product research, forecasting market demand

7/29/2019 Product research, FORECASTING MARKET DEMAND

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FORECASTING MARKET DEMAND&

Product Market Strategies

Pranav Shandil


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FORECASTINGMARKET DEMAND

A marketing decision support system (MDSS) is an

ongoing, future-oriented structure designed to generate,process, store, and later retrieve information to aiddecision making in an organizations marketing program.It involves problem-solving technology composed of

people, knowledge, software, and hardware wired intothe sales management process.


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USES OF SALES FORECASTS

A sales forecast is the estimated dollar or unit sales for a

specific future time period based on a proposed marketingplan and an assumed market environment.


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1. A sales forecast becomes a basis for setting and

maintaining a production schedulemanufacturing.2. It determines the quantity and timing of needs for labor,

equipment, tools, parts, and raw materialspurchasing,

personnel.

3. It influences the amount of borrowed capital needed tofinance the production and the necessary cash flow to

operate the businesscontroller.

4. It provides a basis for sales quota assignments to various

segments of the sales forcesales management.

5. It is the overall base that determines the companys

business and marketing plans, which are further broken

down into specific goalsmarketing officer.

A sales forecast is important for at least five reas


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Marketing Plan

Sales Forecasts Sales Force Budget

FIGURE 5.1 PLANNING/FORECASTING/BUDGETING SEQUENCE


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THE

FORECASTING

PROCESS

The forecasting process refers to a series of

procedures used to forecast.


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A market factor is an item orelement that (1) exists in a market,(2) may be measured

quantitatively, and (3) is related tothe demand for a product orservice.

A market index is simply a marketfactor expressed as a percentage

relative to some base figure.


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BASIC STEPS IN BREAKDOWN METHOD OF FORECASTING SALES

General Environment Forecast

Industry Sales Forecast

Company Sales Potential

Company Sales Forecast

Product Lines

Individual Products fo

Customers-Territories-Regions-Divisions-U.S.A.-World


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Company sales potential is the

maximum estimated or potentialsales the company may reach in adefined time period under givenconditions.

The companys share of theestimated sales for an entire industry

is referred to as market share.

Industry sales forecast, or market

potential, is the estimated sales forall sellers.


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SALES FORECASTINGMETHODS

Survey methods are qualitative and includeexecutive opinion, sales force composite,and customers intention surveys.

Mathematical methods are test markets,market factors, nave models, trend analysis,and correlation analysis.

Two categories of sales forecasting methods ex


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SurveyMethods

Executive

Opinion

Users

Expectation

Sales Force

Composite

Build-to-

Order

Mathematical Methos

Test Market Regression

Naive Tre

Moving

Average

Exponential

Smoothing

FIGURE 5.4 THE MORE POPULAR OF MANY FORECASTING METHODS


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SURVEY FORECASTING METHODS

Four basic survey methods are

Executive Opinion Sales Force CompositeUsers Expectations Build-to-Order


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Executive Opinion

1. By one seasoned individual (usually

in a small company).

2. By a group of individuals, sometimescalled a jury of executive opinion.

Executive forecasting is done in twoways:


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1. Key executives submit the independent

estimates without discussion, and these are

averaged into one forecast by the chiefexecutive.

2. The group meets, each person presents

separate estimates, differences areresolved, and a consensus is reached.

The group approach uses two methods


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Delphi Method

Administering a series ofquestionnaires to panels ofexperts.


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Sales Force Composite

Obtaining the opinions of salespersonnel concerning futuresales.


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Users Expectations

Consumer and industrialcompanies often poll their actualor potential customers.


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Build-to-Order

Companies build final products only afterfirm orders are placed.


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MATHEMATICAL FORECASTINGMETHODS

Test markets are a popular method of

measuring consumer acceptance of new

products.

FIGURE 5 5 CITIES COMMONLY USED AS TEST MARKETS RESIDENTS ARE MOST


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Charlotte, NC

Erie, PA

Syracuse, NY

Toledo, OH

Lexington, KYKnoxville, TN

Chattanooga, TN

Portland, ME

Charleston, SCSavannah, GA

Jacksonville, FLBaton Rouge, LA

Little Rock, AR

Omaha, NE

Oklahoma City, OK

Corpus Christi, TX

Beaumont, TX

Spokane, WA

Eugene, OR

Bakersfield, CA

Salt Lake City, UT

Madison, WI

Tucson, AZ Lubbock, TX

Fresno, CA

Peoria, IL

Johnstown, PA

FIGURE 5.5 CITIES COMMONLY USED AS TEST MARKETSRESIDENTS ARE MOST

LIKELY TO SEE NEW PRODUCTS.


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Time Series Projections

Time series methods use chronologicallyordered raw data.


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The trend component.

The seasonal component.

The cyclical component.

The erratic component.

Classical approach to time series analysis:


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Nave Method

Next Years Sales = This Years Sales X This Years SalesLast YearsSales


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Moving Average

Moving averages are used to allowfor marketplace factors changingat different rates and at different

times.


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PERIOD

SALESVOLUME

SALES FORTHREE-YEARPERIOD

THREE-YEARMOVING AVERAGE

1 200

2 250

3 300 7504 350 900 300

5 450 1100 ( 3) = 366.6

6 ?

Period 6 Forecast = 366.6

TABLE 5.1 EXAMPLE OF MOVING-AVERAGE FORECAST


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Exponential Smoothing

Exponential smoothing is similar to the

moving-average forecasting method. Itallows consideration of all past data, but

less weight is placed on data as it ages.

Next Years Sales = a(This Years Sales) + (1-a) (This YearsForecast)


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Trend ProjectionsLeast Squares

Eyeball fitting is simply a plot of thedata with a line drawn throughthem that the forecaster feels mostaccurately fits the linear trend of

the data.


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600

500

400

300

200

100

01984

Time

1985 1986 1987 1988 1989 1990

Observed Sales Forecast Sales

Sales

Trend

Line

FIGURE 5.6 A TREND FORECAST OF SALES


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Regression Analysis

Regression analysis is a statistical method used toincorporate independent factors that are thought toinfluence sales into the forecasting procedure.


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Linear Relationship

Population

(A)

Sales

0

Curvilinear Relationship

Population

(B)

Sales

0

FIGURE 5.7 REGRESSION ANALYSIS

FIGURE 5.8 QUESTIONS TO ANSWER TO IMPROVE CHANCES OF HITTING THE


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Have You Developeda Good

Sales Forecasting

Process?

Market Decision Support System

Breakdown

Use Multiple

Forecasting

Methods

Buildup

FIGURE 5.8 QUESTIONS TO ANSWER TO IMPROVE CHANCES OF HITTING THE

FORECASTING BULLS-EYE

Hav

eYouC

onsid

ered

theB

asicsto

Incre

asing

Accur

acy

andS

electi

ngYou

r

Forec

astin

gMethod

?

Whic

hFor

ecast(s

)

Meth

odSh

ould

YouU

se?

CouldOutside

SourcesH

elp?

CouldtheCom

puter

a

ndSoftwareHelp?

90%

80%

70%60%

140%130%

120%

110%F

O

R

E

C

A

S

T


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TABLE 5.2 GUIDE TO FORECASTING

FORCASTING

METHOD TIME SPANMATHEMATICAL

SOPHISTICATION

COMPUTER

NEED ACCURACY

Executive Opinion Short to medium Minimal Not essential Limited

Delphi Method Medium to long Minimal Not essential Limited; good in dynamic

conditions

Sales Force Composite Short to medium Minimal Not essential Accurate under dynamic conditions

Users Expectations Short to medium Minimal Not essential Limited

Test Markets Medium Needed Needed Accurate

Nave Method Present to medium Minimal Not essential Limited

Moving Average Short to long Minimal Helpful Accurate under stable conditions

Exponential Smoothing Short to medium Minimal Helpful Accurate under stable conditions

Least Squares Short to long Needed Desirable Varies widely

Regression Analysis Short to Medium Needed Essential Accurate if variable relationships

stable


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THE

SALES

MANGAGERS

BUDGET

The sales force budget is the amount of money availableor assigned for a definite period, usually one year.


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Planning

Coordination

Control

BUDGET PURPOSES


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TABLE 5.3 SALES FORCE OPERATING COSTS

1. Base salaries 4. Special incentives

a. Management 5. Office expenses

b. Salespeople 6. Product samples

2. Commissions 7. Selling aids

3. Other compensation 8. Transportation expenses

a. Social Security 9. Entertainment

b. Retirement plan 10. Travel

c. Stock options

d. Hospitalization


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BUDGETS SHOULDBE FLEXIBLE

Sales, costs, prices, or the competitionsmarketing efforts are some factors that may behigher or lower than expected.


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THE BOTTOM LINE

Because of the growing trend in business to centralize datacollections, the job of forecasting has become an integral part of afirms marketing decision support system (MDSS).

A sales forecast is the estimated dollar or unit sales for a specificfuture period based on a proposed marketing plan and an

assumed market environment.Firms know sales forecasting is never 100 percent correct.

Two categories of sales forecasting methods are survey methodsand mathematical methods.

Because the sales forecast has a major impact on the company,the top executives give final approval.

To create a sales forecast, sales managers should know how touse a computer.


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Marketing Strategy

Marketing strategy is the link betweencorporate goals and operational tactics

There are two primary considerations inmarketing strategy

Where are we?

Where do we want to go?


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Portfolio Assessment Tool

Boston Consulting Group matrix

Brands or products are classified according

to whether each has a strong or weakmarket share and slow or growing market

Dog: low share, low growth

Star: high share, high growth

Cash cow: high share, low growthQuestion mark: low share, high growth


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BCG Matrix


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BCG Portfolio Analysis Stars: optimize or hold

Dogs: minimize or divest

Cash cows: milk

Question marks: unknown

New technologies, uncertain markets, etc.

If stars and cash cows are sufficientlyprofitable, companies can carry dogsand question marks


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Discussion Questions Using the BCG Matrix

Where would you likely categorize the

market leader in the typewriter market?

10 years ago, where would you have likelycategorized a small player in the cellphone business?

Where would you categorize the marketleader in cell phones today?


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Corporate IdentityWhat is the companys typical philosophy

toward the marketplace

Offensive

Defensive

Leader

Follower


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Corporate Identity Leader has several meanings

Largest market share

1st to market

First to market may or may not be beneficialbecause adoption can be slow

Quick to innovate and improve, etc.

Quick followers can learn from leadersmistakes


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Corporate IdentityA company may be a leader for some of

its brands/products and not others

A company may be offensive anddefensive to vary its portfolio

A companys products life cycles mayinfluence its identity


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Marketing Metrics Profitability

Sales

ShareAverage prices

Levels of awareness

Penetration in trial

Customer satisfaction Employee satisfaction, etc.


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Example: Metrics


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Goals Lets make more money

Lets delight our customers

Lets redefine our position

Goals about broader concerns


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GoalsGoals can be complex, numerous,

interconnected and overwhelming

Focus on most important goals first

Consider the time frame and the financialsupport need to achieve the goals


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Basic StrategiesDo nothing

Let the brand sink or swim on its own

Do nothing differently

Maintain business as usual

Take action Do something different

Marketers have control over STP and 4Ps

product research, forecasting market demand

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