Chapter 4 Marketing Research

Marketing Information and Customer Insights Managing Marketing Information 4-10

Marketing Research Steps in the Marketing Research Process 4-21Copyright © 2016 Pearson Education, Inc.

Marketing Research Defining the Problem and Research Objectives Exploratory researchDescriptive research Causal research Copyright © 2016 Pearson Education, Inc.4-22

Marketing Research Developing the Research Plan Secondary data is information that already exists somewhere, having been collected for another purpose. Primary data is information collected for the specific purpose at hand. Copyright © 2016 Pearson Education, Inc.4-25

Marketing Research Gathering Secondary Data Advantages Lower costObtained quickly Cannot collect otherwise Disadvantages - data may not be RelevantAccurateCurrentImpartial 4-26 Copyright © 2016 Pearson Education, Inc.

Marketing Research Primary Data Collection Copyright © 2016 Pearson Education, Inc. 4-28

Marketing Research Implementing the Research Plan Collecting the information Processing the information Analyzing the information Interpreting and Reporting Findings Interpret findings Draw conclusions Report to management Copyright © 2016 Pearson Education, Inc. 4-38

Sales Forecasting

SALES FORECASTING Who is affected by it? Ops – raw materials, support for existing products, warehousing, production equipment Finance – inventory, all finance statements and expectations, Wall Street Guidance Marketing – mix variables drive forecast and are effected by it, etc. Sales force – budgets, territory sized and # of reps, sales support, customer service HR – hiring in Ops, Mktg, Sales, all parts of the company, R&D – existing product support, new product investments ($ and direction of investment) All budgets across the company flow from sales budget

Functional area Forecast Too highToo low Production excess output, unsold products inadequate output to meet customer demand Inventory overstockunderstocks Finance idle cashcash shortage Promotion wasted expendituresinsufficient expenditures to cover the market Distribution costly, insufficient to sell excess products inadequate to reach market Pricing reductions to sell excess products price increases to allocate scarce products Sales force too many salespeople, high selling costs too few salespeople, market not covered Customer relations money wasted on unneeded activities, resulting in lower profits unsatisfactory due to out-of- stock products Profits lower unit profits since expenses are high lower total profits because market not covered Impact of Erroneous Sales Forecasts

Qualitative Sales Forecasting Techniques Executive/Owner Judgment Surveys  Customer forecasting survey  Sales force forecasting survey  Expert forecasting survey  Delphi technique (panel of experts)

Quantitative Sales Forecasting Methods Averaging Simple averages Moving (rolling) averages Exponential smoothing Time-Series Analysis Trend Analysis Cycle analysis Seasonal analysis

Quantitative Sales Forecasting Techniques Regression Analysis: Predicting sales based on the relationship between past sales and one or more variables Simple Regression: relationship between 1 independent variable and 1 dependent variable (sales) Multiple Regression: shows strength of relationships between multiple independent variables and dependent variable (sales) Caution 1: no one has yet been able to create a formula that guarantees accurate output Caution 2: correlation does NOT equal causation

Other Sales Forecasting Techniques Market Tests Making a product available in the marketplace and measuring purchases and consumer responses  Test full mix on limited scale  Search for test markets that look like your national target, but on smaller scale

Assumptive Reasoning (Chain Ratio) Break a problem down into “knowable” parts, then rebuild it using reasonable assumptions for those parts

Market Share-Based Forecast 1.Determine the market size a)Actual best; potential if actual is unknown 2.Determine the market share you will obtain a)Excellent justification of share figure(s) b)“We think…” is insufficient 3.Translate share into units and dollars Market share is after-the-fact calculation; measures success of marketing plan and execution

Business Plan Sales Forecasting Exhibit #2: Market Quantification Year Tot Mkt Potential (# Customers)* Mkt Growth Projection** Market Share*** Product Annual Unit Sales Unit Price or Weighted ASP Annual $ Revenue Year 1 Year 2 Year 3 Year 4 Year 5 * How did you determine your market potential? Identify key sources and assumptions ** Actual market or market potential. How did you determine the growth projection(s)? Identify key sources and assumptions *** How did you determine your market share? Indicate key sources and assumptions **** How did you determine your unit forecast? Indicate key sources and assumptions