705342 Marketing Information System

9. Marketing Decision
Support System

EK BUNCHUA
ekbunchua@hotmail.com

Department of Marketing
Faculty of Business Administration
Chiang Mai University
Chapter Outline
9. Marketing Decision
Support System
■ Marketing Decision Support System
■ Characteristics of DSS
■ Identifying DSS Problem
■ Types of DSS
■ Components of DSS
■ Levels of DSS
■ Stages of Decision Making
■ Approaches to Decision Analysis
■ Guidelines in Developing MDSS
 Kotler’s Model of MKIS

Marketing Environment
Marketing Information System
Marketing Managers

Target Markets, Marketing

Macroenvironment Forces
Implementation, Control

Competitors, Publics,
Channels, Suppliers,
Developing Information
Analysis, Planning,

Assessing
Information Internal Marketing
Needs Internal Marketing
Records
Records Intelligence
Intelligence

Distributing Decision
Decision Marketing
Marketing
Information Support
Support Research
Research

Marketing Decisions and Communications

(Kotler)
Another Model of MKIS

Internal
Internal
Records Marketing
Marketing
Records Decision
System
System Decision
Support
Support
System
System
Marketing
Marketing
Intelligence Data • Marketing Mix
Intelligence
System
System
base Planning and
Decisions
• Forecasting
• Resource
Marketing
Marketing Allocation
Research
Research etc.
System
System

(Adapted from McLeod)

Management Decision Making

■ The K-economy
✓ K : Knowledge
✓ KMS : Knowledge Management System

■ Major characteristics
✓ Future-oriented
✓ Risks v.s. Uncertainties
An Example of KM in
an E-tourism Company
Website

Up-to-date
Information

I.T. Support System

Product
(Tour Programs) Reservation
Description Records

.
Promotional
Marketing Campaign
.
Plan Marketing

Service Delivery Service

Actual Sales and New Market Opportunity Realization
Performance for WOM and Retention

Customer
Satisfaction

Customer
Needs
ATKM 801 Assignment 3 – Systems Thinking – Ek Bunchua
Conceptual Marketing

■ A typical approach to systematic decision

making by developing a mental model of
a decision situation that combines known f
acts with intuition, reasoning, and experien
ce
■ Marketing managers need to feel
psychologically comfortable with their dec
isions
Conceptual Marketing

■ Relying on experience
✓ Unique to every person
✓ Very subjective
■ Using practice standards
✓ May be good on average, but ignore
idiosyncratic elements of a decision con
text
Marketing Decision Support System

... a coordinated collection of data,

systems, tools and techniques with support
ing software and hardware
by which an organization gathers and inter
prets relevant information from business a
nd environment and turns it
into a basis for marketing action.

(Kotler)
Marketing Decision Support System

... a set of statistical tools and decision

models with supporting hardware and soft
ware available to marketing managers to as
sist them in analyzing data and making be
tter marketing decisions.

(Dyer and Forman)

Marketing Engineering

■ The art and science of developing and

using interactive, customizable, computer-
decision models for analyzing, planning, a
nd implementing marketing tactics and stra
tegies
■ Marketing engineering is not a substitute
for conceptual marketing; rather, marketi
ng engineering complements it!
 Marketing Engineering
Marketing Environment
Automatic scanning, data entry,
subjective interpretation
Marketing Engineering

Data
Database management
Information
Decision model, mental model
Insights
Judgment under uncertainty
Decisions
Organizational resources
Implementation
 Analytical Marketing System

Analytical Marketing System

Marketing Information

Marketing Decisions
Statistical Bank Model Bank

Regression analysis Product design model

Correlation analysis Pricing model
Factor analysis Site selection model
Discriminant analysis Media mix model
Cluster analysis Advertising budget model
: :
: :

(Kotler)
 ตัวอย่างผลลัพธ์จากระบบ
สนับสนุนการตัดสินใจ (1)
Sales = 2.308
+ 1.452 (Advertising $)
+ 0.781 (No. of retailers)
+ 3.543 (Quality index)
Forecasting Model

Marketing Models

Selecting location for a new retail outlet

=> Visibility
=> Competition intensity
=> Traffic of target customers Decision
=> Rental cost Model
 ตัวอย่างผลลัพธ์จากระบบ
20
สนับสนุนการตัดสินใจ (2)
SONG Perceptual Map
SEXY Bu
SOLO
• Brand Perception
10 SOAP SAPR • Ideal Point
SEFA SILK
SEAL
Performance

SECU
Hi
Pr
TUAL M AP
SUCH
Si
0
M DS study)
SAND SASI
xis = Econom y

= Perform ance
-10 SACK
SIGN
Ot

SUMO

-20
-20 -10 0 10 20

Economy
 Characteristics of DSS

■ DSS offer users flexibility, adaptability, and a quick

response
■ DSS allow users to initiate and control the input and
output
■ DSS operate with little or no assistance from
professional programmers
■ DSS provide support for decisions and problems
whose solutions cannot be specified in advance
■ DSS use sophisticated analysis and modeling tools
 Identifying DSS Problem

■ Problems should be identified by users

■ There must be a body of data to work with and analyze
■ The problem must be one for which no simple formula
provides a solution
■ There must be some systematic way of thinking about
the problem that a DSS can automate or assist
■ The problem must be important enough to engage the
time and energy of management groups ranging from fi
rst line supervisors to senior management
Types of DSS

■ Model-driven DSS
✓ What-if analysis
✓ Goal seeking analysis
✓ Sensitivity analysis
■ Data-driven DSS
✓ Query
✓ Multidimensional analysis, or OLAP
✓ Data mining
Components of DSS

Internal Records
DSS
DSS Marketing Intelligence
Database
Database Marketing Research

DSS
DSSSoftware
Software System
System
Decision
DecisionModels
Models
OLAP
OLAPTools
Tools
Data
DataMining
MiningTools
Tools

User
User Interactive
Interface
Interface Quick response

(Adapted from Laudon and Laudon)

Levels of DSS

Data Management
Level 1 Data acquisition, storage and retrieval

Data Analysis
Level 2
Finding and analyzing relationships
between variables

Decision Analysis
Level 3
Prioritization and choice among
decision alternatives
DSS Level 1
Data Management
■ Tools
✓ Database
✓ Database management system (DBMS)
✓ Query facilities
✓ Report writers
✓ Document and image management system
DSS Level 1
Data Management
■ The difficulties
✓ The amount of data increases exponentially
✓ Data are scattered through out organizations
and are collected by many individuals using se
veral methods and devices
✓ Only small portions of an organization’s data
are relevant for specific decisions
✓ An ever-increasing amount of external data
needs to be considered in making decisions
DSS Level 2
Data Analysis
■ Basic data analysis tools
✓ Spreadsheet
✦ What-if analysis

✦ Goal seeking analysis

✦ Sensitivity analysis

✓ Graphical tools
✓ Statistical tools
DSS Level 2
Data Analysis
■ OLAP (online analytical processing) tools
✓ Access very large amounts of data
✓ Analyze the relationships between many types
of business elements
✓ Involve aggregated data
✓ Compare aggregated data over time periods
✓ Present data in different perspectives
✓ Involve complex calculations between data
elements
DSS Level 3
Decision Analysis
■ Nature of marketing criteria
✓ Quantitative criteria
✦ Monetary

e.g. $ sales value, costs, contribution

✦ Non-monetary

e.g. sales growth rate, market share

✓ Qualitative criteria
e.g. image, satisfaction
DSS Level 3
Decision Analysis
■ Difficulties in decision making
✓ Human cognitive limitations
✦ Short term memory (7+2)

✓ Non-linear utilities
✓ Scaling technique
✦ Need to combine different scales

✦ No scales for qualitative factors

 Non-linear Utilities

■ Even when we deal with a quantifiable scale, the

utility as a function of the scale is hardly ever linear
■ $4 might be worth twice as much to you as $2, but is
$4 million worth twice as much to you as $2 million??

Sales Advertising
Effectiveness

Commission $ Spending
Amount
 Scales of Measurement

■ What you can or cannot

say about the object
■ Which statistical Interval
• Performance rating
analyses you may use
on a 0 to 10 scale

Nominal Ratio
3 • Numbers assigned • Time to finish
7 6 to runners

1 Ordinal
2 3 • Rank order of winners
Understanding DSS Level 3
Stages of Decision Making

Intelligence Is there a problem?

Design What are the alternatives?

Choice Which should you choose?

Implementation Is the choice working?

Phase I : Intelligence Phase

■ Identify the central decision problem

✓ Perform a situation analysis
✦ SWOT Analysis

✦ MC-STEPS

✓ Conduct search & scanning procedures

✓ Problem identification
✓ Determine problem ownership
✓ Present a problem statement
Phase II : Design Phase

■ Develop alternatives & establish criteria

✓ Search for alternatives
✦ Initial list

✦ Revised list

✓ Set criteria for choice

✦ Must criteria

✦ Want criteria

✓ Predict & measure outcomes

Phase III : Choice Phase

■ Evaluate alternatives
✓ Develop multi-criteria decision model
✓ Solution to the model
✓ Sensitivity analysis
✓ Selection of alternatives
Tools for DSS Level 3
Approaches to Decision Analysis
■ Checklists
■ Pro/con analysis
■ Weighting and scoring method
■ Management sciences models
✓ Linear programming
✓ Optimization model
✓ Decision tree
✓ Multiple regression
■ Analytic hierarchy process (AHP)
Analytic Hierarchy Process (AHP)

■ Introduced by Dr.Thomas Saaty in early

1970’s
■ Analysis
✓ Separating material or any entity into its
constituent elements
■ Process
✓ As opposed to event
AHP Basic Concepts

■ Decompose problem and structure

hierarchy
■ Establish priorities
■ Synthesis of judgments
■ Evaluate inconsistency
Why AHP?

■ Helps organize the various elements of a problem

into a hierarchy
■ Guides you in judging via pair-wise comparisons:
✓ The importance of the objectives
✓ The preference for the alternatives
■ Helps you derive priorities by combining:
✓ Intangible information from your experience
and intuition
✓ Tangible information such as data
Typical Application Areas

■ Choosing
e.g. target market, retail site
■ Resource Allocation
e.g. sales force team, budget
■ Evaluation
e.g. salesperson performance, proposal
 AHP Traditional Model

Goal Goal
Goal

Criteria C1
C1 C2
C2 C3
C3 C4
C4

A1
A1 A1
A1 A1
A1 A1
A1
Alternatives
A2
A2 A2
A2 A2
A2 A2
A2
A3
A3 A3
A3 A3
A3 A3
A3
 Pair-wise Comparisons

■ Evaluate the factors in the model by comparing the

elements at each level in the hierarchy
■ Types of pair-wise comparisons
✓ Importance 9.Extremely
Very strongly to extremely
✓ Preference 7.Very strongly
✓ Likelihood Strongly to very strongly
5.Strongly
Moderately to strongly
3.Moderately
Equally to moderately
1.Equally
Inconsistency:
Why does it occur?
■ Clerical Errors
■ Lack of Information
■ Lack of Concentration
■ Inadequate Model Structure
■ Real World

It is more important
to be accurate than consistent
Real World Inconsistency

Consistency Inconsistency
A = 2B, B = 2C A = 2B, B = 2C
 A = 4C  A = 3C

Style > Price, Style > Price,

Price > Quality Price > Quality

Style > Quality 
Style <=
Quality

Inconsistency of 10% or less

 effective judgments &
reliable
AHP Applications in Marketing

■ Who -- target strategy

■ What -- product decisions
■ Where -- distribution decisions
■ How -- promotion decisions
■ How much -- price decisions
■ With what effect -- objectives and goals
for marketing plan
Sample AHP/EC Model for
Target Market Selection
■ To select the best target markets for a PC
✓ Current $ sales
✓ Sales growth rate
✓ Profit margins
✓ Competitive intensity
✓ Fit with current marketing mix
Sample AHP/EC Model for
Competitive Positioning Analysis
■ To evaluate competitive positions of
microwave ovens
✓ Ease of use
✓ Size of microwave
✓ Functions
✓ Cost of microwave
Sample AHP/EC Model for
Screening New-product Ideas
■ To find the product idea that best “fit” the
company
✓ Marketing requirements : synergy,
consumer need, promotability, compatib
ility with existing channels
✓ R&D requirements
✓ Financial requirements
✓ Production capacity
Sample AHP/EC Model for
Skimming or Penetration Pricing
■ To select skimming or penetration
introductory pricing strategy
✓ Price elasticity of demand
✓ Cost (compare to competitors)
✓ Economies of scale
✓ Speed of consumer adoption
✓ Ease of entry
Sample AHP/EC Model for
Perceived-value Pricing
■ To develop a perceived value price for an
airline shuttle
✓ Comfort and amenities
✓ Reliability (on time) -- departure &
landing
✓ Schedule convenience
✓ Ticketing
Guidelines in Developing MDSS

■ A decision support system should:

✔ Assist managers in making decisions
to solve semi-structured problems
✔ Support the manager’s judgment rather
than try to replace it
✔ Improve the manager’s decision-making
effectiveness rather than its efficiency