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Measuring Market Opportunities. Potentials and Forecasts. Potentials. Market potential Area potential Sales potential. Comparing Potential to Actual. Market Potential. Primary (Basic) Demand Gap. Market Demand. Selective (Company) Demand Gap. Company Demand. Why estimate potentials?. - PowerPoint PPT Presentation
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Measuring Market Opportunities
Potentials and Forecasts
Potentials
• Market potential
• Area potential
• Sales potential
Comparing Potential to Actual
Market Potential
Market Demand
Company Demand
Primary (Basic)Demand Gap
Selective (Company)Demand Gap
Why estimate potentials?
How to estimate potentials
• Often relies on:• Assumptions.• Published data (industry publications, gov’t
sources).• Variables that correlate closely to market
potential.
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
Example: What’s the market potential for CD’s?
Assumptions:
Area Potential
General Sales and Marketing Management buying power index:
Area potential = 0.2 x (% of area population) + 0.3 x (% of area retail sales) + 0.5 x (% of area disposable income)
Sales Potential
• Market potential x potential market share
Forecasts
Planning Assumptions
• Forecasts are based on assumptions about:• customer behavior • past and planned product strategies • competitor actions• the environment
• Forecast a range of possible outcomes
Subjective or Judgment-Based Forecasting Methods
• Naïve extrapolation
• Sales force composite
• Jury of expert (executive) opinion
Customer-Based Forecasting Methods
• Market testing
• Market surveys
Sales Extrapolation Forecasting Methods
Moving Average1st Qtr2000
$500K
2nd Qtr2000
$600K
3rd Qtr2000
$700K
4th Qtr2000
$600K
1st Qtr2001
$633.3K
Average =$600K Average =
$633.3K Average =$644.4K
Percent Rate of Change1st Qtr1998
$100K
1st Qtr1999
$125K
% change=25%Sales = $125K + ($125K x .25) = $125K + $31.25K = $156.25K
To predict sales for 1st quarter 2000:
Regression
Sales = b0 + b1(time) (base + trend)
Sales = b0 + b1(advertising) + b3(price) + b4(competitors’ prices) + b5(competitors’ advertising) + b6(disposable income)
• Leading Indicators
Estimating 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%
Market Development Index
• What’s the potential for the market to develop?
MDI= current market demand maximum market potential
Interpreting MDI
• MDI < 33• Considerable market growth potential.• Can grow market with high prices and basic
benefits.
• MDI 33-67• Growth is possible, but need to offer more
product variations and lower prices; expanded distribution.
• MDI>67• Still room for market growth, but more
difficult.• Need very customer-focused solutions.
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