situational analysis understanding the market definition and measurement
TRANSCRIPT
![Page 1: Situational Analysis Understanding the Market Definition and Measurement](https://reader036.vdocuments.us/reader036/viewer/2022062519/5697bfc01a28abf838ca37fa/html5/thumbnails/1.jpg)
Situational Analysis
Understanding the Market Definition and Measurement
![Page 2: Situational Analysis Understanding the Market Definition and Measurement](https://reader036.vdocuments.us/reader036/viewer/2022062519/5697bfc01a28abf838ca37fa/html5/thumbnails/2.jpg)
Market Definition
Three dimensions of definition: Works from broad to narrow. Identifies all possible opportunities, enabling
business to be proactive and to anticipate consumer needs.
![Page 3: Situational Analysis Understanding the Market Definition and Measurement](https://reader036.vdocuments.us/reader036/viewer/2022062519/5697bfc01a28abf838ca37fa/html5/thumbnails/3.jpg)
First Dimension:
Identifies competing product classes serving generic need.
Example:
Generic need = thirst
Competing product classes =
milk, soda, coffee, tea, juices, water, etc.
![Page 4: Situational Analysis Understanding the Market Definition and Measurement](https://reader036.vdocuments.us/reader036/viewer/2022062519/5697bfc01a28abf838ca37fa/html5/thumbnails/4.jpg)
Second Dimension:
Identifies competing product forms within product class.
Example:
Product class = coffee
Competing forms = whole bean, ground, instant, coffee bags, etc.
![Page 5: Situational Analysis Understanding the Market Definition and Measurement](https://reader036.vdocuments.us/reader036/viewer/2022062519/5697bfc01a28abf838ca37fa/html5/thumbnails/5.jpg)
Third Dimension:
Identifies competing brands within product form.
Example:
Product form = whole bean
Competing brands = Folger’s, Starbuck’s, Millstone,
Gevalia, etc.
![Page 6: Situational Analysis Understanding the Market Definition and Measurement](https://reader036.vdocuments.us/reader036/viewer/2022062519/5697bfc01a28abf838ca37fa/html5/thumbnails/6.jpg)
Marketing Definition
Broad
Narrow
Thirst
Milk CoffeeSoda Tea Juice
GroundWholeBean
InstantCoffee
Bag
Folger’s Starbuck’s Millstone Gevalia
![Page 7: Situational Analysis Understanding the Market Definition and Measurement](https://reader036.vdocuments.us/reader036/viewer/2022062519/5697bfc01a28abf838ca37fa/html5/thumbnails/7.jpg)
A strategic marketing definition should...
Identify opportunities.
Identify the served market.
![Page 8: Situational Analysis Understanding the Market Definition and Measurement](https://reader036.vdocuments.us/reader036/viewer/2022062519/5697bfc01a28abf838ca37fa/html5/thumbnails/8.jpg)
Basic Types of Market Measurements
Market Potential The maximum sales opportunity that can
be achieved by all sellers in the market. Sets upper limit on consumption units.
![Page 9: Situational Analysis Understanding the Market Definition and Measurement](https://reader036.vdocuments.us/reader036/viewer/2022062519/5697bfc01a28abf838ca37fa/html5/thumbnails/9.jpg)
Measuring Market Potential
MP=N x P x Q MP=market potential N=number of possible buyers P=average selling price Q=average number purchased by each
buyer
![Page 10: Situational Analysis Understanding the Market Definition and Measurement](https://reader036.vdocuments.us/reader036/viewer/2022062519/5697bfc01a28abf838ca37fa/html5/thumbnails/10.jpg)
Example: What’s the market potential for CD’s?
Assumptions:
Everyone in U.S. > 14 years buys, on average, 4 CD’s per year at ave. price of $14/CD
![Page 11: Situational Analysis Understanding the Market Definition and Measurement](https://reader036.vdocuments.us/reader036/viewer/2022062519/5697bfc01a28abf838ca37fa/html5/thumbnails/11.jpg)
Measuring Market Potential
Measuring market potential often relies on: Assumptions. Published data (industry publications, gov’t
sources). Variables that correlate closely to market
potential.
![Page 12: Situational Analysis Understanding the Market Definition and Measurement](https://reader036.vdocuments.us/reader036/viewer/2022062519/5697bfc01a28abf838ca37fa/html5/thumbnails/12.jpg)
Demand
Market Demand The amount of products currently being
purchased from all sellers in the market (i.e., industry sales).
Company Demand The amount of products currently being
purchased from a company.
![Page 13: Situational Analysis Understanding the Market Definition and Measurement](https://reader036.vdocuments.us/reader036/viewer/2022062519/5697bfc01a28abf838ca37fa/html5/thumbnails/13.jpg)
Gaps Between Potential and Demand
Market Potential
Market Demand
Company Demand
Primary (Basic)Demand Gap
Selective (Company)Demand Gap
![Page 14: Situational Analysis Understanding the Market Definition and Measurement](https://reader036.vdocuments.us/reader036/viewer/2022062519/5697bfc01a28abf838ca37fa/html5/thumbnails/14.jpg)
Measuring Market Demand
Market demand sets upper limit on sales--i.e., 100% of market share=market demand.
MD= (EC x PA) + (NC x PA) MD=market demand EC=existing customers NC=new customers PA=purchase amount
![Page 15: Situational Analysis Understanding the Market Definition and Measurement](https://reader036.vdocuments.us/reader036/viewer/2022062519/5697bfc01a28abf838ca37fa/html5/thumbnails/15.jpg)
Example: What is the market demand for the cellular phone market in 2001?
Market attracts approx. 5 million new customers/year ≈ 70 mill.
MD = (65 mill. X 400 minutes/yr.) +
(5 mill. X 200 minutes/yr.)
= 27 billion minutes/year
![Page 16: Situational Analysis Understanding the Market Definition and Measurement](https://reader036.vdocuments.us/reader036/viewer/2022062519/5697bfc01a28abf838ca37fa/html5/thumbnails/16.jpg)
Measuring Company Demand: Sales Forecasting
Forecasts are predictions--they have to be continuously monitored and adjusted.
Different approaches: Top-down forecasting Build-up forecasting
![Page 17: Situational Analysis Understanding the Market Definition and Measurement](https://reader036.vdocuments.us/reader036/viewer/2022062519/5697bfc01a28abf838ca37fa/html5/thumbnails/17.jpg)
Subjective Forecasting Methods
Utilize opinions of employees, managers, or customers.
Least accurate, although popular to use.
Three different types.
![Page 18: Situational Analysis Understanding the Market Definition and Measurement](https://reader036.vdocuments.us/reader036/viewer/2022062519/5697bfc01a28abf838ca37fa/html5/thumbnails/18.jpg)
Sales Force Composite
Salespeople project sales volume for customers in their own territory; estimates are aggregated and reviewed at higher management levels.
Benefit:
Disadvantage:
![Page 19: Situational Analysis Understanding the Market Definition and Measurement](https://reader036.vdocuments.us/reader036/viewer/2022062519/5697bfc01a28abf838ca37fa/html5/thumbnails/19.jpg)
Jury of Executive Opinion
Solicit the judgment of a group of experts or experienced managers to estimate sales.
Benefit: Disadvantage:
![Page 20: Situational Analysis Understanding the Market Definition and Measurement](https://reader036.vdocuments.us/reader036/viewer/2022062519/5697bfc01a28abf838ca37fa/html5/thumbnails/20.jpg)
Customer/Industry Surveys
Survey customers to ask them how much they intend to buy in a future period.
Benefit: Disadvantage:
![Page 21: Situational Analysis Understanding the Market Definition and Measurement](https://reader036.vdocuments.us/reader036/viewer/2022062519/5697bfc01a28abf838ca37fa/html5/thumbnails/21.jpg)
Extrapolation Methods
Utilizes existing sales data.
Higher accuracy than subjective methods.
![Page 22: Situational Analysis Understanding the Market Definition and Measurement](https://reader036.vdocuments.us/reader036/viewer/2022062519/5697bfc01a28abf838ca37fa/html5/thumbnails/22.jpg)
Naïve Forecasting
Uses past sales data to forecast future sales, assuming that there will be no changes. Assumes that the best estimate of future
sales is the current level of sales. Often used as a standard for comparison
with other forecasts.
![Page 23: Situational Analysis Understanding the Market Definition and Measurement](https://reader036.vdocuments.us/reader036/viewer/2022062519/5697bfc01a28abf838ca37fa/html5/thumbnails/23.jpg)
Moving Average
Compute the average sales volume achieved in recent periods and use the average to predict sales in the next period. Can be a conservative forecast. Can assign different weights to different time periods--
smoothing constants.
![Page 24: Situational Analysis Understanding the Market Definition and Measurement](https://reader036.vdocuments.us/reader036/viewer/2022062519/5697bfc01a28abf838ca37fa/html5/thumbnails/24.jpg)
Example: Moving Average
1st Qtr2000
$500K
2nd Qtr2000
$600K
3rd Qtr2000
$700K
4th Qtr2000
$600K
1st Qtr2001
$633.3K
Average =$600K Average =
$633.3K Average =$644.4K
![Page 25: Situational Analysis Understanding the Market Definition and Measurement](https://reader036.vdocuments.us/reader036/viewer/2022062519/5697bfc01a28abf838ca37fa/html5/thumbnails/25.jpg)
Percent Rate of Change
Trend projection.
If sales have been generally increasing, forecasts with this method will be greater than forecasts using other methods.
![Page 26: Situational Analysis Understanding the Market Definition and Measurement](https://reader036.vdocuments.us/reader036/viewer/2022062519/5697bfc01a28abf838ca37fa/html5/thumbnails/26.jpg)
Example: Percent Rate of Change
1st Qtr1998
$100K
1st Qtr1999
$125K
% change=25%
To predict sales for 1st quarter 2000:
Sales = $125K + ($125K x .25) = $125K + $31.25K = $156.25K
![Page 27: Situational Analysis Understanding the Market Definition and Measurement](https://reader036.vdocuments.us/reader036/viewer/2022062519/5697bfc01a28abf838ca37fa/html5/thumbnails/27.jpg)
Leading Indicators
When sales are influenced by basic changes in the economy, can use leading indicators to predict sales.
![Page 28: Situational Analysis Understanding the Market Definition and Measurement](https://reader036.vdocuments.us/reader036/viewer/2022062519/5697bfc01a28abf838ca37fa/html5/thumbnails/28.jpg)
Quantitative Methods
Methods that utilize numerical procedures to extend past sales into the future.
Regression.
Time series analysis.
![Page 29: Situational Analysis Understanding the Market Definition and Measurement](https://reader036.vdocuments.us/reader036/viewer/2022062519/5697bfc01a28abf838ca37fa/html5/thumbnails/29.jpg)
Market Share
Market share index =
product awareness x (70%)
product attractiveness x (65%)
intention to buy x (60%)
product availability x (60%)
product purchase (50%)
= 8%
![Page 30: Situational Analysis Understanding the Market Definition and Measurement](https://reader036.vdocuments.us/reader036/viewer/2022062519/5697bfc01a28abf838ca37fa/html5/thumbnails/30.jpg)
Market Development Index (MDI)
What’s the potential for the market to develop?
MDI= current market demand
maximum market potentialX 100
![Page 31: Situational Analysis Understanding the Market Definition and Measurement](https://reader036.vdocuments.us/reader036/viewer/2022062519/5697bfc01a28abf838ca37fa/html5/thumbnails/31.jpg)
Interpreting MDI:
MDI < 33 Considerable market growth potential. Can grow market with high prices and
basic benefits.
![Page 32: Situational Analysis Understanding the Market Definition and Measurement](https://reader036.vdocuments.us/reader036/viewer/2022062519/5697bfc01a28abf838ca37fa/html5/thumbnails/32.jpg)
Interpreting MDI (continued)
MDI 33-67 Growth is possible, but need to offer more
product variations and lower prices; expanded distribution.
![Page 33: Situational Analysis Understanding the Market Definition and Measurement](https://reader036.vdocuments.us/reader036/viewer/2022062519/5697bfc01a28abf838ca37fa/html5/thumbnails/33.jpg)
Interpreting MDI (continued)
MDI>67 Still room for market growth, but more
difficult. Need very customer-focused solutions.