2 Assessing Market Potential: Sales Forecasting Defining market demandDemand can be measured at several levels
3 Describing a market Penetrated Market Potential market Current number of users of a product or a service and the sales volume generated by them.Potential marketThose people who have an interest in buying the product or the serviceAvailable MarketThose people in the potential market having an ability to use the product/service.Served or Target MarketThe market that the firm can effectively compete inSource of Information:Secondary dataSample Survey
4 Predicting Future Demand In choosing the appropriate forecasting method, the analyst must consider the following:The data that can be used: The accuracy, currency, representativeness, representativeness and extensiveness of data must be assessed before choosing a technique.The Technique: The analyst must have adequate knowledge about the technique and its limitations; he/she must be comfortable with it.Cost: Greater accuracy involves greater cost. Cost Vs. level of accuracy demanded must be assessed before choosing the techniqueTime horizon: The method or technique must be the most appropriate for the period of time in question.
5 Approaches to Sales Forecasting Basic approaches to sales forecasting include:Stage 1. Environmental forecast about consumer spending, consumer saving, interest rate. Inflation, employment, investment etc.;Stage 2. Use the above data along with industry and environmental trends to forecast sales and profits to be earned by the industry. Often, this is not possible. I those cases, this stage is skipped.Stage 3. Develop a company sales forecast using the data in 2 above and assuming a given market share.
6 Forecasting Sales of established products/services Two approaches with variantsQuestioning people to generate primary dataSurveys of buyer intentionsSales-force opinionExpert opinionAnalyzing historical data with Secondary dataTime dependent approachestime-series analysis,moving average,exponential smoothing, statistical demand analysis etc.Mathematical and statistical modelslinear programming, transportation algorithm, assignment models, PERT/CPM Network models, Decision Tree analysis, Inventory models, Markov Process, Queuing, Simulation etc.
7 Segmentation Research I refers to a unique group of customers or potential customers who share some common characteristics that differentiate them from others.Segmenting and choosing the optimum market is called target marketing and is a vital marketing skill.Segmentation of the consumer market may be based on:demographic variablesgeographic variablesgeodemographic variablespsychographic variablesbehavior patterns
8 Segmentation Research II Geographic segments:Based on consumers geographic location including streets, towns, cities, provinces, countries, regions, continents, trading and/or political blocks, such as AFTA, NAFTA, ASEAN etc.Demographic segments:based on variables such as age, sex, level of education, marital status, family lifecycle, job type and level of income etc.Geodemographic segments:based on variables such as house-type and locations, for example, people who live in high-rise apartment complex
9 Segmentation Research III Psychographic segmentsdeveloped on the basis of the psychological profile of people and includes variables such as attitude, lifestyle and personalities of people.Behavioral segmentsbased on behavior pattern of people such as consumption behavior such as heavy user, medium user, light user etc. and on the basis of other benefit enjoyed.
10 Different variables that may be used in these markets include: Segmentation in Industrial, organizational and Business-to Business Market.Different variables that may be used in these markets include:Customer typeType of product or service, standard industrial classification code may be usedCustomer locationSizeIn terms of sales, number of staff etc.
11 Product Research Has three roles: Idea Generation Includes alternative specifications for product concepts utilizing end user analysis or problem analysis.Screening: Evaluating new-product ideasRefers to initial screening of consumer reactions to new product concepts. Not effective for products that are radically innovative and for products that require significant changes in the consumption pattern.Consumer product/market testinginvolves testing the product in the market
12 STAGE I: Idea Generation Focus groups and direct observation provide insights for product development.Secondary data, Group discussion, Brainstorming [ on a given problem]Problem Inventory Analysis -->Examining Customer complaintsAttribute based customer surveysInvolves listing all the product attributes and then systematically modify one or more of them to see what would improve the product.Morphological AnalysisInvolves identification of the relevant dimensions of the product under study and enumeration of relevant variables with each dimension identified.Imitation, Acquisition, licensing
13 STAGE II: Screening Purposes of concept testing: Determine customer attitude towards the product concept or idea.Measure customers’ reaction towards the product’s attributes, e.g.. packaging, color, size, etc..Predict the trial rate of the intended productDetermine whether the product concept warrants further development and provide guidance on how the concept might be improved or re-defined.Data collection methods include:Focus group discussionSurvey ResearchNot very easyQuestions are to be formulated carefully to capture and effectively communicate the spark of an idea.Demonstration
15 STAGE III: Product/Market Testing I Product and market testing provides a more detailed assessment of a new product's chances for success.Includes technical testing, preference and satisfaction testing, simulated test markets and test markets to evaluate potential success/failure and define important marketing elements.Uncovers product shortcomingsevaluate commercial productsevaluate alternative formulationsuncover the appeal of the product to various market segmentsgain ideas for other elements of the marketing program
16 Product/Market Testing II Technical Testing on a prototype provides information on product shelf life, product wear/tear rates, problems regarding use/consumption, potential defects, maintenance schedulePreference and satisfaction testingreserved for the final version of the productSimulated test marketing [laboratory test markets] provides insights to potential market response/market sharePopular models include ASSESSOR, BASES, DESIGNOR, and LITMUS
17 Approaches to measure performance of the test product Three Approaches:Testing against a standard productTest Product --> brand leaderHorse Racing AlternativeSeveral test products are developed for testing against one another to determine which one attains the highest level of consumer acceptance.Testing against a historical standardTest product --> Performance of a successful product which may not be involved in the test. A seldom used technique.
18 Product/Market Testing III: Test Marketing Objective:To obtain reasonable prediction for performance of a new product;To understand the contributing factors underlying a particular performance;To provide management with the opportunity to pre-test alternative marketing strategies.Only those products, which have shown a good chance of success in the earlier concept and product development test, are subjected to test marketing.
19 Typical information gathered and major design issues in test marketing Awareness level;Purchase and repurchase rate;Users’ experience with the product;Users’ perception of the product;Users’ profile and lifestyles;Reasons for not using products;Market share.Design Issues:The number of test markets to be chosen;at least threeinvolves cost-benefit analysisThe criteria used for selecting test markets;a normal and not over-tested marketThe length of the test.six to 12 months
20 Price Research IGenerally undertaken for exploring pricing approaches for new products or services before they are launched. Involvesshowing different sets of brands in the same product category to respondents at different prices and asking them which one they would buy;presenting different prices for a product/service to respondents and asking them if they would buy the product/service. The responses are then used to construct a so-called “buy-response’ curve.
21 Price Research IIPricing research may also be conducted using consumer panels. Data obtained may be analyzed using regression analysis. Regression analysis can help in sorting out effects of price Vs other variables on quantities sold.Sample survey may also be used in price research. However, this should be used with care since obtaining a response curve using survey may be subject to error and bias.Other pricing research techniques include:Laboratory experiments,simulated test marketsusing standard test market
22 Promotion Research Objective: To develop advertising appeals. Types of research generally undertaken include:Psychological or motivational studiesGenerally used within the framework of individual interviews. Involves talking with people in depth about what a product or service may mean to them, what feelings are evoked by it, and discover what it symbolizes to them.Sociological studiesFocus group studies may be undertaken to generate ideas.Anthropological studiesA small number of people may be observed to understand how a product fits into their lives and what keep them interested in a particular brand.
24 Message Research: Pre-test Pre-test refers to the test of an ad-message before releasing the advertisement. Test techniques commonly used are:Verbal responses involvingConsumer jury methodPortfolio testQualitative researchOn-the air-test and Theater persuasion testPhysiological responses involvingGalvanic skin responsesPupil dilation responses andEye movement trackingBehavioral responses involvingIn-store persuasion
25 Pre-test IIConsumer jury method: Uses 50 to 100 customers as jurors who are asked to rank the test advertisements in order of interest, preference or ability to influence the purchase of the product.Portfolio test:A sample of consumers are asked to look through a portfolio of print advertisements within an allotted period of time. The portfolio is then taken away and the respondents are asked to recall the specifics of the ads shown. Recalls are generally unaided. The effectiveness of the test is measured by attributes such as ability to recall the contents, claim of credibility in the advertisement, general reaction, etc.
26 Pre-test IIQualitative Research: The two most widely used methods are Focus group discussions and depth interviews. Commonly used during the development stage of the advertisement.On-the-air test:The test advertisement is broadcast in a small number of test markets and selected respondents are interviewed by telephone on the following day to ascertain various aspects of the ad message.
27 Pre-test IIITheater persuasion test: Involves a test group of target customers who are invited to a small theater to view pilot episodes of some new TV programs. But before the show starts, they are presented with a list of product brands (including the brand shown on the test ad) and asked to indicate their preferred brand. It is announced that a lucky draw will be held and each winner will be awarded their preferred brand. The TV program is then shown including the test ad. At the end of the show, the viewers are once again asked to indicate their preferred brand followed by a second lucky draw.Brand preferences both before and after the show are then computed and compared.
28 Pre-test - IVGalvanic Skin Responses, pupil dilation response and eye-movement tracking method make use of different types of mechanical devices are not very popular methods.In-store persuasion: Involves intercepting a quota sample of shoppers [Sample X] in a retail store who are shown a stack of print advertisements including the test ad and are given a coupon booklet with discounts for several products including the product in the test ad. These shoppers are given sufficient time to look through these ads. Intercept Sample X shoppers as they leave the shop and record if they have purchased the product carried in the test ad. Calculate the purchase incidence.Repeat the same treatment to another Quota sample of shoppers [Sample Y] who are not shown the stack of ads. Calculate the purchase incidence and determine if they are significantly different from that of Sample X.
29 Post-testMost of the pre-testing techniques are applicable to post testing. Additional ones are briefly described below:Recognition Test: Measures the incidence and intensity of reading an advertisement. Normally involves interview with 100 to 150 qualified readers of a given issue of a magazine or periodical that carried the advertisement. Specific questions are then asked to see if they can remember the ad, its contents and the extent to which they remembered.Recall: Respondents are not shown an advertisement in full in advance but asked what he/she can remember about the ad.Triple Association Test: Used for assessing respondents’ abilities to associate the product category, the brand, and the copy theme. Two of these three are read or shown to a respondent who is asked to mention the third.
30 Media Research I Focuses on six aspects: 1. Media distribution Refers to circulation of newspaper/magazine/periodicals or the number of TV/Radio ownership and Internet subscription.2. Media audienceNumber of people exposed to the ad medium in question.3. ExposureNumber of people actually noting the advertisement; generally less than media audience.
31 Media Research II Focuses on six aspects... 4. Perception Number of people having conscious awareness and perception of the advertisement in question. In print advertisements, perception is affected by factors such as size, color, position and language of the media. Typically, perception is less than exposure.5. CommunicationNumber of people who comprehend specific things about and aspects of the advertisement. Communication lags perception.6. PurchaseNumber of people purchasing the product after seeing the advertisement.
32 Major types of information needed are; Newspaper as Ad MediumMajor types of information needed are;CirculationGenerally available from secondary sources in the form of audited circulation figures.ReadershipData on readership is generally unknown and need to be gathered through sample surveys.Often problematic because identifying the reader is not always easy.
33 Television as a Medium I Objective is to determine the TV audience. Programs watched by more people are preferred by advertisers. Methods of measurement include:Determining the Program ratingRespondents are provided with a roster of TV programs shown during the past three days and are asked a series of questions to ascertain the programs (i) they generally watch, and (ii) the programs they have actually watched on each of the three days in question.Telephone interviewingAlso known as coincidental telephone interview, this method involves telephone interview with a sample of respondents during the broadcasting hour.
34 Television as a Medium II Using audimeter deviceDeveloped by A.C. Nielson Company, this is the most sophisticated method of TV audience measurement. A technical device called ‘audimeter’ is attached to each of the TV sets of a panel of pre-selected households. The device automatically records the time when the TV set is switched on (and off), the channel watched, duration of watching; and instantly transmits the data to a central computer for processing. However, an audimeter does not record who in the household is/are watching.Using people meterA technical device that like audimeter, which is activated (and deactivated) by each household member pressing a button when he or she watches the program (stops watching it).
35 Television as a Medium III Diary MethodA specially designed diary is given to a panel of households to record the television viewing behavior of the viewerNumber of radio listeners may be measured in the same way as TV audience is measured. Simplest way to measure cinema audience is through sample survey. Internet users may also be identified using Internet-based surveys.Radio/Cinema/Internet as media