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Marketing Strategy Assessing & Estimating Market Demand

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  • 1. Marketing Strategy Mostafa Ewees (PhD) Stanford University at California Assistant Professor at German University in Cairo (GUC) EDUCATIONAL CONSULTANT Assessing & Estimating Market Demand
  • 2. Agenda
    • The marketing minute (or five):
      • Jessica
      • Muzghan
    • Class objectives for this session
    • Some theory
    • Introduction to Contadina case:
      • Richard
      • Casey
    • The Nestle Refrigerated Foods – Contadina Case
    • Homework for next class
  • 3. The Marketing Minute
  • 4. Class objectives
    • Compare and contrast the different methods of calculating and forecasting market demand estimates.
    • Illustrate and evaluate the new product development process for consumer packaged goods.
    • Illustrate market research techniques employed to gauge consumer preferences and demand.
    • Analyze and interpret research findings to determine market acceptance for a product.
    • Identify the different stages in the consumer decision-making process.
    • Explain how marketers may implement effective marketing strategies to influence the decision outcome at each stage of the consumer decision-making process.
  • 5. Our perspective in this class
    • The Chain of Marketing Productivity
  • 6. Understanding Customer Behavior Opportunity Assessment Marketing Strategy Marketing Assets Segmentation Targeting Positioning 4Ps: . Product . Price . Distribution . Promotion Financial Position The Chain of Marketing Productivity
  • 7. Some theory
    • Assessing & Estimating Market Demand
  • 8. Market definitions
    • Market demand – total volume that would be bought by:
      • a defined customer group
      • in a defined geographical area
      • in a defined time period
      • in a defined marketing environment
      • under a defined marketing program
    • Market potential – limit approached by market demand as industry marketing expenditures approach infinity for a given marketing environment
    • Company demand – company’s estimated share of market demand at alternative levels of company effort in a given time period.
  • 9. Methods for market demand assessment
    • Estimates provided by information suppliers (e.g. AC Nielsen)
      • Point of sale store scanner data
      • Consumer panel data
      •  Not available in all the countries
      •  Normally expensive
    • Analogy method
      • Extrapolate from the relationship between indicators and demand in another country
      • What indicators to use?
      • Which country to use as comparison?
  • 10. Methods for market demand assessment
    • Top-down: Chain ratio method
      • String chain of percentages
      • Country data to product-level data
    • Bottom-up approach
      • Start with: What is required for consumer to buy product? Identify all potential buyers in each market and estimate their potential purchases
    • Cross-sectional regression analysis
    • Judgmental methods (e.g. composite of sales force opinions, expert opinions)
  • 11. Recommendations for market demand assessment
    • Simpler methods are frequently preferred
    • Use several methods simultaneously
    • Understand why differences may occur
    • Do a sensitivity analysis
    • Use interval as opposed to point estimates
    • Develop customized indicators which are specific to the product-market in question
    • Favor observations of behavior over reports of opinion
    •  Don’t be mislead by the numbers! Make sure you know the reasoning behind them.
  • 12. The Product Development Process Concept Development and Testing Marketing Strategy Development Idea Screening Idea Generation Analysis Sales, Costs, Profits Product Development Market Testing Commerciali- zation
  • 13.
    • Unaware
    • Aware
    • Interested
    • Consider
    • Trial
    • Repeat
    Consumer Decision Making – Hierarchy of Effects Model
  • 14. Analyzing Consumer Preferences – Concept Testing
    • Presenting the product concept, symbolically or physically, to target consumers and getting their reactions
      • Communicability (clear benefits) and believability
      • Need level – does the product solve a problem of fill a need
      • Gap level – do other products currently meet this need and satisfy you?
      • Perceived value – is the price reasonable in relationship to value?
      • Purchase intention
      • Who would use this product, when and how often
    • Relatively inexpensive, easily understood but:
      • Main problem: If consumers rate the product concept poorly, how do we fix it?
  • 15. Analyzing Consumer Preferences – Conjoint Analysis
    • Products as a bundle of attributes
    • Estimate attribute utilities (weights) by decomposing overall product preference ratings
    • Basic idea:
      • By forcing consumers to make trade-offs among product attributes, we can determine the value of each attribute considered individually.
    • Main Steps:
      • Define the product concept
      • Define the relevant attributes; use focus groups and depth interview
        • Attributes should be actionable
  • 16. Analyzing Consumer Preferences – Conjoint Analysis
    • Main steps:
      • Define the levels of each attribute
        • Look for extremes (consult R&D)
        • Look for saturation effects (focus groups and interviews)
      • Choose a sample size and respondent type
      • Perform study
      • Interpretation, and further study
        • Generate “Ideal” products
        • Generate Elasticities
      • Value systems are estimated at the individual level
        • Can be useful method for defining market segments based on differing attributes of importance
  • 17. The case
    • Nestle Refrigerated Foods
    • Contadina
  • 18.
    • Would you launch?
  • 19. Would you launch?
  • 20. Nestle Refrigerated Foods: Contadina
    • Using the BASES model described in Exhibit 9, forecast the estimated demand (trial and repeat) for the two Pizza options under consideration.
    • What can one learn from Exhibits 13, 14, 15?
    • How does the pizza concept test data (Exhibits 19, 20, 21) compare to the pasta concept test data (Exhibit 6)?
    • What is your reading of Exhibits 23 and 24 (include Exhibit 18 if you wish)?
    • In general, how would you compare the pizza opportunity to the pasta opportunity? What are the similarities? Differences?
    • Why was the pasta product so successful?
    • Would you launch the pizza?
  • 21. Here I am, stuck in the middle with you?
  • 22. What Nestle Refrigerated Foods did next
    • Cunliffe launched Contadina Pizza on a national basis without the benefit of a test market
    • Product performed below expectations in sales, market share, and profitability
    • The marketing mix was changed, but sales did not improve
    • Due to inflexible manufacturing capacity, the price could not be cut
    • Pricing and product positioning were the main reasons for the product’s subsequent failure
  • 23. Class objectives
    • Compare and contrast the different methods of calculating and forecasting market demand estimates.
    • Illustrate and evaluate the new product development process for consumer packaged goods.
    • Illustrate market research techniques employed to gauge consumer preferences and demand.
    • Analyze and interpret research findings to determine market acceptance for a product.
    • Identify the different stages in the consumer decision-making process.
    • Explain how marketers may implement effective marketing strategies to influence the decision outcome at each stage of the consumer decision-making process.
  • 24. Homework for next class
    • Delivering & Capturing Customer Value
    • Read : Major Sales: Who Really does the Buying (HBR)
    • Case : Salesoft (HBS case)
    • The second of eight cases eligible for write-up
    • Case intro: Lanz Cook
    • Niki Craig
    • Marketing Minute: Renee Johnson
    • Atif Zaidi

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