3.3. forecasting market opportunities

1. ][Welcome to
Marketing Strategy
Forcasting Market Oportunities

2. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
What Makes For Good Forecasting?
Keys to improve the credibility and accuracy of forecasts of sales and market
potential
•Make explicit the assumptions on which the forecast is based
•Use multiple methods
Biases in forecasting
• Forecasters are subject to anchoring bias
• Capacity constraints are sometimes misinterpreted as forecasts
• Incentive pay: bonus plans can cause managers to artificially inflate or
deflate forecasts
• Unstated but implicit assumptions can overstate a well-intentioned forecast
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3. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Forecasting Methods
Statistical methods: advantages
•Useful in established firms for established products
•Likely to result in a more accurate forecast than other
methods under stable market conditions
Statistical methods: limitations
•Assumes the future will look very much like the past
•Requires history
•Not useful for new products with no history
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4. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Forecasting Methods
Observation: advantages
•Based on what people actually do
Observation: limitations
•Observation is typically not possible for new-to-the-world
products
•Requires prior examples to observe
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5. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Forecasting Methods
Surveys: advantages
• Many different groups of respondents can be surveyed, from
consumers to salespeople to suppliers, etc.
• Does not require history or prior examples
Surveys: limitations
• What people say is not always what people do
• The persons being surveyed may not be knowledgeable, but when
asked their opinion, they will probably provide it
• What people imagine about a product concept in a survey may not
be what is actually delivered once the product is launched
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6. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Forecasting Methods
Analogy: advantages
• Requires no history nor prior examples
• Best when used for new product forecasting where neither statistical
methods nor observations are possible
• Also useful for new-to-the-world high-technology products, for which
product prototypes are often either not available or extremely
expensive to produce
Analogy: limitations
• The proposed new product is never exactly like that to which the
analogy is drawn
• Market and competitive conditions may differ considerably from
when the analogous product was launched
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7. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Forecasting Methods
Judgment: advantages
• Those with sufficient forecasting experience in a market they know well
may be quite accurate in their intuitive forecasts.
Judgment: limitations
• It is often difficult for them to defend their forecasts against those
prepared by evidence-based methods when the two differ.
Market tests: advantages
• Closest forecasting method to the true market
Market tests: limitations
• Expensive to conduct

8. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Forecasting Methods
• For consumer products sold through supermarkets and
mass merchants, competitors can buy the data
collected through scanners at the checkout and learn
the results of the test market without bearing the
expense.
• Competitors can deliberately distort market conditions
to invalidate the test
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9. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
 Thank You 
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