Principles of Marketing Demand How many will buy

Principles of Marketing Demand: How many will buy? ! 23/11/2007 Asian School of Business, Trivandrum 2007 1

Overview • Types of Demand • Estimating Demand 23/11/2007 Asian School of Business, Trivandrum 2007 2

Demand • Market demand: total volume that would be bought by – – a defined customer group in a defined geographical area in a defined time period under a defined marketing program • Company demand: the company’s estimate of market demand at different levels of it’s marketing effort, in a given time. 23/11/2007 Asian School of Business, Trivandrum 2007 3

Market Demand • It need not be a fixed number, it shows the state of the market-prosperity/decline. • • Market Minimum: demand that takes place without any marketing expenditure. Market Potential: the upper limit, beyond which extra expenditure is useless. Market sensitivity: distance between MP & MM • Market Forecast: Somewhere in between. • 23/11/2007 Asian School of Business, Trivandrum 2007 4

Company Demand • The company’s estimate. Depends on its own products, prices, ads and on the competitor’s • Co. Sales Potential: sales’ upper limit as marketing effort increases. Co. Sales Forecast: expected sales based on a chosen plan. Leads to sales quota (higher). Sales Budget: conservative estimate of sales volume for production (lower) • • 23/11/2007 Asian School of Business, Trivandrum 2007 5

Estimating Demand Current Demand: Total Market Potential • Total Market Potential: maximum amount of sales. • Common method-Potential number of buyers X average quantity purchased by him X price • Potential number of buyers- estimate total population & eliminate groups that will obviously not buy…leads to suspect. Suspect is researched to find prospect 23/11/2007 Asian School of Business, Trivandrum 2007 6

Estimating Demand Current Demand: Total Market Potential • Chain Ratio Method: multiply base with many percentages • Demand = Population X X personal discretionary per capita income X average % of income spent on food X average % of food expense spent on beverage X average % of beverage expense spent on alcohol X average % of alcohol expense spent on beer X average % of beer expense spent on light beer 23/11/2007 Asian School of Business, Trivandrum 2007 7

Estimating Demand Current Demand: Area Market Potential • • Companies have to select the best territories to market Market Buildup Method: Identify all potential buyers in each area & estimate their purchases. Multiple Factor Index Method: Find out factors that may effect sales and give weights. Eg. Population, Disposable income, retail sales 23/11/2007 Asian School of Business, Trivandrum 2007 8

Estimating Demand Current Demand: Area Market Potential • • • Multiple Factor Index Method: E. g. . Population, Disposable income, Retail sales First, give weights based on data- 0. 5, 0. 2, 0. 1 If Kerala has 3% of India’s population, 2% of income and 1% of retail sales Buying Power Index: 0. 5(3)+0. 2(2)+0. 1(1)=2. 0 23/11/2007 Asian School of Business, Trivandrum 2007 9

Estimating Demand Sales Figures in Kerala Percent of Indian brand sales A Trivandrum 3. 09 Alappuzha 6. 74 Kochi 1. 13 Percent of Brand Dev Index Indian category A/B X 100 sales B 2. 71 10. 41 0. 81 114 65 140 Find out where brand is more developed than the category 23/11/2007 Asian School of Business, Trivandrum 2007 10

Estimating Future Demand • • • Survey of buyer’s intention Sales force opinion Expert opinion Past sales analysis Market testing using prototype 23/11/2007 Asian School of Business, Trivandrum 2007 11

Thank You End of Session 23/11/2007 Asian School of Business, Trivandrum 2007 12