Demand Analysis & Sales Forecasting

Dr. Dawne Martin

Business Marketing

October 11, 2011

Administrative Things

Exam 2, October 27 Part III of Project Due 10/31 For next time: Chapter 6 & 7

Market Segmentation Approaches

What are the criteria for a good market segment?

What are the primary bases of segmentation used in B2B marketing?

When are they used? How is the market segmented in your

industry?

Types of Forecasts

Sales Forecast

Market Potential

Industry Sales

Sales Potential

Market Forecast (Market Demand)

Questions

Why do we need to estimate market demand?

What are the uses for sales forecasts? Why is it important that they are as accurate as possible?

Examples of Forecasts Used in Business Marketing

Sales Management Decisions

Assessing market opportunity & allocating resources

Evaluating competitive performance

Planning for manufacturing and inventory

Assessing the size of the sales force

Type of Forecast

Market potential & market forecast

Sales potential

Sales forecast

Sales forecasts

Forecasting Approaches: Top-Down

Forecast of general economic & business conditions for country

Market potential for relevant industry

Factors affecting company’s share of total industry sales

Sales potential for company as % of industry sales

Company sales forecast

Zone, region, district, territory & account forecasts

Forecasting Approaches: Bottom-Up

Sales person’s forecast of accounts

Combined into territory forecasts

Combined into District, Region, Zone forecasts

Company Sales Forecasts

Determining Market & Sales Potential

Statistical Series Assumes there is a good relationship between demand

and statistical series Example: # employees and number of uniforms

Single Series Method Based on NAICS or market segments Steps

Select Statistical series Relate series to demand through usage factor Estimate series for desired time period Potential = usage factor X value of series for year

Multiple Series Methods – for more complex demand Multiple regression techniques

Determining Market & Sales Potential Market Research

Uses Estimate demand from few buyers Estimate demand for new products Supplement data from statistical series

Methods Surveys – Institute for Supply Chain Management

Manufacturing -- http://www.ism.ws/ISMReport/MfgROB.cfm?navItemNumber=12942

Non-Manufacturing -- http://www.ism.ws/ISMReport/NonMfgROB.cfm

Focus groups Customer visits

Forecasting Methods:Association/Casual & Time Series

Association/Causal Correlation Regression Models Leading Indicators

http://www.newyorkfed.org/research/national_economy/

Econometric Models Input-Output Models

http://www.bea.gov/industry/

Time-Series Moving Averages Exponential Smoothing Adaptive Filtering Time-Series

Extrapolation Times Series

Decomposition Box-Jenkins

Forecasting Methods: Judgement & Counting Methods

Naïve Extrapolation Sales Composite Jury of Executive Opinion Scenario Analysis and Sensitivity Analysis Delphi Technique Historical Analogy Counting Methods

Market Testing Market Survey

Summary

Demand Analysis (Market Potential) and Sales forecasts are used throughout the organization

Choosing a forecasting technique is based on: Who and how it will be used Time frame Data available Costs/Benefits

Various methods may be used, but should combine top-down & bottom- up

Problem

Biomedical researchers at a Midwest medical school notes that jaundice is seen in approximately 60 percent of infants. To quickly diagnose the problem, the researchers have developed a device that provides a one-handed test for jaundice. A key benefit from the product is for dark-skinned infants. How would you assess the market potential for this product?