Transcript Measuring Market Opportunities Potentials and Forecasts

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?
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
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•
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:
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•
•
•
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 Average
1st Qtr
2000
2nd Qtr
2000
3rd Qtr
2000
4th Qtr
2000
1st Qtr
2001
$500K
$600K
$700K
$600K
$633.3K
Average =
$600K
Average =
$633.3K
Average =
$644.4K
Percent Rate of Change
1st Qtr
1998
1st Qtr
1999
$100K
$125K
% change=25%
To predict sales for 1st quarter 2000:
Sales = $125K + ($125K x .25)
= $125K + $31.25K
= $156.25K
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
product attractiveness x
intention to buy x
product availability x
product purchase
(70%)
(65%)
(60%)
(60%)
(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.