mkt potential and sales forecasting

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Chapter Six

Organizational Demand Analysis

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Composed of:

• Sales forecasting

• Market potential analysis.

Organizational Demand Analysis

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• Estimating market potential and forecasting sales are the two most significant dimension of company’s demand analysis.

• Knowledge of market potential enables the marketer to isolate the market opportunity and allocate marketing resources to product and customer segments that offer the highest returns.

• The sales forecast – the firms best estimate of expected sales with a particular marketing plan, enables a Marketing Manager to review the various strategies before allocating resources.

• The two main methods of estimating market potential are:

- Statistical series methods - Market surveys

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First, what is highest possible level of market demand that may accrue to all producers in industry in particular time period?

Second, what level of sales can the firm reasonably expect to achieve, given particular level and type of marketing effort?

Organizational Demand Perspectives

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Secondary Data – Internet

• Internet has all types marketing intelligence.

• Information easy to locate

• Internet information more current than “hard” data sources

• Inexpensive, quick access, easy to use

• Can be used for primary data collection

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Before Using Internet Information

Assess quality:

• How was it gathered?

• Sample size?

• Who provided information?

• Original purpose for which information was collected?

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Internet Market Research Limitations

No standards for information

Owner has no requirement to provide account of site’s accuracy.

No review process

People can publish whatever they want—opinion enters in.

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Sales forecast answers the question:

What level of sales do we expect next year, given particular level and type of marketing effort?

Relationship Between Potential and Forecast

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A Complete Market Census is Warranted When:

Markets very concentrated Direct sales contact Orders have relatively high value Unit volume low

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Qualitative Approachesto Sales Forecasting

Qualitative techniques

• Rely on informed judgment and rating schemes.

- Executive judgment method,

- Sales force composite method,

- Delphi method.

Effectiveness of qualitative approaches depends on close

relationships between customers and suppliers.

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Qualitative Approachesto Sales Forecasting

Executive Judgment

• Enjoys high level of usage.

• Collective expertise, experience, and opinions

• Primary limitation: does not systematically analyze cause-and-effect relationships.

• No established formula for deriving estimates.

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Delphi Application

Usually applied to long-range forecasting.

Well suited to:

• Forecasting for new products

• Estimating for future events when historical data are limited.

• Analyzing situations not appropriate for quantitative analysis.

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Quantitative Forecasting Offers Two Primary Methodoligies

1. 0 Time series techniques use historical data ordered in time project trends and sales growth rates.

2.0 Causal analysis uses factors that have affected sales in the past and seeks relationships in mathematical models.

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Typically, qualitative estimates merged with quantitative ones.

Summary of Qualitative Forecasting Techniques

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• The essence of sound forecasting is to combine effectively the forecasts provided by various methods.

• The process of sales forecasting is challenging and requires understanding of the available alternatives.