Management will find that the organizational problems are now more important than the technical problems

in planning

HOW TO BUILD A MARKETING INFORMATION SYSTEM

By Donald F. Cox and Robert E. Good

Recently the marketing vice president of a company whose sales volume is $350 million asked, "How should we go about developing a marketing information system? I don't mean one that will keep track of orders and shipments, but a system giving our marketing managers information that will help them make better decisions about pricing, advertising, promotion, product policy, sales force effort, and so forth." He asked the question of us because, since early 1966, we have been studying the attempts of 15 major U S. corporations to develop a sophisticated marketing information system, or MIS. We have talked with executives at companies such as Chemstrand, CocaCola, General Electric, General Foods, IBM, Lever Brothers, Pillsbury, Schenley, and Westinghouse. Although this field is relatively new, most of the technical aspects of developing an MIS are no longer an obstacle. Nevertheless, few companies are very far along in taking advantage of an approach which, its users agree, has great potential. In this article we will attempt to provide some guidelines which might help answer the inquiring marketing vice president - and others with similar questions. First we will present a brief review of some of the characteristics and advantages of a sophisticated MIS, and of the current "state of the art." Then we will identify some of the key decisions which must be made by top management in the MIS development process. In each case we will present a distillation of the experience of the companies studied as an aid in making these critical management decisions.

AUTHORS' NOTE: This is a partial report of a study of the development of marketing information systems which is being supported by the Division of Research of the Harvard Business School. It is desirable first to differentiate between the two major components of such systems - support systems and operating systems. Support systems include those activities required to generate and manipulate data - i.e., market research and other data gathering, programming, and data processing. Operating systems are those that use the data as an aid to planning and controlling marketing activities. This article is concerned mainly with the development of three types of marketing operating systems - those designed for control, for planning, and for basic research. In EXHIBIT I we summarize some of the applications and probable benefits of each type of system (assuming increasing degrees of sophistication) and present examples of systems now operating. The following are examples of marketing systems we have observed, with some of the advantages the companies claim for them. 1. CONTROL SYSTEMS These provide continuous monitoring (sometimes through exception reporting) and rapid spotting of trends, problems, and marketing opportunities. They allow better anticipation of problems, more detailed and comprehensive review of performance against plans, and greater speed of respon se. For instance:

What It Is & Can Do

An MIS may be defined as a set of procedures and methods for the regular, planned collection, analysis, and presentation of information for use in making marketing decisions. This of course is a step beyond logistics systems, which handle inventory control, orders, and so forth.

IBM's Data Processing Division has developed an MIS which district sales managers can interrogate through a time-sharing computer terminal located in an executive's office. A manager punches a typewriter-like keyboard and receives an immediate print-out of information such as: Sales (or rentals) to date - broken down by product code, type of customer, and branch making the sale. Sales in relation to goals.

 Combinations of information which relate to sales, customer classifications, product codes, and so forth. The data are current to within three or four days, allowing the manager to keep up to date on marketing problems and opportunities and on progress in relation to goals.

EXHIBIT I. BENEFITS POSSIBLE WITH A SOPHISTICATED MIS TYPICAL APPLICATlON CONTROL SYSTEMS 1. Control of marketing costs. 2. Diagnosis of poor sales performance. 3. Management of fashion goods. BENEFITS 1. More timely computerized reports. EXAMPLES

4. Flexible promotion strategy.

1. Undesirable cost trends are spotted more quickly so that corrective action may be taken sooner. 2. Flexible on-line retrieval of data. 2. Executives can ask supplementary questions of the computer to help pinpoint reasons for a sales decline and reach an action decision more quickly. 3. Automatic spotting of problems and 3. Fast-moving fashion items are reported opportunities. daily for quick reorder and slow-moving items are also reported for fast price reductions 4. Cheaper, more detailed, and more 4. On-going evaluation of a promotional frequent reports. campaign permits reallocation of funds to areas behind target. 1. Automatic translation of terms and 1. Survey-based forecasts of demand for classifications between departments. complex industrial goods can be automatically translated into partsi requirements and production schedules. 2. Systematic testing of alternative 2. Complex simulation models both promotional plans and compatibility testing developed and operated with the help of of various divisional plans. data bank information can be used for promotional planning by product managers and for strategic planning by top management. 3. Programrned executive decision rules can 3. Credit decisions are automatically made as operate on data bank information. each order is processed. 4. Detailed sales reporting permits 4. Computer automatically repurchases automation of management decisions. standard items on the basis of correlation of sales data with programmed decision rules 1. Additional manipulation of data is possible when stored for computers in an unaggregated file 2. Improved storage and retrieval capabilities allows new types of data to be collected and used. 3. Well-designed data banks permit integration and comparison of different sets of data. 4. Comprehensive monitoring of input and performance variables yields information when changes are made. 1. Sales analysis is possible by new market segment breakdowns. 2. Systematic recording of information about past R&D, contract bidding situations allows improved bidding strategies 3. Advertising expenditures are compared to shipments by county to provide information about advertising effectiveness. 4. Changes in promotional strategy by type of customer are matched against sales results on a continuous basis.

PLANNING SYSTEMS RESEARCH SYSTEMS

1. Forecasting.

2. Promotional planning and corporate long-range planning

3. Credit management. 4. Purchasing.

. 1. Advertising strategy 2. Bidding strategy 3. Evaluation of advertising expenditures 4. Continuous expriments

Schenley has installed the so-called SIMR (Schenley Instant Market Reports) system which allows key executives to retrieve (via video display desk consoles and printers) current and past sales and inventory figures for any brand and package size (or combination) for each of 400 distributors. SIMR furnishes information in less than one second after a query, compared with many minutes or even hours under its former computer and manual system. Furthermore, since the computer does the calculations, managers have great flexibility and near-instant speed of response in making many

types of comparisons of sales and inventory positions, such as:

 How a brand is doing in any size or in all sizes in any market or in all markets. How a distributor is doing with a particular brand. How a bottle size is doing by distributor, state, or region. How a market is doing by month or has done since the end of the previous fiscal year. We can get answers literally while we are still formulating the questions," states Bernard Goldberg, president of Schenley's marketing subsidiary. "Needed information is available so quickly that it helps us think." 1 2. PLANNING SYSTEMS These furnish, in convenient form, information the marketing executive requires for planning marketing and sales programs. At least three major consumer goods producers, for example, are developing "data books" for product managers. The books bring together the basic information a product manager needs to formulate annual marketing plans and to "replan" during the course of the year. Putting the information into one book, rather than in a welter of reports, not only saves time, but it also enables all product managers in a group or division to base their plans on the same data. Consequently, their superiors are able to review comparable information quickly when considering the plans for approval. At a more sophisticated level, planning systems allow simulation of the effects of alternate plans so that the manager can make a better decision. For instance:

company simulates each doctor's prescription decision for every patient he "sees." (Commercial research services are available which provide information on the incidence of symptoms of illness and the "patient mix" of the various medical specialists.) The doctor considers the symptoms "presented" by each patient and decides whether to prescribe a drug and, if so, which type and brand. His decision is based on factors such as his experience with the drug, current attitudes, exposure to the advertising of various brands, exposure to detail men, and word-of-mouth information from other doctors. The simulation even includes a "forgetting routine" which causes a doctor to forget from time to time some of the information he has acquired. While the company does not disclose how the simulation model is being used, it certainly is capable of generating extremely sophisticated marketing planning. For example, marketing managers can test the effects on share of market and sales of variations in amount, type, and timing of advertising and simultaneously test the effects of variations in frequency of detail men's calls. On a broader basis, the system can be used to screen a number of alternative marketing programs to select the most promising ones to be actually test marketed. Perhaps the ultimate in sophistication is a marketing planning system which reviews alternatives, then actually makes decisions and takes action. Thus, several large retailing organizations have developed systems that review sales trends and inventories and then place orders for merchandise. The most advanced unit of this type we have seen is not a marketing system; rather, it buys and sells securities in a stock brokerage house. Still in the future are marketing systems that decide the amount and timing of advertising and price promotions in each of several dozen sales districts. 3. BASIC RESEARCH SYSTEMS These systems are used to develop and test sophisticated decision rules and cause-and-effect hypotheses which should improve ability to assess effects of actions and permit greater learning from experience. For instance:

Pillsbury's system enables marketing managers to obtain sales forecasts for each of 39 sales branches, supported by varying levels of trade promotion. The marketing manager asks the question, "What will sales be in each branch if we spend x dollars on trade promotions in comparison with .75 x dollars and with 1.2 x dollars?" Pillsbury does not claim that the system is perfect - it is obviously no better than the assumptions on which the simulation is based - but it has had a surprisingly good "batting average" in accuracy. It has great value to marketing managers because it allows them to look at alternate plans in each of the 39 sales branches; this was never feasible before. A large pharmaceutical company has developed an even more complex model. The company has programmed an artificial panel representing the nation's population of doctors. Every week the

Industrial Data Processing Applications Report (S3), Business Publications International, Division of OA Business Publications, Inc., 1965.

A large consumer goods company is developing an MIS which, among other things, stores in computer memory the characteristics of each advertisement run (color versus black and white, nature of illustration, amount of copy, and so forth) and readership and attitude change scores for each ad. The purpose is to be able to relate ad characteristics to effectiveness measurements under different conditions and with different types of consumers by systematically studying "experience."

Most companies find it difficult to relate advertising to sales because there are so many important "uncontrollable" variables which are nearly impossible to take into account in an unsophisticated MIS. One large consumer goods producer has developed an MIS which for the first time allows the company to collect, store, and retrieve advertising, sales, and other marketing data at a level of detail which makes possible much better controlled studies of the relationship of advertising to sales.

Current Progress
The examples which we have presented probably represent the most sophisticated types of MIS now in existence. While we have not surveyed the 500 largest corporations in the country, we have screened more than 50 companies and have reviewed more than 100 current articles on information systems. As far as we have been able to determine, the current state of the art is something like this: Very few companies have developed advanced systems, and not all of these are in operation. Some might even best be classified as subsystems, since they relate to only a portion of the marketing decisions made. Some companies, perhaps 15, are actively upgrading their systems to a high level. Of these, about half seem to be progressing well; the others have been much less successful. Many other companies are contemplating plans to develop sophisticated systems.

operation? And why have some companies succeeded more than others in realizing the potentials of the MIS? One characteristic of the more successful companies is striking. In every case, at least some members of top management have seen the promise of the technique and have viewed its development as a top management responsibility. They have devoted a great deal of time, thought, and effort to guiding (and sometimes) actually protecting the development process Unfortunately, it is widely believed that the job of building an MIS can be turned over to a technical staff group. This has not proved to be the case. Information systems are not merely technical appendages (developed by technical people) that are easily meshed with most existing marketing planning and control systems. The best way to show why participation of top management is necessary is to pose five key questions which must be answered in the process of instituting a sophisticated MIS. In our opinion, each is a management question: 1. 2. 3. 4. 5. How should we organize to develop a better MIS? How sophisticated should our marketing systems be? What development strategy should we follow - do we attempt to build a "total" system in one move, or in stages? What should be the major characteristics ("macro specifications") of our system? How much should we spend on developing and operating an MIS?

While the field is too new to permit comprehensive and conclusive statements about all its aspects, we can present some guidelines and working hypotheses that are worthy of management's consideration. READYING THE ORGANIZATION The starting point in organizing for MIS development is not the establishment of a marketing systems group. The starting point is a review and appraisal of the entire marketing organization and of the policies that direct it. As James Peterson, vice president grocery products marketing of The Pillsbury Company, pointed out to us: "We realized we couldn't develop a marketing control system until we had clearly and sharply defined the responsibilities of our marketing managers. If the system was to measure their performance against plans, we had to specify precisely what each man was accountable for. Some companies, for instance, have failed to decide whether a product manager is accountable for unit sales and market share, for sales revenue, for marketing profit, or for net profit. Until responsibilities and spheres of activity are clearly defined, if is virtually impossible to build a marketing control system. In fact, specification of who is accountable for what

The reasons why marketing systems have not developed to the same extent as, say, production, logistics, or financial systems are not "technical." Marketing research technology (data gathering), computer technology (data handling), and analytical procedures (e.g., mathematical model building) are all sufficiently advanced to permit companies to build effective marketing systems. Although insufficient time has elapsed since the installation of most advanced marketing information systems to allow a precise assessment of benefits, the users of sophisticated systems with whom we have talked are virtually all very enthusiastic about their systems, even though many see room for improvement.

Developing the System

Because many of the technical problems of developing sophisticated support systems have been solved and many users are gratified over the results, why are there so few advanced marketing information systems in

automatically determines many of the control system's characteristics. Management must next decide how to organize MIS development activities. Our observations show that this is a much more complex problem than might be assumed. Sophisticated systems require the coordinated efforts of many departments and individuals, including: Top management. Marketing management, brand management. Sales management. New products groups. Market research personnel. Control and finance departments. Systems analysts and designers. Operations researchers, statisticians, and model builders. Programmers. Computer equipment experts and suppliers. The contribution of each group of course depends on its specialized talents and interests in the system. Programmers cannot define managers' information needs, and managers usually cannot program. No one person knows enough to accomplish all phases of MIS development. Furthermore, sophisticated systems do not fall into a company's traditional data handling domains, such as the market research department or the accounting and control department, because an essential feature of a good MIS is that it integrates and correlates marketing and financial data. Many companies we have observed have not really come to grips with the difficult problem of providing the organizational arrangements and leadership necessary for successful MIS development. They have not answered the question of who is responsible for MIS design, planning, and development. Why is there a leadership vacuum? Partly because top management does not fully appreciate the requirements and implications of the MIS, and partly because it has an understandable reluctance to disturb entrenched and powerful departments. The approaches which have been tried in an attempt to solve the problems of organization and leadership can be characterized as: "Clean piece of paper" approach. Committee approach. Low-level approach. Information "coordinator" approach.

response to management information needs. In the precomputer era, if was rarely possible to correlate marketing and accounting data in a sophisticated manner and on a regular basis for presentation to management. Now it is possible, but the marketing data are supplied by one set of departments and the accounting data by another. In the absence of coordination and compatibility, line management must often do its own correlating. Therefore the "ideal" procedure is to abolish the traditional information gathering and processing departments and establish a management information department. While this may represent an "ideal" solution, it is not feasible in most companies. Traditions and positions are too well entrenched. Furthermore, if would not solve all the problems. For one thing, if would not ensure the development of an MIS geared to management needs. For another, no management information department could supply all of the data the system needed, such as reports from the field sales organization. Committee Approach. Some companies have established MIS committees. They are excellent vehicles for communicating points of view and for joint learning and sharing in the experience of developing an MIS. They can create shared awareness of compatibility and coordination problems and of the need to resolve them. The committee approach alone, however, is not the answer. Because meetings and committee assignments consume time, if is difficult to involve busy line managers. Furthermore, it is not easy to get anyone to carry out assignments in addition to his regular job. Finally, a committee of peers, chaired by a peer, is not always able to exert the leadership which may be required. Committees of this kind simply lack "clout". And at times clout may be the only thing that will accomplish necessary changes. Low-level Approach. Some companies have assigned the task of MIS development to a junior member of the market research department - often as a part-time assignment. This reflects a total lack of understanding of the difficulty of the task, and the outcome is predictable. The man, no matter how clever he is, lacks the time and the clout to overcome the organizational and psychological barriers he encounters. Such an assignment has led to the resignation of more than one bright young research man. Information 'Coordinator' Approach. Some companies, while retaining traditional departmental boundaries, have appointed a top-level executive to the post of information czar or "coordinator," sometimes called "director of marketing systems." We have observed that men who are capable of understanding both management information needs and systems problems can make substantial progress in MIS development in this position - when they enjoy top management support. But it is a delicate position; one coordinator we

'Clean Piece of Paper' Approach. This involves drawing a new organization chart. The argument goes that the financial and accounting departments and market research departments have developed as much from growing data gathering and processing capability as in

know preferred not to have any formal title until, after a year, he had established good working relationships with the various departments. Furthermore, even a sensible and sensitive information manager must establish organizational lines that encourage the coordinated efforts of the affected departments and divisions of the company in the design and the accomplishment of the MIS plan. For many companies this approach has the best chance of success. We suggest that management designate the director of marketing systems as a "prime contractor" who develops MIS plans and specifications, and coordinates and reviews the work of the various "subcontractors" or suppliers contributing to the program. Such a prime contractor-subcontractor approach has proved in military and civilian applications to be effective in handling projects or tasks that require the utilization of many talents and capabilities, not all of which exist in the department or organization directly involved. For the prime contractor to be effective he must have cost control. It is therefore advisable to use an interdepartmental billing system. The prime contractor is responsible for the overall budget, and negotiates with users (marketing managers) to determine their information needs and to obtain from them the funds required to develop and operate an MIS that would meet these needs. He also arranges to compensate the various supplying departments, such as the systems group for programming, for their services. Management must also determine the prime contractor's organizational location. It is essential that he represent the department or division which will use (and pay for) the MIS. For a variety of reasons, not one of the companies studied having a central or corporate systems department (responsible for support systems) has designated that group as the "prime contractor" for operating its MIS They view the corporate systems group as an important supplier of technical advice and of programming and data processing services for the marketing departments. But in the large companies, at least, final authority, and responsibility for MIS development, where such authority has been designated, generally rests with the marketing department. Of the several arguments for this practice, the most important is that the expertise of corporate systems groups is usually in support systems (programming and data processing). Effective development of marketing planning and control systems requires a management, rather than a technical support systems, orientation. Furthermore, effective MIS can be developed only by people who understand users' problems and who can be responsive to users' needs. HOW SOPHISTICATED? Someone must decide on the level of sophistication of the MIS to be developed. This decision should, of

course, be based on a review of the company's needs and the costs of meeting them. Equally important, the abilities of managers must be considered. To develop and use effectively some of the more sophisticated systems that have been described, managers must be able to: Define specific information needs. Develop analytical approaches and models. Make explicit their planning, decision-making, and control processes and procedures. Interpret and use sophisticated information.

One of the characteristics of the more advanced MIS is automation of certain aspects of the marketing management process. But it is first necessary to make the process explicit. For instance, to develop exceptionreporting systems managers' exception or "control" criteria must be articulated. Simulation models cannot be built into the system until managers have spelled out the characteristics of the different elements of the company's marketing system (consumers, distributors, competitors, and so forth) and have attempted to define how these elements interact. If a company already has a well-articulated set of decision rules as to what constitutes an "exception," it would not be difficult to build an automated exception reporting system. Such a system could be developed, for instance, for the marketing manager who says, "I always like to know about all situations in which sales, profits, or market share are running 4% or more behind plan Furthermore, in any exceptional cases I also require the following diagnostic information: prices, distribution levels, advertising, and consumer attitudes." The problem is, as has been well documented in a Marketing Science Institute study2, that many marketing managers, particularly those at the operating level, do not use explicit planning and control systems. They do not make their decision rules and exception criteria explicit. In short, they are not equipped to contribute to the development of a sophisticated MIS, nor are they comfortable with it once it is operating. Though related to research information, their decisions often are highly intuitive. The problem seems less severe at higher management levels, partly because top management control systems are more explicitly articulated than those at the operating level. System-Manager Balance. It is important that a balance be maintained between management sophistication and MIS sophistication. As a company upgrades the latter, so must it raise the former. In a "steady state" (before anyone tinkers with the marketing system) there usually seems to be a correspondence between management sophistication and information quality. Managers usually get the
2

D. J. Luck and Patrick J. Robinson, Promotional Decision Making (New York, McGraw-Hill Book Company, Inc., 1964).

quality of information they ask for. Though they may complain of a lack of good information and blame one or more of the information supplying departments, questioning often reveals that in most cases they have not "been asking for better information in any specific way. If, as we have suggested, the two "quality levels" are roughly in balance, what happens when only the level of information quality is raised significantly? Our prediction is that this would not lead to better decisions. In fact, the reverse may be true, as the result of the confusion and resentment generated by the manager's inability to deal with the more sophisticated information. Information quality can be upgraded much more rapidly than management quality. It is easy to throw the management system out of balance by installing a sophisticated MIS, but there seems to be little point in doing so A more positive approach is to develop a master plan for improving the system, but make the improvements gradually - say, over several years. Marketing control systems like Schenley's or IBM's, described earlier, are easier to develop and use than those like the pharmaceutical company's simulationbased planning system. So a company might first install a marketing control system and subsequently, as managers gained experience in using it, develop advanced planning systems. 'COMPLETE' SYSTEMS While an attempt to develop a highly sophisticated "total" marketing system at the outset has a high probability of failure, it is desirable to build a complete subsystem at one time - even if it is only a part of what will eventually be the company's total system. To illustrate: A company develops a first-rate exception reporting system that will quickly present "exceptional" sales results to the marketing manager. Very likely he will be faced with more problems than ever before, because of the system's ability to monitor large amounts of detailed information. It will be difficult (and dangerous), however, for the manager to act on this information. Before he can take intelligent action, he must also know whether the deviations from plan are the result of deviations in sales effort, of unusual competitive activities, or of other factors. To be complete, therefore, the system must also include a diagnostic procedure. 'MACRO' SPECIFICATIONS Apart from decisions on the general characteristics of the system to be used, the company must determine the overall or macro MIS specifications. Besides the type of system to be developed, the most important considerations are the nature of the data bank, the form and the method of data display and presentation, and computer selection.

We should, however, underscore here the necessity of ensuring the participation in these decisions not only of top management but also of the line managers. In most cases we have studied, and in all of the least successful instances, the marketing systems developers have failed to involve line managers in the process of developing macro specifications. In many cases where systems developers have made the effort, they have found it difficult to elicit the views of busy line managers in the brief periods available in typical interviews or meetings. The systems developers subsequently present the managers with a fait accompli - which may or may not work. A more effective approach is to involve the managers in an extended session, lasting days if necessary, in which a consensus on overall MIS specifications can be reached. In these sessions the group should develop flow charts of the "system" - or total environment in which the company operates - and designate critical decision points, identify the information they require for planning and controlling marketing (or other management) activities, and make cost/benefit analyses of alternative designs before agreeing on one design. This approach not only helps ensure a system that is keyed to management's needs, but also allows management to defer a decision on the size of the MIS development budget until it has assessed the alternative systems. 'Micro' Data Bank. Perhaps the most essential element in upgrading a system is a bank or file based on disaggregated or "micro" data. These are data recorded and stored in the lowest level of aggregation and detail such as the size, price, time, and location of a single purchase of a product. As Professor Arnold E. Amstutz of M.I.T. has commented: "At the heart of every successful information system is a disaggregated data file. . . . As new inputs are received they are maintained along with existing data rather than replacing or being combined with existing information. . . . The existence of a disaggregated data file facilitates system evaluation. . In the first stages of system development it is simply impossible to anticipate the direction of later advancement. Aggregate data files may preclude highly profitable system modification. The disaggregated data file provides the flexibility which is the prerequisite of intelligent system evolution." 3 In designing the data bank it is important to provide for common denominators in different sets of data, so that the correlation and analysis potential of the MIS can be
3

"The Marketing Executive and Management Information Systems," in Science, Technology and Marketing, 1966 Fall Conference Proceedings of the American Marketing Association, p. 76.

realized. This means that such elements as the geographic, time, and responsibility boundaries of different types of data must be compatible to permit meaningful comparisons. A disaggregated data bank gives the system the flexibility required for future upgrading. The alternative is to try to anticipate all possible future uses of the system and to agree on aggregated units (like aggregating all package sizes of a brand), aggregated time periods (a week, month, or quarter), and aggregated geographical areas (sales territories or regions). Management must weigh the greater cost of a disaggregated data bank against the possibility that future conditions or new insights may call for analyses which are precluded because the data have been aggregated. Since most people who have participated in MIS development admit that they are unable to foresee all important management information needs, and since most current systems are likely to evolve to increasing stages of sophistication. the prudent decision would be to develop a disaggregated data bank - if the company can afford it. Presentation and Format. Developing a sophisticated MIS involves resolving the matters of what information should be presented, how it should be presented, and to whom. One important aspect of this question is the degree of executive-system interaction desired. At the extreme of "distance," executives receive information in the form of regular reports. With somewhat closer but not complete interaction, the manager can make special requests for information from the data bank. At the extreme of "closeness," the manager can obtain almost instantaneous computer response with a timesharing or on-line system. Consider Schenley's experience : Schenley has installed a video display and retrieval system. Of interest is the fact that the new system carries little new information; indeed, the same data were generated previously in the form of computer print-out. The information in paper form, however, was too voluminous and unwieldy to use. What the new retrieval and presentation system has achieved is simply to make data much more usable for management. On-line systems such as Schenley's have a tremendous advantage in speed of access to information. Critics of these systems argue that managers do not need to know what happened as of the close of business yesterday. 4 This may be true. But there are benefits in being able to receive split-second responses. A manager's willingness to formulate questions and get data on which to base decisions may depend on the ease and speed with which he can retrieve answers from the computer. Although it is too early to tell whether the cost of this capability can
4

be justified large companies should seriously consider experimenting with this type of system. Computer Selection. The computer requirement for a company's MIS will, of course, depend on the system's performance specifications and the decisions management has made on each of the preceding design problems. While technical help is necessary in the decisions on equipment, management has the responsibility for making certain that the hardware chosen will meet the MIS needs and specifications at the time of installation, which may be some years away. In this respect, managers should recognize that they probably will learn many new ways to use the computer, such as new marketing planning, control, decision, and research applications, given some experience with an improved MIS. So even with the most careful planning, demands for computer capacity are likely to expand faster than anticipated. COST & VALUE It is difficult to generalize about how much an MIS will cost - or how much it will be worth. Usually there is not a large increase in data gathering costs, since many companies now have available to them much of the raw data required. Cost increases result from data storage and transforming the raw data into useful information. It is extremely difficult to determine MIS development costs, since many companies lack accounting arrangements, like interdepartmental billing, which allow them to keep track of the total cost of the manpower contributing to the program. On a "best estimate" basis, we are aware of simple or partial systems which have cost only a few thousand dollars. At the other extreme, one complex marketing system we know of must have cost several million dollars. A large company with sales in the $500 million range should expect to invest several hundred thousand dollars (plus equipment charges) to develop a relatively sophisticated, computer-based MIS. And development costs will not end there, since after the first stage is operational, it is probable that management will want to upgrade the system continually. If top executives authorize expenditures of this magnitude, they are likely to want a justification of the value of the system. Usually, computer-based information systems, such as those used for accounting, have been justified mainly on the ground that they reduce personnel and other administrative costs. Few advanced marketing information systems could be justified on the basis of cost reduction. However, that test alone is not appropriate for an MIS. The main purpose of an MIS is to help the marketing manager make more profitable decisions, not to reduce data handling and paperwork costs. So an MIS should he evaluated in terms of its estimated effects on marketing efficiency.

See John Dearden, "Myth of Real-Time Management Information," HBR May-June 1966, p 123.

Determining how much an MIS could increase marketing effectiveness is not an easy task. The involvement of management in developing overall specifications should help in making an estimate, however imprecise, of system benefits. In addition, the decision on a budget for MIS development need not be made in a single giant step. Rather, it is possible to attain system sophistication in discrete increments, involving a series of smaller budgeting de cisions and cost/benefit evaluations.

companies are demonstrating their faith. And some of the pioneers already claim their faith is justified.

Conclusion
Marketing men in many of the large corporations we studied are almost uniformly enthusiastic about the promise of the computer-based, advanced MIS. Relatively few such systems are now operating, however, and many companies have had indifferent success in deriving benefits from them. In the more successful companies, the following patterns have been evident: The development of the MIS has been viewed as a management responsibility, including both top management and operating line management. Formal organizational lines have been drawn to provide leadership in use of the technique - usually including the appointment of a high-level information coordinator or "prime contractor" who develops plans and coordinates the efforts of the departments involved. The prime contractor reports to the user group, such as the marketing department, rather than to the central systems group. Line managers participate in developing overall specifications for the MIS. The sophistication of the system is balanced with that of the managers who use it. Systems development typically proceeds in manageable stages, rather than in attempts to develop "total" systems at once. The system is based on a disaggregated data bank which allows managers to retrieve analyses in the form they want without having to specify all their information needs in advance. Investments in systems development and operation are justified not on the basis of cost reduction, which is often irrelevant with the MIS, but on an estimate of the system's ability to help managers make more profitable marketing decisions. Source: Harvard Business Review, May-June 1967, p.145-154.

It is evident that a good deal of faith is required to make substantial investments in the MIS - whose benefits by and large are still unproven. Yet more and more