1. Measuring Market Opportunities
Chapter Six
Measuring Market Opportunities

2. Keys to Good Forecasting
Make assumptions explicit
Then debate the assumptions, not the forecast itself
Collect data to verify or refute the assumptions
Use multiple methods
Top down
Bottom up 4

3. What are the advantages and limitations of the six main evidence-based forecasting methods?
Statistical methods
Observation
Surveys
Analogy
Judgment
Market tests
Statistical methods: advantages
Useful in established firms for established products
Likely to result in a more accurate forecast than other methods under stable market conditions
Statistical methods: limitations
Assumes the future will look very much like the past
Requires history
Not useful for new products with no history
Observation: advantages
Based on what people actually do
Observation: limitations
Observation is typically not possible for new-to-the-world products
Requires prior examples to observe
Surveys: advantages
Many different groups of respondents can be surveyed, from consumers to salespeople to suppliers, etc.
Does not require history or prior examples
Surveys: limitations
What people say is not always what people do
The persons being surveyed may not be knowledgeable, but when asked their opinion, they will probably provide it
What people imagine about a product concept in a survey may not be what is actually delivered once the product is launched
Analogy: advantages
Requires no history nor prior examples
Best when used for new product forecasting where neither statistical methods nor observations are possible
Also useful for new-to-the-world high-technology products, for which product prototypes are often either not available or extremely expensive to produce
Analogy: limitations
The proposed new product is never exactly like that to which the analogy is drawn
Market and competitive conditions may differ considerably from when the analogous product was launched
Judgment: advantages
Those with sufficient forecasting experience in a market they know well may be quite accurate in their intuitive forecasts.
Judgment: limitations
It is often difficult for them to defend their forecasts against those prepared by evidence-based methods when the two differ.
Market tests: advantages
Closest forecasting method to the true market
Market tests: limitations
Expensive to conduct
For consumer products sold through supermarkets and mass merchants, competitors can buy the data collected through scanners at the checkout and learn the results of the test market without bearing the expense.
Competitors can deliberately distort market conditions to invalidate the test

4. (if product available)
Chain Ratio Forecasts
Research Findings:
Forecast Result:
Target Market Size: 77.4m
Estimated Trial: 34.5%(1)
77.4 * .345 = 26.7 million
(if all are aware)
Estimated Awareness: 48%
26.7 * .48 = 12.8 million
(if product available)
Estimated Distribution: 70%
12.8 * .70 = 9.0 million
(Estimated Trial)
(1) Reduced from actual response of 70%. See Exh. 6.2.

5. What questions should informed users of marketing research ask, before approving a study?
What are the research objectives? Will the proposed study meet them?
Are the data sources appropriate? Secondary or primary? Qualitative or quantitative?
Is the research itself well designed?
Are the planned analyses appropriate?

6. Targeting Attractive Market Segments
Chapter Seven
Targeting Attractive Market Segments

7. Three Kinds of Market Segmentation Criteria
Demographic
Reflects who the customers are
Geographic
Reflects where the customers are
Behavioral
Reflects how they behave in this usage category
Geo-demographic YAWYL VALS 4

8. A Useful Tool for Assessing Market Segments: Segment Rating Chart
WEIGHT
RATING (0-10)
TOTAL
Market attractiveness factors
Customer needs and behavior .5 10
5.0
Segment size and growth rate .3 7
2.1
Macro trends .2 8
1.6
Total: Market attractiveness
1.0
8.7
Competitive position factors
Opportunity for competitive advantage .6
4.2
Capabilities and resources 5
Industry attractiveness
1.4
Total: Competitive position
6.6
Where does the necessary data come from to support the factor ratings?
Primary and secondary marketing research
Analytical frameworks from earlier chapters

9. How should we decide which segments to target?
Market
Attractiveness
High
(8-10)
Moderate
(4-7)
Low
(0-3)
Company’s Competitive Position
= Market attractiveness and competitive position of distance runners segment
How can these factors be assessed?
Market attractiveness factors
Customer needs and behavior: unmet needs?
Segment size and growth rate
Macro trends
Competitive position factors
Opportunities for competitive advantage
Capabilities and resources
Industry attractiveness

10. Market Attractiveness
Exhibit 7.9 Implications of Alternative Positions Within the Market-Attractiveness/Competitive-Position Matrix
Competitive Position
Weak
Medium
Strong
Build selectively:
Spec. in limited strengths
Seek to overcome weak.
Withdraw if indications of sustainable growth are lacking
Desirable Potential Target
Invest to build:
Challenge for leadership
Build selectively on strengths
Reinforce vulnerable areas
Desirable Potential Target
Protect position:
Invest to grow at max. digestible rate
Concentrate on maintaining strength
High
Limited expansion or harvest:
Look for ways to expand w/out high risk; otherwise min. invest. and focus operations
Desirable Potential Target
Build selectively:
Emphasize profitability by increasing productivity
Build up ability to counter competition
Manage for earnings:
Protect existing strengths
Invest to improve position only in areas where risk is low
Med.
Market Attractiveness
Divest:
Sell when possible to maximize cash value
Meantime, cut fixed costs & avoid further investment
Manage for earnings:
Protect position
Minimize investment
Protect and refocus:
Defend strengths
Seek ways to increase current earnings without speeding market’s decline
Low
Sources: Adapted from George S. Day, Analysis for Strategic Market Decisions (St. Paul: West, 1986), p. 204; D. F. Abell and J. S. Hammond, Strategic Market Planning Problems and Analytical Approaches (Englewood Cliffs, NJ: Prentice Hall, 1979); and S. J. Robinson, R. E. Hitchens, and D. P. Wade, “The Directional Policy Matrix: Tool for Strategic Planning,” Long Range Planning 11 (1978), pp 14