income, household type, ethnicity and location. An aging population, smaller households and growing diversity shift what sells.
  • Economic conditions such as inflation, interest rates, unemployment and consumer confidence change buying power and willingness to spend. Recessions push buyers toward value.
  • Competition: brand competitors (same type, other brand), product-form competitors, generic competitors (different products meeting the same need) and total-budget competitors. Market structures: pure competition, monopolistic competition, oligopoly and monopoly.
  • A marketing information system (MIS) gathers, sorts, analyzes and distributes timely information. Its inputs are internal records, marketing intelligence and marketing research. A decision support system (DSS) lets managers explore the data themselves.
  • The research process: define the problem and objectives, develop the research plan, collect data, analyze data, present findings, and follow up.
  • Types of research: exploratory (clarify a vague problem), descriptive (who, what, when, where) and causal (cause and effect, using experiments).
  • Secondary data was collected earlier for another purpose (cheap, quick, may not fit). Primary data is collected fresh for the current problem (fits, but costs more and takes longer).
  • Primary methods: surveys, observation, experiments, focus groups and in-depth interviews. Qualitative research explores attitudes in depth; quantitative research measures with numbers.
  • Probability samples give every member a known chance of selection (simple random, stratified, cluster). Nonprobability samples (convenience, quota, judgment, snowball) cannot measure sampling error.
  • Good research is valid (measures what it claims to measure) and reliable (gives consistent results). Biased questions and nonresponse harm both.
  • Big data, scanner data, loyalty-card data and web analytics let firms track behavior directly. Data mining searches large databases for patterns, and privacy rules limit how the data may be used.

Formulas and rules

Sample size matters for precision; larger random samples reduce sampling error
Sales forecast methods: test market, trend extension, executive judgment, sales force composite

Exam traps

Watch forSecondary data is not 'lower quality': it was gathered for another purpose and may be outdated or off target.
Watch forA convenience sample is cheap but cannot be generalized to the population.
Watch forExploratory research does not test hypotheses. Only causal research (experiments) shows cause and effect.
Watch forReliability is consistency; validity is accuracy. A scale can be reliable and still invalid.

Key terms

  • Environmental scanning: Watching the external environment for trends that affect the firm.
  • Uncontrollable factors: Outside forces the firm cannot control: demographic, economic, social, technological, political and legal, competitive.
  • Demographics: Statistics describing a population: age, income, household, ethnicity, location.
  • Consumer confidence: Buyers' optimism about the economy; it affects willingness to spend.
  • Brand competition: Rivals offering the same type of product under other brand names.
  • Generic competition: Different products that satisfy the same basic need.
  • Monopolistic competition: Many sellers with differentiated products.
  • Oligopoly: A few large sellers whose actions affect each other.
  • Marketing information system (MIS): People, equipment and procedures that gather, sort, analyze and distribute marketing information.
  • Decision support system (DSS): Software that lets managers explore data and test options.
  • Marketing intelligence: Everyday information about competitors and the environment.
  • Exploratory research: Research that clarifies a vague problem.
  • Descriptive research: Research that describes who, what, when, where.
  • Causal research: Research (usually experiments) that tests cause and effect.
  • Secondary data: Data collected earlier for another purpose.
  • Primary data: Data collected fresh for the current problem.
  • Focus group: A small group led by a moderator to discuss a topic in depth.
  • Probability sample: A sample in which every member has a known chance of selection.
  • Convenience sample: A nonprobability sample of whoever is easiest to reach.
  • Stratified sample: A probability sample drawn from each subgroup in proportion.
  • Validity: Whether research measures what it claims to measure.
  • Reliability: Whether research gives consistent results when repeated.
  • Data mining: Searching large databases for patterns.
  • Test marketing: Selling a new product in a limited area to see how it sells.

Practice questions

Five of the 50 Unit 3 questions in Credit Sprint. Every choice is explained in the app.

1. Which of the following is a controllable factor in a firm's marketing environment?
  1. The price it charges
  2. A new law on product labeling
  3. A competitor's new advertising campaign
  4. Interest rates set by the central bank
Show answer

The price it charges. Firms control the marketing mix: product, price, place and promotion.

2. A new law requires clear calorie labels on restaurant menus. This is a change in the
  1. competitive environment
  2. demographic environment
  3. political and legal environment
  4. economic environment
Show answer

political and legal environment. Laws and regulations are part of that environment.

3. Which is an input to a marketing information system?
  1. A mission statement
  2. The product life cycle
  3. The 4 Ps
  4. Internal company records, marketing intelligence and marketing research
Show answer

Internal company records, marketing intelligence and marketing research. These are the three main inputs.

4. Research aimed at clarifying a poorly understood problem, often using focus groups, is
  1. causal research
  2. syndicated research
  3. descriptive research
  4. exploratory research
Show answer

exploratory research. It helps define the problem.

5. Which is an example of primary data?
  1. Answers from a survey the firm designed for its own question
  2. A trade magazine article
  3. Census Bureau population tables
  4. Last year's annual report
Show answer

Answers from a survey the firm designed for its own question. Primary data are collected fresh.