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Chapter 5. MARKET MEASUREMENT BA 315 - L.P.Chew

Chapter 5. MARKET MEASUREMENT BA 315 - L.P.Chew. OUR TERMINOLOGY… POTENTIAL= POSSIBILITIES FORCAST = EXPECTATIONS MARKET = INDUSTRY SALES = COMPANY. Market Potential and Sales Forecasting.

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Chapter 5. MARKET MEASUREMENT BA 315 - L.P.Chew

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  1. Chapter 5. MARKET MEASUREMENTBA 315 - L.P.Chew OUR TERMINOLOGY… POTENTIAL= POSSIBILITIES FORCAST = EXPECTATIONS MARKET = INDUSTRY SALES = COMPANY

  2. Market Potential and Sales Forecasting • Potential: The maximum sales reasonably attainable under a given set of conditions within a specified period of time. • An upper limit or ceiling on sales.

  3. Market Potential and Sales Forecasting • Forecast: The amount of sales expected to be achieved under a set of conditions within a specified period of time. • What you expect to sell.

  4. Estimating Market Potential • Determine the potential buyers or users of the product. • Determine how many individual customers are in the potential groups of buyers defined in step 1. • Estimate the potential purchasing or usage rate.

  5. now review a regional player…..DOBBS AUTO Estimate the potential purchasing or usage rate & forecast

  6. Forecasting • Sales forecasts are essential for production planning. • Scenario planning, asking “what-if” questions. • Judgement methods, which rely on pure opinions. • Counting methods, which use customer data. • Time-series methods. • Association/causal methods, model relating market factors to sales.

  7. Time-Series Methods • Moving Averages - uses averages of historical sales figures to make a forecast. • Exponential Smoothing - relies on the historical sales data and is more complicated than the moving average. • Extrapolation - linearly extrapolates data.

  8. Association/Causal Methods • Correlation. • Regression Analysis.

  9. Market potential & sales forecasts Market potential estimates and sales forecasts complement each other in the marketing planning process. Market potential data is used to help the firm decide which opportunities to pursue & the level of expenditure to apply to each opportunity. The sales forecast is applied to: making decisions on short term,tactical issues; planning production inventory & working capital; and the like.

  10. The formulation of market strategy is planned on the basis of the marketing potential associated with each of the firm's target segments Once marketing strategy plans are set, a sales forecast can be developed and then used to guide tactical production, advertising, and logistics decisions

  11. Chapter 5. Organizational Demand Analysis • pivotal role of market potential analysis and sales forecasting in planning and controlling marketing activities, and to provide a firm understanding of the various approaches for measuring potential and forecasting sales.

  12. Chapter 5. Organizational Demand Analysis • chapter focuses on the different approaches for calculating market and sales potentials • qualitative and quantitative forecasting approaches are discussed in terms of the applicability to various forecasting situations. Executive judgment, sales force composite, and the Delphi method are the qualitative forecasting methods

  13. Chapter 5. Organizational Demand Analysis • Quantitative methods, including time series analysis and causal techniques • Executive judgment, sales force composite, and the Delphi method are the qualitative forecasting methods • These qualitative methods are most effectively applied to forecasts for new products or in situations where little historical data exists

  14. Methods of Sales Forecasting (1) • Simple Trend Analysis—sales forecast based on firm’s recent performance. • Market Share Analysis—similar to trend analysis but assumes market share will stay the same. • Jury of Executives—company experts predict sales. • Sales Force Surveys—salespeople share experiences and customer feedback. • Consumer Surveys—measure attitudes, purchase intentions, expectations, consumption rates, and SWOT.

  15. Methods for Sales Forecasting (2) • Chain-Ratio Method—firm starts with general market information and then computes a series of more specific information. Combined data yield a sales forecast. • Market Build Up Method—firm gathers data from small, separate market segments and aggregates them. • Test Market—sales estimate from short-run, geographically limited sales of new products. • Advanced Statistical Analyses—methods for sales forecasting that include computer simulations

  16. TIME SERIES • Time series models are based on the accuracy of historical sales patterns when sales trends are not likely to change in the future. Time series models are most useful when market forces are relatively stable within forecasting horizon.

  17. Moving averages/ exponential smoothing • Moving averages is a method based upon a specified historical period to forecast the value for a future period. • When differential weights are desired, such as for recent years, exponential smoothing can be used.

  18. Multiple regressions models • Multiple regressions models, employed when a number of factors have an impact on sales, allow managers to forecast industry sales, as well as incorporate the expected effects of any controllable marketing variables which are likely to be significant when forecasting company sales.

  19. Sales penetration is the degree to which a company achieves its sales potential. A high level of sales penetration usually means there is little room for growth. 1. Sales penetration = Actual sales/Sales potential. 2. A firm with high sales penetration must realize that diminishing returns may occur if it attempts to convert remaining nonconsumers, since costs may outweigh revenues. Other segments may be better opportunities.

  20. LINDELL MANUFACTURES INK FOR FOUR TYPES OF PRINTERS IN FIVE STATES.HISTORICAL SALES DATA SHOWS THAT INK COSTS THESE PRINTERS .1% OF EACH SALESDOLLAR. • HOW MUCH INK DID THEY CONSUME IN THE MOST RECENT YEAR THAT YOU ARE ABLE TO FIND IN OUR LIBRARY. I SUGGEST THAT YOU USE THE 1997 CENSUS OF MANUFACTURESOR THE MOST CURRENT ANNUAL SURVEY OF BUSINESS (MANUFACTURES).

  21. LINDELL MANUFACTURES INK FOR FOUR TYPES OF PRINTERS IN FIVE STATES. • PLEASE CONSULT YOU PACKET FOR A LIST OF SECONDARY DATA SOURCES TO ACCESS INCLUDING THE AFOREMENTIONED. KEY: USE $ VALUE OF SHIPMENTS. • YOU MAY WORK WITH THE SIC CODES, RATHER THAN THE NAICS CODES, BECAUSE THEDATA MAY BE EASIER TO FIND IN SIC, WHILE WE ARE IN TRANSITION FROM SIC TO NAICS

  22. LINDELL MANUFACTURES INK FOR FOUR TYPES OF PRINTERS IN FIVE STATES.. • STATES.....PENNSYLVANIA, OHIO, MICHIGAN, INDIANA AND ILLINOIS • SIC / NAICS CODES OF PRINTERS......... • 2711- NEWSPAPERS • 2721- MAGAZINES • 2732- BOOK • 2741- OTHER PRINTING

  23. LINDELL MANUFACTURES INK. • A- WHAT WAS THE TOTAL INK/PRINTER MARKET FOR THIS FIVE STATE REGION? • B- WHAT IS THE TOTAL MARKET BY STATE? • C- WHAT IS THE RELATIVE MARKET FOR EACH STATE? • D- HOW WOULD YOU PROJECT THE $ MARKET FOR THE COMING YEAR 2003?

  24. PLEASE PREPARE THE EXERCISES AT THE END OF THE CHAPTER AND THOSE CASES IN YOUR PACKET. NOW GO FOR IT!!! • OPPORTUNITYISNOWHERE!!!

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