Measuring Market Opportunities Potentials and Forecasts.

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Presentation transcript:

Measuring Market Opportunities Potentials and Forecasts

Potentials Market potential Area potential Sales potential

Comparing Potential to Actual Market Potential Market Demand Company Demand Primary (Basic) Demand Gap Selective (Company) Demand Gap

Why estimate potentials?

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) x (% of area retail sales) x (% of area disposable income)

Sales Potential Market potential x potential market share

Forecasts

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 % change=25% Sales = $125K + ($125K x.25) = $125K + $31.25K = $156.25K To predict sales for 1st quarter 2000:

Regression Sales = b 0 + b 1 (time) (base + trend) Sales = b 0 + b 1 (advertising) + b 3 (price) + b 4 (competitors’ prices) + b 5 (competitors’ advertising) + b 6 (disposable income)

Leading Indicators

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 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.