1. Measuring Market Opportunities: Forecasting and Market Knowledge5
Measuring Market Opportunities: Forecasting and Market Knowledge

2. Key Questions Before Making a Forecast.
Purpose of the forecast?
What specifically needs to be forecast?
Importance of the past to the future?
Method(s) to be used for forecasting?
What could change the forecast?
Forecast horizon? Long term ≥ 10 yrs; Medium Term: up to 5 yrs; Short term: up to 1 year.
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The Sales Forecast.
Is based on a specific marketing plan.
Stated as dollars or units.
Estimate market and sales potential first.
Establish marketing goals and broad strategies before making a sales forecast.
Typically covers a 1-year period.
Once made, the forecast becomes a key controlling factor in all operational planning throughout the company.
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Forecasting.
More than a “Sales” thing. Other organizational functions also forecasts variables that affect their operations
Commonly used methods
Statistical forecasting using high volumes of historical or collected data
Extrapolations
Analogs
Expert judgment/Delphi method
Top down
Bottom up
Most companies use a combination of these
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Top Down vs. Bottom Up.
Top Down: Assumption - international and national events affect the future behaviour of local variables
Forecast of economic conditions and industry trends.
Determine the product’s market potential
Determine its sales potential
Measure the firm’s current or desired market share
Forecast sales for the firm
Bottom Up: Assumption - local events affect the future behaviour of global variables
Develop customers/salespeople input for future demand
Combine the estimates to get a total forecast.
Adjust the forecast by managerial insights, competition, and general economic trends.
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Discussion Question
1. Of the two main approaches for sales forecasting - top-down and bottom-up - which is better? Why?
Both approaches have merits:
Each process typically has access to different information, and will likely result in different forecasts
Using both methods concurrently adds confidence to the forecast, if both methods produce similar results
If the results of the two approaches differ, useful discussions of the underlying assumptions will be surfaced
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7. Forecast is Projecting Evidence.
Evidence from:
History
Field/Market research
Other organizations
Alternative future possibilities
Plans, strategies, and actions for future
Issues
Changes
Etc.
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8. How does one go from methods to math?
Chain ratio method (how many total xxx?, how many fit yy criteria?, how many…?)
Brand or category indices (e.g., best or worst regions, cities, months, circumstances, etc. for the occurrence of event xxx)
What’s the logic behind the chain ratio method?
# of households in target market times concept purchase intent = # of households that will try if aware
# of households that will try if aware times awareness adjustment = # of households will try if they find product at their store
# of households will try if they find product at their store times distribution adjustment = # who will try the product
What’s the logic behind brand or category indices?
Category Development Indices report the ratio of consumption in a certain category to population in a defined geographical area.
Brand Development Indices compare sales for a given brand to population in a defined geographic area
Commonly used to assess whether a category or brand has above-average or below-average penetration in different geographic markets
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9. Ideas for new products or new ventures: How fast will customers adopt?
Early
majority
34%
Late
adopters
13.5%
16%
2.5%
Innovators
Laggards
and
Non-adopters
Source: Adapted with permission from Marketing, 11/e, Acetate 8-8, by Michael J. Etzel, Bruce J. Walker, and William J. Stanton. The McGraw-Hill Companies, Inc. © All rights reserved.

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Discussion Question
4. How fast will the adoption curve move for a particular innovation?
Diffusion of innovation factors, in order of importance (Rogers 1983):
(1) risk
(2) relative advantage
(3) relative simplicity
(4) compatibility with current behavior
(5) ease of small-scale trial
(6) ease of communication of benefits.
Then ask, “What are the implications of diffusion theory for forecasting new product market penetration?
Diffusion theory suggests that high penetration levels are rare at the outset. Typically, first-year penetration levels include some but not all of the innovators, i.e., less than 2½ percent will likely adopt in year one.
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11. Targeting Attractive Market Segments6
Targeting Attractive Market Segments

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Discussion Questions
1. What’s a market?
2. What’s a market segment?
What’s a market?
A group of individuals or organizations (i.e., buyers) having the willingness and ability to buy goods and services to satisfy a class of want or need
What’s a market segment?
A group of potential customers in a market who share similar wants and needs that are different from the wants and needs of consumers in other segments
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13. Objectives of Market Segmentation
Identify a homogeneous segment that differs from other segments
Specify criteria that define the segment
Determine segment size and potential
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14. Defining Market Segments
Three good ways to do it.
Who the customers are
Where they are
How they behave
Ask, for each approach, “What tools do we have to define segments this way? Can you think of examples of markets typically segmented this way?”
Who?
Tools: demographic descriptors (age, income, gender, education, etc.): cereal, clothing, cosmetics, some magazines
Where?
Tools: geographic descriptors: suntan lotion, snow blowers, trade areas for retail stores
How they behave?
Tools:
Benefits sought: bicycles of various types, computers of various types
Product usage: key accounts among organizational buyers
Lifestyle/psychographics: health clubs, automobiles/SUVs
Social class: jewelry, automobiles
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15. Segmentation variables.
Geographic: Region, country, population
density, climate…
Demographic: Age, gender, income, occupation, What else???…
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16. Segmentation variables.
Psychographics: personality, lifestyles, values,
attitudes…
Behavioral: benefits sought, usage rate, brand
loyalty, end use, readiness to buy, decision
maker(s)…
(George Day, 1980) Top-down approach: start
with the total population and divide it into
segments. Bottom-up approach: start with a
single customer and build on that profile
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17. 1. Choose criteria to measure market attractiveness and competitive
Which Segments to Target? Constructing a Market Attractiveness/Competitive-Position Matrix
1. Choose criteria to measure market attractiveness and competitive
2. Weigh market attractiveness and competitive position factors to reflect their relative importance.
3. Assess the current position of each potential target market on each factor.
4. Project the future position of each market based on expected environmental, customer, and competitive trends
5. Evaluate implications of possible future changes for business strategies and resources requirements. 7

18. 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

19. Implications of Alternative Positions Within the Market-Attractiveness/Competitive-Position Matrix
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

20. Differentiation and Positioning7
Differentiation and Positioning

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What is Positioning?
A couple of definitions
Creating distinct and valued physical and perceptual differences between one’s product and its competitors, as perceived by the target customer.
The act of designing the firm’s market offering so that it occupies a distinct and valued place in the minds of its target customers.
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22. Other Positioning Strategies
Re-positioning: changing the identity of a product, relative to the identity of competing products, in the collective minds of the target market.
De-positioning: attempting to change the identity of competing products, relative to the identity of your own product, in the collective minds of the target market.
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Positioning Concepts
three types:
Functional positions
Solve problems
Provide benefits to customers
Get favorable perception by investors and lenders
Symbolic positions
Self-image enhancement
Ego identification
Belongingness and social meaningfulness
Affective fulfillment
Experiential positions
Provide sensory stimulation
Provide cognitive stimulation
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24. Physical vs. Perceptual Positioning Analysis Exhibit 7.3
Physical positioning
Technical orientation
Physical characteristics
Objective measures
Data readily available
Physical brand properties
Large number of dimensions
Represents impact of product specs and price
Direct R&D implications
Perceptual positioning
Consumer orientation
Perceptual attributes
Perceptual measures
Need for marketing research
Perceptual brand positions and positioning intensities
Limited number of dimensions
Represents impact of product specs and communication
R&D implications need to be interpreted
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25. Product Mix Strategies Market penetration versus market skimming
Premium
Goods
Penetra-
tion
Super
Bargain
High
Quality
Over-
Pricing
Average
Quality
Bargain
Medium
Hit and
Run
Shoddy
Goods
Cheap
Goods
Low
High
Medium
Low
Price
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26. Generic Competitive Strategies
Exhibit 7.1
Competitive Advantage
Lower Cost
Differentiation
Broad Target
Cost Leadership Strategy
Differentiation Strategy
Narrow Target
Focus Strategy
(Differentiation Based)
Competitive
Scope
Source: Adapted from Michael Porter, Competitive Advantage,New York: The Free Press, 1985, p. 12.

27. Steps in the Positioning Process Exhibit 7.4 (1 of 2)
1. Identify a relevant set of competitive products serving a target market.
2. Identify the set of determinant attributes that define the “product space” in which positions of current offerings are located.
3. Collect information from a sample of customers and potential customers about perceptions of each product on the determinant attributes.
4. Determine product’s current location (positioning) in the product space and intensity thereof.
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28. Steps in the Positioning Process Exhibit 7.4 (2 of 2)
5. Determine customers’ most preferred combination of determinant attributes.
6. Examine the fit between preferences of market segments and current position of product (market positioning).
7. Write positioning statement or value proposition to guide development and implementation of marketing strategy.
8. Position
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29. Some Key Questions Concerning Positioning Decisions
For whom are they written?
In what sort of language?
Should they focus on features or benefits?
How many differentiating attributes should anchor them?
For whom are positioning statements or value propositions written?
An internal audience: marketing decision makers and ad agencies
Should they be written in catchy consumer language or “plain prose?”
Plain prose. The ad agency or other creative staff will develop the catchy consumer language, based on the chosen positioning. Can the class think of examples of catchy current tag lines and the positioning they represent?
Should they focus on features or benefits? Why?
Benefits, which are ultimately why people buy (e.g., safety, for Volvo, vs. side door airbags)
What’s a feature?
A physical attribute of the good or service itself
What’s a benefit?
The end-use consequences that the user will experience by using the product
On how many attributes should one’s positioning be based?
One, or perhaps two at most. No more. Why?
Clear and simple communication
No confusion about what the product stands for.
Examples?
Volvo: Safety. Note there’s more Volvo could say, but here’s where they focus. (One attribute)
Miller Lite beer: Tastes great. Less filling. (Two attributes)
Domino’s Pizza: Originally, fast delivery. Later changed to hot delivery.
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30. Marketing Strategies for New Market Entries8
Marketing Strategies for
New Market Entries

31. Marketing Strategy: Introduction Stage.
Most important attributes at this stage are: Price & Promotion
Price
Low
High
High-Profile
Strategy
Preemptive
Penetration
Strategy
High
Promotion
Selective
Penetration
Strategy
Low-Profile
Strategy
Low
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32. Marketing Strategy: Introduction Stage.
1.High-Profile Strategy (High price-High Promotion)
When? - High control over offering
- Low fear of competition
2. Selective Penetration Strategy (High Price-Low Promotion)
When? - High profitability
- High fear of competition
3. Preemptive Penetration Strategy (Low Price-High Promotion)
When? - Strongly felt buyer need
- Easy competitive entry
4. Low-Profile Strategy (Low Price-Low Promotion)
When? - Current Production constraints
- Large potential market
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33. How do opportunities evolve over time?
Product category sales
(real dollars)
Profit per unit
Profit/unit
Sales
Life cycle
extension
Growth
Competitive
turbulence
Maturity
Decline or
Introduction
Ask students the following questions:
Is the product life cycle concept useful? Why or why not?
The product life cycle is concerned with the sales history of a product or product class. The concept holds that a product’s sales change over time in a predictable way and that products go through a series of five distinct stages: introduction, growth, shakeout, maturity, and decline. Each of these stages provides distinct opportunities and threats, thereby affecting the firm’s strategy as well as its marketing programs. Despite the fact that many new products do not follow such a prescribed route because of failure, the concept is valuable in helping management look into the future and better anticipate what changes will need to be made in strategic marketing programs.
What are the product life-cycle limitations?
The product life-cycle model’s major weakness lies in its normative approach to prescribing strategies based on assumptions about the features or characteristics of each stage. It fails to take into account that the product life cycle is driven by market forces expressing the evolution of consumer preferences (the market), technology (the product), and competition (the supply side).
Time (years)
Source: Reprinted with permission from p. 60 of Analysis for Strategic Marketing Decisions, by George Day. Copyright © 1986 by West Publishing Company. All rights reserved.

34. Categories of New Products Defined According to Their Degree of Newness to the Company and Customers in the Target Market (Exhibit 8.4.)
High
20%
10%
New product
lines
New-to-the
world products
Newness to the company
Additions to
existing product
lines
26%
26%
Revisions/
improvements to
existing products
11% 7%
Repositionings
Cost
reductions
Low
Low
High
Newness to the market
Source: New Products Management for the 1980s (New York: Booz, Allen & Hamilton, 1982). 2

35. Business Analysis for New Product.
Product’s relationship to existing line
Development Costs
Available Personnel and facilities
Competition and Market acceptance
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Discussion Question
1.Is it better to be a market pioneer, or a follower?
What are the advantages for pioneers?
First choice of market segments and positions
Defines the rules of the game
Distribution advantages
Economies of scale and experience
High switching costs for early adopters
Possibility of positive network effects
Possibility of preempting scarce resources to suppliers
What are the advantages for followers?
Ability to take advantage of pioneer’s positioning mistakes
Ability to take advantage of pioneer’s product mistakes
Ability to take advantage of pioneers marketing mistakes
Ability to take advantage of pioneer’s limited resources
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37. Some Advice for Would-Be Pioneers
Being a pioneer without the basis for sustainable competitive advantage is a trap!
First mover advantage is trumped by pioneers who are better. Best beats first. Concentrate on being best.
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Discussion Question
2. When, and for whom, does it make sense to pursue a pioneer strategy?
A pioneering firm stands the best chance for long-term success in market-share leadership and profitability when:
The new product-market is insulated from the entry of competitors, at least for a while, by strong patent protection, by proprietary technology (such as a unique production process), by substantial investment requirements, or by positive network effects.
The firm has sufficient size, resources, and competencies to take full advantage of its pioneering position and preserve it in the face of later competitive entries.
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39. Copyright 2008 by The McGraw-Hill Companies, Inc. All rights reserved.
Discussion Question
3. When, and for whom, does it make sense to pursue a follower strategy?
A follower will most likely succeed when:
There are few legal, technological, or financial barriers to inhibit entry.
It has sufficient resources or competencies to overwhelm the pioneer’s early advantage.
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40. Strategies for Growth Markets9
Strategies for Growth Markets