6 1 Market Potential and Sales Forecasting Chapter

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Market Potential and Sales Forecasting Chapter 06 Mc. Graw-Hill/Irwin Copyright © 2008 by The

Market Potential and Sales Forecasting Chapter 06 Mc. Graw-Hill/Irwin Copyright © 2008 by The Mc. Graw-Hill Companies, Inc. All Rights

Forecasts versus Potential 6 -3

Forecasts versus Potential 6 -3

Five major uses of potential estimates § To make entry/exit decisions § To make

Five major uses of potential estimates § To make entry/exit decisions § To make resource level decisions § To make location and other resource allocation decisions § To set objectives and evaluate performance § As an input to forecasts 6 -4

Deriving Potential Estimates 6 -5

Deriving Potential Estimates 6 -5

Useful Sources for Potential Estimates § § § Government Sources Trade Associations Private Companies

Useful Sources for Potential Estimates § § § Government Sources Trade Associations Private Companies Financial and Industry Analysts Popular Press The Internet 6 -6

New or Growing Product Potential § Relative Advantage § Compatibility § Risk 6 -7

New or Growing Product Potential § Relative Advantage § Compatibility § Risk 6 -7

Methods of Estimating Market and Sales Potential § Determine who are the potential buyers

Methods of Estimating Market and Sales Potential § Determine who are the potential buyers or users of the product § Determine how many are in each potential group of buyers defined by step 1 § Estimate the purchasing or usage rate 6 -8

Market Potential: Electric Coil 6 -9

Market Potential: Electric Coil 6 -9

Uses of Sales Forecasts § To answer “what if” questions § To help set

Uses of Sales Forecasts § To answer “what if” questions § To help set budgets § To provide a basis for a monitoring system § To aid in production planning § By financial analysts to value a company 6 -10

Scenario-Based Forecasts 6 -11

Scenario-Based Forecasts 6 -11

Judgment-based Forecasting Methods § § § Naïve extrapolation Sales force composite Jury of expert

Judgment-based Forecasting Methods § § § Naïve extrapolation Sales force composite Jury of expert opinion Delphi method Electronic Markets 6 -12

Summary of Forecasting Methods 6 -13

Summary of Forecasting Methods 6 -13

Graphical Eyeball Forecasting 6 -14

Graphical Eyeball Forecasting 6 -14

Customer-Based Methods § Market Testing § Situations in which potential customers are asked to

Customer-Based Methods § Market Testing § Situations in which potential customers are asked to respond to a product or product concept § Market Surveys § A form of primary market research in which potential customers are asked to give some indication of their likelihood of purchasing a product 6 -15

Time-Series Forecasting Methods § Moving Averages § Exponential Smoothing § Regression Analysis 6 -16

Time-Series Forecasting Methods § Moving Averages § Exponential Smoothing § Regression Analysis 6 -16

Potential Customers by Industry and Size 6 -17

Potential Customers by Industry and Size 6 -17

Sample Data 6 -18

Sample Data 6 -18

Times-Series Extrapolation 6 -19

Times-Series Extrapolation 6 -19

Time-Series Regression Example 6 -20

Time-Series Regression Example 6 -20

Trial over Time for a New Product 6 -21

Trial over Time for a New Product 6 -21

Model-Based Methods § Regression analysis § Leading indicators § Econometric models 6 -22

Model-Based Methods § Regression analysis § Leading indicators § Econometric models 6 -22

Forecasting Method Usage 6 -23

Forecasting Method Usage 6 -23

Use of New-Product Forecasting Techniques by All Responding Firms 6 -24

Use of New-Product Forecasting Techniques by All Responding Firms 6 -24

Developing Regression Models § Plot sales over time § Consider the variables that are

Developing Regression Models § Plot sales over time § Consider the variables that are relevant to predicting sales § § Customer status and traits “Our” marketing programs Competitive behavior General environment § Collect data § Analyze the data 6 -25

Cereal Sales Data (monthly) 6 -26

Cereal Sales Data (monthly) 6 -26

Cereal Data 6 -27

Cereal Data 6 -27

Cereal Data Correlation Matrix* 6 -28

Cereal Data Correlation Matrix* 6 -28

Regression Results: Cereal Data* 6 -29

Regression Results: Cereal Data* 6 -29

Format for Reporting a Regression Model Based Forecast 6 -30

Format for Reporting a Regression Model Based Forecast 6 -30

The Impact of Uncertain Predictors on Forecasting 6 -31

The Impact of Uncertain Predictors on Forecasting 6 -31

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