Mba – marketing management


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Mba – marketing management

  1. 1. MBA – MARKETING MANAGEMENT <ul><li>Introduction </li></ul><ul><li>MKIS </li></ul><ul><li>Researching the market </li></ul><ul><li>Scope of marketing research </li></ul><ul><li>The marketing research process </li></ul><ul><li> - Research brief </li></ul><ul><li> - Research plan </li></ul><ul><li>- Data sources </li></ul><ul><li>- Qualitative and Quantitative techniques </li></ul><ul><li>- Sampling </li></ul><ul><li>- Research instruments </li></ul><ul><li>Implementing the plan </li></ul><ul><li>Interpreting and reporting the findings </li></ul><ul><li>Other aspects of research </li></ul><ul><li>- Defining the market </li></ul><ul><li>- Estimating actual sales and market share </li></ul><ul><li>- Forecasting future demand </li></ul>
  2. 2. MARKETING RESEARCH <ul><li>Introduction </li></ul><ul><li>To carry out marketing analysis, planning, implementation and control, </li></ul><ul><li>managers need information. One marketing executive put it this way. </li></ul><ul><li>‘ To manage a business well is to manage it’s future and to manage the future is </li></ul><ul><li>to manage information’. </li></ul><ul><li>Increasingly, marketers are viewing information, not just an input for making </li></ul><ul><li>better decisions, but also as a marketing asset that gives competitive </li></ul><ul><li>advantage of strategic importance. </li></ul><ul><li>During the 20 th century most companies have been small and have known </li></ul><ul><li>their customers first hand. Managers picked up on information by being around </li></ul><ul><li>their customers, observing them and asking questions. But through the 20 th </li></ul><ul><li>century and into the 21 st century companies have become national and </li></ul><ul><li>international in scope, and so need more information on larger, more distant </li></ul><ul><li>markets in order to make timely decisions. </li></ul>
  3. 3. <ul><li>In addition, as incomes increase and buyers become more selective, sellers </li></ul><ul><li>need better information about how their buyers respond to different products </li></ul><ul><li>and appeals. As sellers use more complex marketing approaches and face </li></ul><ul><li>more competition, they need information on the effectiveness of their marketing </li></ul><ul><li>tools. </li></ul><ul><li>The supply of information has also increased greatly. According to J Nesbitt, the </li></ul><ul><li>world is undergoing a ‘ mega-shift ’ from an industrial to an information based </li></ul><ul><li>economy. His studies concluded that more than 65% of the US workforce now work </li></ul><ul><li>at producing or processing information compared to only 17% in the 1950s. In some </li></ul><ul><li>way, the proliferation of computer databases means that today, running down </li></ul><ul><li>information is not a problem, but drowning in it is. Frequently we hear that </li></ul><ul><li>marketers have too much information of the wrong kind and not enough of the right </li></ul><ul><li>kind. </li></ul><ul><li>One way of ensuring the right information is available at the right time is for </li></ul><ul><li>firms to develop their MKIS system. </li></ul>
  4. 4. MKIS SYSTEM <ul><li>Marketing research should be seen simply as just one part of an ongoing </li></ul><ul><li>integrated information process or system. </li></ul><ul><li>The marketing information system (MKIS) requires the firm to develop and </li></ul><ul><li>utilise a system for scanning the macro and micro environments in a </li></ul><ul><li>continuous manner and for storing the data such that it can be retrieved and </li></ul><ul><li>reviewed in the future. </li></ul><ul><li>The way the system operates is demonstrated on the following slide </li></ul><ul><li>. </li></ul>
  5. 5. A Basic Marketing Information System Macro environment Opportunities and Threats Micro environment Strengths and Weaknesses Company Objectives and Strategies Marketing Plans <ul><li>Marketing intelligence network/system </li></ul><ul><li>Marketing Research </li></ul><ul><li>Internal records </li></ul><ul><li>Sales/marketing reports </li></ul><ul><li>Continuous monitoring </li></ul><ul><li>Decision information </li></ul><ul><li>Forecast information </li></ul><ul><li>Data storage and retrieval </li></ul>Implementation of marketing plans <ul><li>Key: </li></ul><ul><li>Implementation - </li></ul><ul><li>Feedback - </li></ul>
  6. 6. RESEARCHING THE MARKETS <ul><li>The marketing process </li></ul><ul><li>The first stage in the marketing process is to understand customers , the markets in </li></ul><ul><li>which they buy as well as the marketing environment in which all of this activity takes </li></ul><ul><li>place as show below: To understand each of these 3 areas, an organisation requires </li></ul><ul><li>information which directs activities, helps satisfy customer needs </li></ul><ul><li>and at the same time, reduces the risks involved in decision making. The overall success </li></ul><ul><li>of the marketing process will therefore be dependent upon the quality of information </li></ul><ul><li>gathered and then on how this information is used. </li></ul>CUSTOMERS MARKETING ENVIRONMENT MARKETS
  7. 7. <ul><li>Purpose and Definition of Marketing Research </li></ul><ul><li>The purpose of marketing research is to provide answers to questions. The American </li></ul><ul><li>Marketing Association (AMA) uses a simple working definition. </li></ul><ul><li>‘ Marketing research is the systematic gathering, recording and analysing of data about </li></ul><ul><li>problems relating to the marketing of goods and services.’ </li></ul><ul><li>Systematic – using an organised and clear method or system. </li></ul><ul><li>Gathering – knowing what you are looking for and collecting appropriate information. </li></ul><ul><li>Recording – keeping clear and organised records of what you found out. </li></ul><ul><li>Analysing – ordering and making sense of you information in order to draw out relevant trends and conclusions. </li></ul><ul><li>Problems relating to marketing – finding out the answers to questions which will help you to better understand your customers and other details about the marketplace. </li></ul><ul><li>But it is really about DICE . </li></ul>
  9. 9. SCOPE OF MARKETING RESEARCH <ul><li>Marketing research includes a number of </li></ul><ul><li>activities covering the range of problems and </li></ul><ul><li>decisions with which marketers have to deal as shown on the next slide. </li></ul>
  10. 10. Sales by rep/product Effectiveness of selling techniques Elasticity factors Price bands Marginal costing Product design Benefits offered Packaging Test marketing Media effectiveness Type of copy Channel members Location studios Logistics Sales Research Pricing Research Product Research Promotion Research Distribution Research £ Marketing environment research P.E.S.T Competitor research No. of size strengths and weaknesses Scope of marketing research Customer profile Needs and wants Buyer behaviour Market segment Size and trends Brand shares Demand factors Customer research Market research
  11. 11. MARKETING RESEARCH PROCESS <ul><li>Marketing research is NOT a ‘one-off’ activity which takes place as part of a </li></ul><ul><li>new product development. It should be ongoing so marketers should constantly </li></ul><ul><li>be collecting and analysing information and feeding it through for planning and </li></ul><ul><li>decision making purposes. </li></ul><ul><li>There are 5 distinctive stages in the setting up of a marketing research </li></ul><ul><li>programme. </li></ul>
  12. 12. Define the problem and determine the research objectives. Decide on information needed, data sources, contact methods and sampling plans. Who, where, when and what time frame the data is to be collected. Data storage and retrieval using a marketing information system. Presentation to key management decision makers together with conclusions and recommendations Research brief Research plan Information needs Data sources Methodology Sampling Collection of data Analysis and evaluation Interpreting and presenting the findings 1. 2. 3. 4. 5.
  13. 13. RESEARCH BRIEF <ul><li>The key to good research </li></ul><ul><li>The first stage of the research process is always the hardest, but it is also the key to </li></ul><ul><li>providing a sound and effective research project. Defining the research problem is at the </li></ul><ul><li>heart of determining the research objectives – or in other words, exactly what information </li></ul><ul><li>is required in order in make effective decisions to address the problem </li></ul><ul><li>Marketing research objectives may, for example, include; </li></ul><ul><li>To identify new markets </li></ul><ul><li>To monitor changes in customer needs or preferences </li></ul><ul><li>To identify new product opportunities </li></ul><ul><li>To improve the quality of information available for strategic decision making </li></ul><ul><li>To improve the organisations understanding of changes in the marketplace, particularly of competitors strategies </li></ul><ul><li>To identify opportunities and threats </li></ul><ul><li>To monitor the effects of political, economic, social and technological trends (PEST) </li></ul>
  14. 14. RESEARCH PLAN <ul><li>The first stage here is determining the information required and developing a plan for </li></ul><ul><li>gathering it efficiently. The plan should outline sources of existing data, explain the </li></ul><ul><li>specific research methods and sample plans and instruments that researchers will use to </li></ul><ul><li>gather new data. </li></ul><ul><li>Information needs </li></ul><ul><li>Research objectives need to be translated into specific information needs. For example; </li></ul><ul><li>Bolswessanen, a Dutch food and drinks company, decides to conduct research and find </li></ul><ul><li>out how consumers will react to a new breakfast cereal aimed at the adult market. The </li></ul><ul><li>European breakfast cereal market has been growing fast as health conscious people </li></ul><ul><li>abandon croissants in France, rolls in Belgium and espresso in Italy. </li></ul>
  15. 15. <ul><li>The specific information they seek could be as follows; </li></ul><ul><li>The demographic, economic and lifestyle characteristics of current breakfast cereal users (how do social and demographic trends affect the breakfast cereal markets?) </li></ul><ul><li>Consumer usage patterns, for cereals, how much do they eat, where and when? (will all the family eat the cereal or does each family member have their favourite). </li></ul><ul><li>Retailer reactions to the new product (failure to get retailer support could seriously hurt sales). </li></ul><ul><li>Consumer attitudes towards the new product ( will consumers switch from own brands and is the product strong enough to compete with the market leaders, Kelloggs) </li></ul><ul><li>Forecasts of sales of the new product ( will the new packaging increase Bolswessanen’s profits?) </li></ul>
  16. 16. DATA SOURCES <ul><li>There are two broad areas from which researchers can often obtain data as shown below. </li></ul>Market Research Secondary data sources Primary data sources Secondary data is information that already exists somewhere, having been collected for another purpose. Primary data consists of information collected for the specific purpose at hand. Researchers usually start by gathering secondary data (see sources over). For example, a visit to the library may provide all the information that Bolswessanen needs on cereal usage, at almost no cost, whereas a study to collect primary information may take weeks or months and cost a lot. Also, secondary data can sometimes provide data which an individual company cannot collect on its own because it is not directly available or it is too expensive to collect. However, it is most unlikely that secondary information exists on customers reactions to Balwassannen’s new cereal. Plus what secondary data is available must be evaluated to ensure it is relevant, accurate, up to date and impartial in respect of the research project at hand.
  17. 17. SECONDARY DATA SOURCES Reports of individual firms Professional bodies, trade associations Trade publications Reports/research papers from institutes/universities etc Other sources Secondary data Internal External *Sales reports *Distribution costs and prices/inventory records *Production schedules /quality reports *Finance/revenues/ profits *Advertising expenditures etc Commercial Nielsen, BRMB etc Indexes Guides Directories etc Industry sources Government sources Government information Census Reports
  18. 18. PRIMARY DATA COLLECTION TECHNIQUES <ul><li>Good decisions require good data. Just as researchers must carefully evaluate </li></ul><ul><li>the quality of secondary information, they must also take great care in </li></ul><ul><li>collecting primary data to ensure they provide the decision makers with </li></ul><ul><li>relevant, accurate, current and unbiased information </li></ul>
  19. 19. <ul><li>There are 2 main research techniques which can be used dependant on the type of </li></ul><ul><li>information that is sought. </li></ul>Depth Interview Focus Groups Projective Techniques Observation Survey Experiment Diaries Product Tests Qualitative Quantitative Primary Research Techniques
  20. 20. QUALITATIVE TECHNIQUES <ul><li>These techniques are used primarily in exploratory research where there is a requirement </li></ul><ul><li>to understand, explore, diagnose, generate ideas, test hypotheses, or simply gain insight </li></ul><ul><li>into a market situation. The approaches use in-depth techniques to examine attitudes, </li></ul><ul><li>feelings and motivations of product users. The research itself is characterised by small </li></ul><ul><li>unrepresentative samples and as such often precedes quantitative research in providing </li></ul><ul><li>a basis for questionnaire development. The main techniques used are described below: </li></ul><ul><li>Depth Interviews – this represents a relatively unstructured one to one interview </li></ul><ul><li>possibly with Bolswessanen’s retail customers. The interviewer needs to be fully trained </li></ul><ul><li>in the skill of probing and eliciting detailed answers to each question (eg psychologists </li></ul><ul><li>are often used). </li></ul><ul><li>Focus Groups – a focus group consists normally of 8-12 persons led by a moderator in </li></ul><ul><li>an in-depth discussion on a particular topic. The aim of the session is to learn and </li></ul><ul><li>understand what people have to say about a topic and understand their reasoning. Used </li></ul><ul><li>primarily in consumer research it brings together a knowledgeable group of people to </li></ul><ul><li>discuss a topic of interest. It would also prove a useful tool for Bolswessanen in </li></ul><ul><li>assessing retailer reactions to its new breakfast cereal, but, getting the retailers together </li></ul><ul><li>as with most business people often proves too difficult. It could however prove useful in </li></ul><ul><li>researching consumer motivations for cereal choice, usage and their attitudes or feelings </li></ul><ul><li>towards the new cereal. </li></ul>
  21. 21. <ul><li>Projective Techniques – sometimes used in depth interviews in order to discover </li></ul><ul><li>hidden feelings which respondents are reluctant to or cannot reveal, often because of </li></ul><ul><li>psychological defence mechanisms. </li></ul><ul><li>There are a number of projection techniques used such as: </li></ul><ul><li>Word association – used to help select brand names, advertising themes and </li></ul><ul><li>slogans (eg what word comes into your mind when I say Kelloggs). </li></ul><ul><li>Sentence/story completion – scenarios are presented and the participant is asked </li></ul><ul><li>to complete the sentence or story, reflecting their hidden beliefs and motivations. </li></ul><ul><li>(I ate a large bowl of cereal yesterday, it made me feel…….?) </li></ul><ul><li>Cartoon Picture Tests – cartoon figures are shown in a particular situation and the </li></ul><ul><li>balloons from their mouths are left open for the participant to complete. This technique </li></ul><ul><li>measures strength of attitude towards a particular product or brand. </li></ul><ul><li>Third person – rather than ask someone directly what they think, a third party is </li></ul><ul><li>used (eg why don’t many housewives provide their family with nutritionally balanced </li></ul><ul><li>breakfasts?) </li></ul>
  22. 22. QUANTITATIVE TECHNIQUES <ul><li>Quantitative Techniques </li></ul><ul><li>Quantitative research provides statistics from a large sample of consumers. The table below </li></ul><ul><li>shows that designing a plan for primary data collection calls for a number of decisions on </li></ul><ul><li>research techniques, methods, sampling plan and research instruments. </li></ul><ul><li>Observation – this technique gathers primary data by watching relevant people, actions </li></ul><ul><li>and situations. For example, Bolswessanen could send researchers into supermarkets to </li></ul><ul><li>find out about cereal brands stocked, prices charged, shelf space and display. A bank </li></ul><ul><li>evaluates possible new branch locations by checking traffic patterns, location of competing </li></ul><ul><li>branches. A department store checks numbers of customers entering and leaving its store, </li></ul><ul><li>the number of shopping bags each has and the route they take as they walk around the </li></ul><ul><li>store. A mystery shopper observes how the assistants serve their customers. The research </li></ul><ul><li>instruments used here can include reporting sheets, mechanical or electronic observation </li></ul><ul><li>devices and people meters on television sets. </li></ul>Research techniques Methods Sampling plan Research Instruments Observation Mail Sampling unit Questionnaire Survey Telephone Sample size Mechanical/ Experiment Personal Procedure Electronic Internet/Text
  23. 23. <ul><li>Experimental – this technique gathers casual data. Experiments involve selecting </li></ul><ul><li>matched groups of participants, giving them different products (i.e. cereals) controlling </li></ul><ul><li>unrelated factors and checking for differences in group responses. Such experiments </li></ul><ul><li>may be carried out in a laboratory, in a person’s home (i.e. product placements) or in a </li></ul><ul><li>test area (i.e. a retail shop). Before launching its new cereal Bolwessenan may choose to </li></ul><ul><li>carry out laboratory consumer tasting sessions with cereal eating consumers to ascertain </li></ul><ul><li>their preferences. </li></ul><ul><li>Survey – survey techniques can include several contact methods, including; </li></ul><ul><li>telephone, mail, internet and face to face. The approach is best suited for gathering </li></ul><ul><li>descriptive information and could serve Bolwessanen in understanding consumers’ </li></ul><ul><li>knowledge, preferences and buyer behaviour towards different cereals by simply asking </li></ul><ul><li>them. Dependant on the survey design it may be possible to collect the data more quickly </li></ul><ul><li>and at a lower cost than observational or experimental research. However, such a </li></ul><ul><li>technique has its problems. Pepople cannot always answer your questions because they </li></ul><ul><li>can’t remember or never thought about it. Or, they may be unwilling to respond to </li></ul><ul><li>someone they don’t know or just haven’t got the time. </li></ul>
  24. 24. STRENGTHS AND WEAKNESSES OF THE CONTACT METHODS <ul><li>Below is a sumary of the strengths and weaknesses of the four contact methods that can </li></ul><ul><li>be applied to surveys. </li></ul>Mail Telephone Personal Internet Flexibility Poor Good Excellent Fair Quantity of data collected Good Fair Excellent Good Control of interviewer bias Excellent Fair Poor Excellent Control of Sample Fair Excellent Fair Fair Speed of data collection Poor Excellent Good Excellent Response rate Poor Good Good Excellent Cost Good Fair Fair Excellent Sample frame Good Excellent Fair Poor
  25. 25. <ul><li>Sampling Plan – marketing researchers draw conclusions about large groups of </li></ul><ul><li>consumers by studying a small sample of the consumer population. A sample is a </li></ul><ul><li>segment of the population selected to represent the population as a whole. Ideally the </li></ul><ul><li>sample should be representative so that the researcher can make accurate estimates of </li></ul><ul><li>the thoughts and behaviours of the larger population. </li></ul><ul><li>Choosing a sample calls for 3 decisions </li></ul>Sample Sampling unit Who to be sampled? Sample size How many to sample? Sampling procedure How the sample is to be selected?
  26. 26. RESEARCH INSTRUMENTS <ul><li>Two main research instruments are used in quantitative studies: </li></ul>Research Instruments Questionnaire Mechanical/Electronic devices
  27. 27. <ul><li>Questionnaire – this is by far the most common instrument. A questionnaire consists of </li></ul><ul><li>a set of questions presented to the respondent for his or her answers. In preparing a </li></ul><ul><li>questionnaire, marketing researchers must decide what questions to ask, the form of </li></ul><ul><li>questions, the wording of questions and the ordering of questions. Each question must </li></ul><ul><li>be checked to see that it contributes to answering the research objectives and the </li></ul><ul><li>information needs identified . Only questions that address the objectives should be </li></ul><ul><li>asked. </li></ul><ul><li>There are two general types of question – closed and open questions. Closed questions </li></ul><ul><li>include all possible answers and allow respondents to make choices by ticking a box and </li></ul><ul><li>are good for filtering out respondents and for control. Open-ended questions allow </li></ul><ul><li>respondents to answer in their own words and are useful in exploratory research in trying </li></ul><ul><li>to find out what people think. Questions generally should use simple, direct and </li></ul><ul><li>unbiased words. All questions should be pre-tested before use. </li></ul><ul><li>NB: leave difficult or personal questions until last so that respondents does not become </li></ul><ul><li>defensive. </li></ul>
  28. 28. <ul><li>Activity </li></ul><ul><li>Review the questions below that a holiday director has prepared for use in interviewing </li></ul><ul><li>the parents of prospective campers. How would you assess each questions? </li></ul><ul><li>What is your income to the nearest £100? </li></ul><ul><li>Are you a strong or weak supporter of overnight camping for your children? </li></ul><ul><li>Do your children behave themselves well on adventure holidays? </li></ul><ul><li>How many adventure holiday operators mailed literature to you last April? This April? </li></ul><ul><li>What are the most ‘salient’ and ‘determinant’ attributes in your evaluation of adventure holidays? </li></ul><ul><li>Do you think it is right to derive your child of the opportunity to grow into a mature person though the experience of adventure holidays? </li></ul><ul><li>Mechanical devices – two common mechanical instruments include people meters and </li></ul><ul><li>supermarket scanners. Others include; galvanometer ( i.e. lie detector) which can be </li></ul><ul><li>used to measure the strength of interest or emotion aroused by the subjects exposure to </li></ul><ul><li>different stimuli (eg ad or picture). Tachistoscope flashes an ad to a subject at an </li></ul><ul><li>exposure of less than one hundredth of a second to several seconds. After each </li></ul><ul><li>exposure the respondent describes everything they recall. </li></ul>
  29. 29. Implementing the research plan <ul><li>This stage of the marketing research process involves collecting, processing and </li></ul><ul><li>analysing the data. This can be done by the company’s own staff or by a research </li></ul><ul><li>agency. </li></ul><ul><li>The data collection phase is generally the most expensive and the most subject to error. </li></ul><ul><li>The researcher should watch fieldwork closely to make sure the research plan is </li></ul><ul><li>implemented correctly and to guard against only collecting data from certain types of </li></ul><ul><li>respondents, those who give biased or dishonest answers and with interviewers who </li></ul><ul><li>make mistakes or take short cuts. </li></ul><ul><li>Interpreting and reporting the findings </li></ul><ul><li>The researcher must now interpret the findings, draw conclusions and report to </li></ul><ul><li>management. </li></ul>
  30. 30. OTHER ASPECTS OF RESEARCH <ul><li>Defining the market </li></ul><ul><li>When a company finds an attractive market, it must estimate that market’s current size </li></ul><ul><li>and future potential. Over or underestimating the market can seriously affect our </li></ul><ul><li>decisions and future profits </li></ul><ul><li>To the marketer, a market is a set of actual or potential buyers of a product or service. </li></ul><ul><li>and the industry is the set of sellers. The size of a market hinges on the number of </li></ul><ul><li>buyers who might exist for a particular market offer. Potential buyers generally display </li></ul><ul><li>3 common characteristics, </li></ul><ul><li>interest in a product </li></ul><ul><li>income sufficient to buy the product </li></ul><ul><li>access means by which to acquire the product </li></ul>
  31. 31. <ul><li>Using hypothetical figures, the diagram below brings all 3 characteristics together in </li></ul><ul><li>attempting to define a market. </li></ul>Total Population 100% Potential Market A. Total Market Potential Market 100% Available Market Qualified Available market Served market Penetrated Market 40% 20% 10% 5% B. Potential Market 10%
  32. 32. <ul><li>The bar on the left shows the ratio of the potential market, i.e. all interested persons </li></ul><ul><li>taken from the total population. The figure could be obtained by contacting a random </li></ul><ul><li>sample of consumers and a question such as; </li></ul><ul><li>‘ Do you have an interest in buying, owning or using a particular product or service?’ </li></ul><ul><li>If 1 person in 10 says yes, you can assume that 10% of the total number of consumers </li></ul><ul><li>would constitute the potential market. </li></ul><ul><li>The bar on the right shows several possible breakdowns of the potential market. Firstly </li></ul><ul><li>the available market – those whose interest, income and access is 40% of the potential </li></ul><ul><li>market. The point of this review of potential market is required because consumer </li></ul><ul><li>interest alone is not enough to define a market. Potential buyers must have enough </li></ul><ul><li>income to afford the product and have the ability to access it. To ascertain the available </li></ul><ul><li>market we would need to ask the same random sample, </li></ul><ul><li>‘ Would you pay £xx for such a product or service?’ </li></ul><ul><li>Those who answer ‘yes’ to both questions will determine the market size based on </li></ul><ul><li>interest and income. However, if the product or service is restricted to a certain location </li></ul><ul><li>or region (ie say 50% of the region) then this will half the market size. The available </li></ul><ul><li>market is therefore estimated as the set of consumers who have interest, income and </li></ul><ul><li>access to a particular product. </li></ul>
  33. 33. <ul><li>Companies may restrict sales to certain groups. For example, the law will prevent sales </li></ul><ul><li>of alcohol to persons under 18. The remaining adults make up the qualified available market . Now the company has a choice of going after the whole qualified available </li></ul><ul><li>market or concentrating on selected segments. The selected segments , possibly based </li></ul><ul><li>on demographics, will determine the company’s served market(s) . </li></ul><ul><li>Now by assessing the number of customers the company already serves in this final </li></ul><ul><li>customer sector will enable the marketer to determine the company’s penetrated market. </li></ul><ul><li>(which in this case is 5% of the potential market). </li></ul><ul><li>These market definitions are a useful tool for marketing planning. If a company is unsatisfied </li></ul><ul><li>with current sales, it can take a number of actions. </li></ul><ul><li>Marketing planning actions </li></ul><ul><li>Expand into other available markets </li></ul><ul><li>Lower its price to expand the size of the potential market </li></ul><ul><li>Attempt to penetrate the served market by attracting a greater proportion of buyers through </li></ul><ul><li>stronger promotion and distribution efforts. </li></ul><ul><li>Expand the potential market by increasing its advertising to convert non-interested consumers into interested consumers. </li></ul><ul><li>(eg concern over heart disease amongst middle-aged people who have avoided exercise for </li></ul><ul><li>years may be persuaded via a communication campaign to encourage them to buy exercise </li></ul><ul><li>products/ or attend fitness centres.) </li></ul>
  34. 34. <ul><li>Estimating Actual Sales and Market Shares </li></ul><ul><li>Besides estimating demand for the segments served, a company will want to know the </li></ul><ul><li>actual industry sales in its market. Then it must identify its competitors and estimate </li></ul><ul><li>their sales. </li></ul><ul><li>The industry’s trade association will often collect and publish total industry sales, </li></ul><ul><li>although not listing individual company sales separately. This way a company can </li></ul><ul><li>evaluate its performance against the industry as a whole in terms of market share and </li></ul><ul><li>market trend performance. </li></ul><ul><li>Another way to estimate sales is to buy reports from marketing research firms that audit </li></ul><ul><li>total sales and brand sales (eg Neilson, AGB and others use scanner data to audit retail </li></ul><ul><li>sales of various product categories in supermarkets and pharmacies and sell the </li></ul><ul><li>information to interested companies. </li></ul><ul><li>Forecasting future demand </li></ul><ul><li>Forecasting is the art of estimating future demand by anticipating what buyers are likely </li></ul><ul><li>to do under a given set of conditions. Very few products and services lend themselves to </li></ul><ul><li>easy forecasting. Getting it wrong , however, can lead to excessively large unwanted </li></ul><ul><li>stock, costly price mark-downs or lost sales due to being out of stock. </li></ul>
  35. 35. <ul><li>3 Stage Approach to Sales Forecasting </li></ul><ul><li>Environment Forecast - Review of inflation, unemployment, interest rates, consumer spending and saving, government investment/expenditure, exports and other events. </li></ul><ul><li>Industry Sales - Above events are used to forecast industry sales </li></ul><ul><li>Market Share - The company prepares its sales forecast assuming a certain share of industry sales </li></ul><ul><li>Techniques for forecasting </li></ul><ul><li>Survey of Buyer’s Intentions - This requires asking them directly. Several research organisations will conduct periodic surveys of consumers buying intentions </li></ul><ul><li>Composite of Sales Force - Sales force provide estimates of sales </li></ul><ul><li>Opinions by product/region which are often used to help set sales quotas. A good conservative approach is that the salesperson will never wish to overstate the market potential in his/her area and will take account of competitor actions. </li></ul>
  36. 36. <ul><li>Expert Opinion - Experts include dealers, wholesalers, distributors, suppliers, marketing consultants and trade associates </li></ul><ul><li>Test Market - Where there is no past experience to go on (eg launch of new product) as company may conduct a direct test market </li></ul><ul><li>Time series analysis - Forecasts are often based on past sales data. The assumption is that statistical analysis can uncover the causes of past sales which can then be used to predict future sales. The method consists of breaking down the original sales into 4 components – trend, cycle, season and erratic events. </li></ul><ul><ul><ul><ul><ul><li>Trend – long term underlying pattern of growth or decline in sales relating to changes in population, technology, social changes etc </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Cycle – captures the medium term, wavelike movements of sales resulting from changes in general economic and competitive activity. </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Seasonality – refers to a consistent pattern of sales movements with the year and often is used to predict short term forecasts. </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Erratic – erratic events include fads, strikes, snow storms, earthquakes, riots, fire etc. </li></ul></ul></ul></ul></ul>