Analyzing Market Opportunities: Potentials, Forecasts, and Demand Estimation Techniques
This comprehensive guide delves into measuring market opportunities by evaluating market potential, area potential, and sales potential. It explores the gap between potential and actual market demand, outlining methods for estimating these potentials based on various variables and assumptions, such as buyer numbers, pricing, and purchasing habits. Using formulas like MP=N×P×Q and models like Market Development Index (MDI), readers will learn about forecasting techniques, including subjective and customer-based methods. Understanding these concepts is essential for effective sales and marketing management.
Analyzing Market Opportunities: Potentials, Forecasts, and Demand Estimation Techniques
E N D
Presentation Transcript
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
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 • 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
Planning Assumptions • Forecasts are based on assumptions about: • 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 $500K 2nd Qtr 2000 $600K 3rd Qtr 2000 $700K 4th Qtr 2000 $600K 1st Qtr 2001 $633.3K Average = $600K Average = $633.3K Average = $644.4K
Percent Rate of Change 1st Qtr 1998 $100K 1st Qtr 1999 $125K To predict sales for 1st quarter 2000: % change=25% 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)
Estimating Market Share • Market share index = product awareness x (70%) product attractiveness x (65%) intention to buy x (60%) product availability x (60%) product purchase (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.
