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MEASURING ANDFORECASTING DEMAND
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MEASURING ANDFORECASTING DEMAND
A company estimate that market’s current size and future potential carefully, to develop effective
targeting strategies, and to manage their marketing efforts effectively. The total market demand for a
product or service is the total volume that would be bought by a defined consumer group in a defined
geographic area in a defined time period in a defined marketing environment under a defined level and
mix of industry marketing effort.
FORECASTING FUTURE DEMAND
Forecasting is the art of estimating future demand by anticipating what buyers are likely to do under a
given set of future conditions. Good forecasting becomes a key factor in company success. Poor
forecasting can lead to overly large inventories, costly price markdowns, or lost sales due to items being
out of stock.
COMPOSITE OF SALES-FORCE OPINIONS
The company may base its sales forecasts on information provided by the sales force. The company
asks its salespeople to estimate sales by product for their individual territories. It then adds up the
individual estimates to arrive at an overall sales forecast. Salespeople may have better insights into
developing trends than any other group. After participating in the forecasting process, the salespeople
may have greater confidence in their quotas and more incentive to achieve them.
EXPERT OPINION
Companies can also obtain forecasts by experts. Experts include dealers, distributors, suppliers,
marketing consultants, and trade associations, forecasting specialist, and Expert opinion is often
captured in a number of academic journals also.
Delphi Method
Occasionally companies will invite a special group of experts to prepare a forecast. The experts may be
asked to exchange views and develop a group estimate (group discussion method). Or they may be
asked to supply their estimates individually, with the company analyst combining them into a single
estimate. Finally, they may supply individual estimates and assumptions that are reviewed by a
company analyst, revised, and followed by further rounds of estimation is called the Delphi method.
TEST MARKETING
Test market is especially useful in forecasting new-product sales or established product sales in a new
distribution channel or territory. (Test marketing is discussed in next Chapter)
Survey Research
Survey research, the most widely used method for primary data collection, is the approach best suited
for gathering descriptive information. A company that wants to know about people’s knowledge,
attitudes, preferences, or buying behavior can often find out by asking them directly. The major
advantage of survey research is its flexibility; it can be used to obtain many different kinds of
information in many different situations. Surveys addressing almost any marketing question or decision
can be conducted by phone or mail, in person, or on the Web. However, survey research also presents
some problems. Sometimes people are unable to answer survey questions because they cannot
MEASURING ANDFORECASTING DEMAND
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remember or have never thought about what they do and why. People may be unwilling to respond to
unknown interviewers or about things they consider private. Respondents may answer survey questions
even when they do not know the answer just to appear smarter or more informed. Or they may try to
help the interviewer by giving pleasing answers. Finally, busy people may not take the time, or they
might resent the intrusion into their privacy.
Market segmentation, Targeting & Positioning
Market segmentation: Dividing a market into smaller segments with distinct needs, characteristics,
or behavior that might require separate marketing strategies or mixes.
Differentiation : Differentiating the market offering to create superior customer value.
Market targeting (targeting) : The process of evaluating each market segment’s attractiveness
and selecting one or more segments to enter
Positioning : Arranging for a market offering to occupy a clear, distinctive, and desirable place
relative to competing products in the
minds of target consumers.
Geographic segmentation : Dividing a market into different geographical units, such as nations,
states, regions, counties, cities, or even Neighborhoods
Demographic segmentation : Dividing the market into segments based on variables such as age,
gender, family size, family life cycle, income, occupation, education, religion, race, generation, and
nationality.
Psychographic segmentation : Dividing a market into different segments based on social class,
lifestyle, or personality characteristics.
Behavioral segmentation : Dividing a market into segments based on consumer knowledge,
attitudes, uses, or responses to a product.
Occasion segmentation : Dividing the market into segments according to occasions when buyers
get the idea to buy, actually make their purchase, or use the purchased item.
Benefit segmentation : Dividing the market into segments according to the different benefits that
consumers seek from the product.
Requirements for Effective Segmentation
Clearly, there are many ways to segment a market, but not all segmentations are effective.
• Measurable: The size, purchasing power, and profiles of the segments can be measured. Certain
segmentation variables are difficult to measure. For example, there are approximately 30.5 million
lefthanded people in the India, as few products are targeted toward this left-handed segment. The major
problem may be that the segment is hard to identify and measure. There are no data on the
demographics of lefties, and in Indian Census Bureau does not keep track of lefthandedness in its
surveys.
• Accessible: The market segments can be effectively reached and served. Suppose users of its brand are
who stay out late and socialize a lot then it will be difficult to reach them.
• Substantial: The market segments are large or profitable enough to serve. A segment should be the
largest possible homogeneous group worth pursuing with a tailored marketing program. It would not
MEASURING ANDFORECASTING DEMAND
Babasabpatilfreepptmba.com Page 3
pay, for example, for an automobile manufacturer to develop cars especially for people whose height is
greater than seven feet.
• Differentiable: The segments are conceptually distinguishable and respond differently to different
marketing mix elements and programs.
• Actionable: Effective programs can be designed for attracting and serving the segments.
Market Targeting
Differentiated (segmented) marketing : A market-coverage strategy in which a firm decides to
target several market segments and designs separate offers for each.
Concentrated (niche) marketing : A market-coverage strategy in which a firm goes after a large
share of one or a few segments or niches
Micromarketing : Tailoring products and marketing programs to the needs and wants of specific
individuals and local customer segments; It includes local marketing and individual marketing.
Local marketing : Tailoring brands and promotions to the needs and wants of local customer
segments—cities, neighborhoods, and even specific stores.
Individual marketing : Tailoring products and marketing programs to the needs and preferences of
individual customers—also called one-toone marketing, customized marketing, and markets-of-one
marketing.
Selecting an Overall Positioning Strategy
The full positioning of a brand is called the brand’s value proposition—the full mix of benefits on
which a brand is differentiated and positioned.
Figure: Possible Value Positioning
Figure shows possible value propositions on which a company might position its products. In the
figure, the five green cells represent winning value propositions— differentiation and positioning that
gives the company competitive advantage. The red cells, however, represent losing value propositions.
The center yellow cell represents at best a marginal proposition. In the following sections, we discuss
the five winning value propositions on which companies can position their products: more for more,
more for the same, the same for less, less for much less, and more for less.
More for More. “More-for-more” positioning involves providing the most upscale product or service
and charging a higher price to cover the higher costs. Ex: Star hotels, Rolex watches, Mercedes
automobiles,—each claims superior quality, durability, performance, or style and charges a price to
MEASURING ANDFORECASTING DEMAND
Babasabpatilfreepptmba.com Page 4
match. Not only is the market offering high in quality, but it also gives prestige to the buyer. It
symbolizes status and a loftier lifestyle.
More for the Same. Companies can attack a competitor’s more-for-more positioning by introducing a
brand offering comparable quality at a lower price. For example, Toyota introduced its Lexus line with
a “more-for-the-same” value proposition versus Mercedes and BMW.
The Same for Less. Offering “the same for less” can be a powerful value proposition—everyone likes a
good deal. Discount stores such as Walmart use this positioning. they offer many of the same brands
for deep discounts based on superior purchasing power and lower-cost operations.
Less for Much Less. A market almost always exists for products that offer less and therefore cost less.
For example, many travelers seeking lodgings prefer not to pay for what they consider unnecessary
extras, such as a pool, an attached restaurant, or mints on the pillow. So Hotel chains suspend some of
these amenities and charge less accordingly.
More for Less. The winning value proposition would be to offer “more for less.” Many companies
claim to do this. And, in the short run,some companies can actually achieve such lofty positions. Yet in
the long run, companies will find it very difficult to sustain such best-of-both positioning.
Marketing Research Steps
Stage 1: Formulating the Marketing Research Problem : Formulating
a problem is the first step in the research process. In many ways, research starts with a problem that
management is facing. This problem needs to be understood, the cause diagnosed, and solutions
developed.
Stage 2: Method of Inquiry : The scientific method is the standard pattern for
investigation. It provides an opportunity for you to use existing knowledge as a starting point and
proceed impartially. The scientific method includes the following steps:
1. Formulate a problem
2. Develop a hypothesis
3. Make predictions based on the hypothesis
4. Devise a test of the hypothesis
5. Conduct the test
6. Analyze the results
The terminology is similar to the stages in the research process. However, there are subtle differences in
the way the steps are performed. For example, the scientific method is objective while the research
process can be subjective.
Stage 3: Research Method : There are two primary methodologies that can be used to
answer any research question: experimental research and non-experimental research. Experimental
research gives you the advantage of controlling extraneous variables and manipulating one or more
variables that influences the process being implemented. Non-experimental research allows observation
but not intervention.
MEASURING ANDFORECASTING DEMAND
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Stage 4: Research Design: The research design is a plan or framework for conducting
the study and collecting data. It is defined as the specific methods and procedures you use to acquire the
information you need.
Stage 5: Data Collection Techniques : Your research design will develop as you
select techniques to use. There are many ways to collect data. Two important methods to consider are
interviews and observation.
Interviews require you to ask questions and receive responses.
Another way to collect data is by observation. Observing a person’s or company’s past or present
behavior can predict future purchasing decisions. Data collection techniques for past behavior can
include analyzing company records and reviewing studies published by external sources.
In order to analyze information from interview or observation techniques, you must record your results.
Because the recorded results are vital, measurement and development are closely linked to which data
collection techniques you decide on.
Stage 6: Sample Design : Your marketing research project will rarely examine an entire
population. It’s more practical to use a sample—a smaller but accurate representation of the greater
population. In order to design your sample, you must find answers to these questions:
1. From which base population is the sample to be selected?
2. What is the method (process) for sample selection?
3. What is the size of the sample?
Once you’ve established who the relevant population is (completed in the problem formulation stage),
you have a base for your sample. This will allow you to make inferences about a larger population.
There are two methods of selecting a sample from a population: probability or non-probability
sampling.
The probability method relies on a random sampling of everyone within the larger population.
Non- probability is based in part on the judgment of the investigator, and often employs convenience
samples, or by other sampling methods that do not rely on probability.
The final stage of the sample design involves determining the appropriate sample size. This important
step involves cost and accuracy decisions. Larger samples generally reduce sampling error and increase
accuracy, but also increase costs.
Stage 7: Data Collection : Once you’ve established the first six stages, you can move on
to data collection. Depending on the mode of data collection, this part of the process can require large
amounts of personnel and a significant portion of your budget. Personal (face-to-face) and telephone
interviews may require you to use a data collection agency (field service).
Internet surveys require fewer personnel, are lower cost, and can be completed in days rather than
weeks or months. Regardless of the mode of data collection, the data collection process introduces
another essential element to your research project: the importance of clear and constant communication.
MEASURING ANDFORECASTING DEMAND
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Stage 8: Analysis and Interpretation : In order for data to be useful, you must
analyze it. Analysis techniques vary and their effectiveness depends on the types of information you are
collecting, and the type of measurements you are using. Because they are dependent on the data
collection, analysis techniques should be decided before this step.
Stage 9: The Marketing Research Report
The marketing research process culminates with the research report.
This report will include all of your information, including an accurate description of your research
process, the results, conclusions, and recommended courses of action. The report should provide all the
information the decision maker needs to understand the project.
It should also be written in language that is easy to understand. It’s important to find a balance between
completeness and conciseness. You don’t want to leave any information out; however, you can’t let the
information get so technical that it overwhelms the reading audience.
One approach to resolving this conflict is to prepare two reports: the technical report and the summary
report. The technical report discusses the methods and the underlying assumptions. In this document,
you discuss the detailed findings of the research project.
The summary report, as its name implies, summarizes the research process and presents the findings and
conclusions as simply as possible.
Another way to keep your findings clear is to prepare several different representations of your findings.
PowerPoint presentations, graphs, and face-to-face reports are all common methods for presenting your
information.
Along with the written report for reference, these alternative presentations will allow the decision maker
to understand all aspects of the project.

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Marketing management module 4 measuring andforecasting demand mba 1st sem by babasab patil (karrisatte)

  • 1. MEASURING ANDFORECASTING DEMAND Babasabpatilfreepptmba.com Page 1 MEASURING ANDFORECASTING DEMAND A company estimate that market’s current size and future potential carefully, to develop effective targeting strategies, and to manage their marketing efforts effectively. The total market demand for a product or service is the total volume that would be bought by a defined consumer group in a defined geographic area in a defined time period in a defined marketing environment under a defined level and mix of industry marketing effort. FORECASTING FUTURE DEMAND Forecasting is the art of estimating future demand by anticipating what buyers are likely to do under a given set of future conditions. Good forecasting becomes a key factor in company success. Poor forecasting can lead to overly large inventories, costly price markdowns, or lost sales due to items being out of stock. COMPOSITE OF SALES-FORCE OPINIONS The company may base its sales forecasts on information provided by the sales force. The company asks its salespeople to estimate sales by product for their individual territories. It then adds up the individual estimates to arrive at an overall sales forecast. Salespeople may have better insights into developing trends than any other group. After participating in the forecasting process, the salespeople may have greater confidence in their quotas and more incentive to achieve them. EXPERT OPINION Companies can also obtain forecasts by experts. Experts include dealers, distributors, suppliers, marketing consultants, and trade associations, forecasting specialist, and Expert opinion is often captured in a number of academic journals also. Delphi Method Occasionally companies will invite a special group of experts to prepare a forecast. The experts may be asked to exchange views and develop a group estimate (group discussion method). Or they may be asked to supply their estimates individually, with the company analyst combining them into a single estimate. Finally, they may supply individual estimates and assumptions that are reviewed by a company analyst, revised, and followed by further rounds of estimation is called the Delphi method. TEST MARKETING Test market is especially useful in forecasting new-product sales or established product sales in a new distribution channel or territory. (Test marketing is discussed in next Chapter) Survey Research Survey research, the most widely used method for primary data collection, is the approach best suited for gathering descriptive information. A company that wants to know about people’s knowledge, attitudes, preferences, or buying behavior can often find out by asking them directly. The major advantage of survey research is its flexibility; it can be used to obtain many different kinds of information in many different situations. Surveys addressing almost any marketing question or decision can be conducted by phone or mail, in person, or on the Web. However, survey research also presents some problems. Sometimes people are unable to answer survey questions because they cannot
  • 2. MEASURING ANDFORECASTING DEMAND Babasabpatilfreepptmba.com Page 2 remember or have never thought about what they do and why. People may be unwilling to respond to unknown interviewers or about things they consider private. Respondents may answer survey questions even when they do not know the answer just to appear smarter or more informed. Or they may try to help the interviewer by giving pleasing answers. Finally, busy people may not take the time, or they might resent the intrusion into their privacy. Market segmentation, Targeting & Positioning Market segmentation: Dividing a market into smaller segments with distinct needs, characteristics, or behavior that might require separate marketing strategies or mixes. Differentiation : Differentiating the market offering to create superior customer value. Market targeting (targeting) : The process of evaluating each market segment’s attractiveness and selecting one or more segments to enter Positioning : Arranging for a market offering to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers. Geographic segmentation : Dividing a market into different geographical units, such as nations, states, regions, counties, cities, or even Neighborhoods Demographic segmentation : Dividing the market into segments based on variables such as age, gender, family size, family life cycle, income, occupation, education, religion, race, generation, and nationality. Psychographic segmentation : Dividing a market into different segments based on social class, lifestyle, or personality characteristics. Behavioral segmentation : Dividing a market into segments based on consumer knowledge, attitudes, uses, or responses to a product. Occasion segmentation : Dividing the market into segments according to occasions when buyers get the idea to buy, actually make their purchase, or use the purchased item. Benefit segmentation : Dividing the market into segments according to the different benefits that consumers seek from the product. Requirements for Effective Segmentation Clearly, there are many ways to segment a market, but not all segmentations are effective. • Measurable: The size, purchasing power, and profiles of the segments can be measured. Certain segmentation variables are difficult to measure. For example, there are approximately 30.5 million lefthanded people in the India, as few products are targeted toward this left-handed segment. The major problem may be that the segment is hard to identify and measure. There are no data on the demographics of lefties, and in Indian Census Bureau does not keep track of lefthandedness in its surveys. • Accessible: The market segments can be effectively reached and served. Suppose users of its brand are who stay out late and socialize a lot then it will be difficult to reach them. • Substantial: The market segments are large or profitable enough to serve. A segment should be the largest possible homogeneous group worth pursuing with a tailored marketing program. It would not
  • 3. MEASURING ANDFORECASTING DEMAND Babasabpatilfreepptmba.com Page 3 pay, for example, for an automobile manufacturer to develop cars especially for people whose height is greater than seven feet. • Differentiable: The segments are conceptually distinguishable and respond differently to different marketing mix elements and programs. • Actionable: Effective programs can be designed for attracting and serving the segments. Market Targeting Differentiated (segmented) marketing : A market-coverage strategy in which a firm decides to target several market segments and designs separate offers for each. Concentrated (niche) marketing : A market-coverage strategy in which a firm goes after a large share of one or a few segments or niches Micromarketing : Tailoring products and marketing programs to the needs and wants of specific individuals and local customer segments; It includes local marketing and individual marketing. Local marketing : Tailoring brands and promotions to the needs and wants of local customer segments—cities, neighborhoods, and even specific stores. Individual marketing : Tailoring products and marketing programs to the needs and preferences of individual customers—also called one-toone marketing, customized marketing, and markets-of-one marketing. Selecting an Overall Positioning Strategy The full positioning of a brand is called the brand’s value proposition—the full mix of benefits on which a brand is differentiated and positioned. Figure: Possible Value Positioning Figure shows possible value propositions on which a company might position its products. In the figure, the five green cells represent winning value propositions— differentiation and positioning that gives the company competitive advantage. The red cells, however, represent losing value propositions. The center yellow cell represents at best a marginal proposition. In the following sections, we discuss the five winning value propositions on which companies can position their products: more for more, more for the same, the same for less, less for much less, and more for less. More for More. “More-for-more” positioning involves providing the most upscale product or service and charging a higher price to cover the higher costs. Ex: Star hotels, Rolex watches, Mercedes automobiles,—each claims superior quality, durability, performance, or style and charges a price to
  • 4. MEASURING ANDFORECASTING DEMAND Babasabpatilfreepptmba.com Page 4 match. Not only is the market offering high in quality, but it also gives prestige to the buyer. It symbolizes status and a loftier lifestyle. More for the Same. Companies can attack a competitor’s more-for-more positioning by introducing a brand offering comparable quality at a lower price. For example, Toyota introduced its Lexus line with a “more-for-the-same” value proposition versus Mercedes and BMW. The Same for Less. Offering “the same for less” can be a powerful value proposition—everyone likes a good deal. Discount stores such as Walmart use this positioning. they offer many of the same brands for deep discounts based on superior purchasing power and lower-cost operations. Less for Much Less. A market almost always exists for products that offer less and therefore cost less. For example, many travelers seeking lodgings prefer not to pay for what they consider unnecessary extras, such as a pool, an attached restaurant, or mints on the pillow. So Hotel chains suspend some of these amenities and charge less accordingly. More for Less. The winning value proposition would be to offer “more for less.” Many companies claim to do this. And, in the short run,some companies can actually achieve such lofty positions. Yet in the long run, companies will find it very difficult to sustain such best-of-both positioning. Marketing Research Steps Stage 1: Formulating the Marketing Research Problem : Formulating a problem is the first step in the research process. In many ways, research starts with a problem that management is facing. This problem needs to be understood, the cause diagnosed, and solutions developed. Stage 2: Method of Inquiry : The scientific method is the standard pattern for investigation. It provides an opportunity for you to use existing knowledge as a starting point and proceed impartially. The scientific method includes the following steps: 1. Formulate a problem 2. Develop a hypothesis 3. Make predictions based on the hypothesis 4. Devise a test of the hypothesis 5. Conduct the test 6. Analyze the results The terminology is similar to the stages in the research process. However, there are subtle differences in the way the steps are performed. For example, the scientific method is objective while the research process can be subjective. Stage 3: Research Method : There are two primary methodologies that can be used to answer any research question: experimental research and non-experimental research. Experimental research gives you the advantage of controlling extraneous variables and manipulating one or more variables that influences the process being implemented. Non-experimental research allows observation but not intervention.
  • 5. MEASURING ANDFORECASTING DEMAND Babasabpatilfreepptmba.com Page 5 Stage 4: Research Design: The research design is a plan or framework for conducting the study and collecting data. It is defined as the specific methods and procedures you use to acquire the information you need. Stage 5: Data Collection Techniques : Your research design will develop as you select techniques to use. There are many ways to collect data. Two important methods to consider are interviews and observation. Interviews require you to ask questions and receive responses. Another way to collect data is by observation. Observing a person’s or company’s past or present behavior can predict future purchasing decisions. Data collection techniques for past behavior can include analyzing company records and reviewing studies published by external sources. In order to analyze information from interview or observation techniques, you must record your results. Because the recorded results are vital, measurement and development are closely linked to which data collection techniques you decide on. Stage 6: Sample Design : Your marketing research project will rarely examine an entire population. It’s more practical to use a sample—a smaller but accurate representation of the greater population. In order to design your sample, you must find answers to these questions: 1. From which base population is the sample to be selected? 2. What is the method (process) for sample selection? 3. What is the size of the sample? Once you’ve established who the relevant population is (completed in the problem formulation stage), you have a base for your sample. This will allow you to make inferences about a larger population. There are two methods of selecting a sample from a population: probability or non-probability sampling. The probability method relies on a random sampling of everyone within the larger population. Non- probability is based in part on the judgment of the investigator, and often employs convenience samples, or by other sampling methods that do not rely on probability. The final stage of the sample design involves determining the appropriate sample size. This important step involves cost and accuracy decisions. Larger samples generally reduce sampling error and increase accuracy, but also increase costs. Stage 7: Data Collection : Once you’ve established the first six stages, you can move on to data collection. Depending on the mode of data collection, this part of the process can require large amounts of personnel and a significant portion of your budget. Personal (face-to-face) and telephone interviews may require you to use a data collection agency (field service). Internet surveys require fewer personnel, are lower cost, and can be completed in days rather than weeks or months. Regardless of the mode of data collection, the data collection process introduces another essential element to your research project: the importance of clear and constant communication.
  • 6. MEASURING ANDFORECASTING DEMAND Babasabpatilfreepptmba.com Page 6 Stage 8: Analysis and Interpretation : In order for data to be useful, you must analyze it. Analysis techniques vary and their effectiveness depends on the types of information you are collecting, and the type of measurements you are using. Because they are dependent on the data collection, analysis techniques should be decided before this step. Stage 9: The Marketing Research Report The marketing research process culminates with the research report. This report will include all of your information, including an accurate description of your research process, the results, conclusions, and recommended courses of action. The report should provide all the information the decision maker needs to understand the project. It should also be written in language that is easy to understand. It’s important to find a balance between completeness and conciseness. You don’t want to leave any information out; however, you can’t let the information get so technical that it overwhelms the reading audience. One approach to resolving this conflict is to prepare two reports: the technical report and the summary report. The technical report discusses the methods and the underlying assumptions. In this document, you discuss the detailed findings of the research project. The summary report, as its name implies, summarizes the research process and presents the findings and conclusions as simply as possible. Another way to keep your findings clear is to prepare several different representations of your findings. PowerPoint presentations, graphs, and face-to-face reports are all common methods for presenting your information. Along with the written report for reference, these alternative presentations will allow the decision maker to understand all aspects of the project.