Which method of measuring forecast and demand multiplies a base number by several percentages?

Presentation on theme: "Collecting Information and Forecasting Demand"— Presentation transcript:

1 Collecting Information and Forecasting Demand
Chapter 3 Collecting Information and Forecasting Demand

2 Marketing Information System (MIS)
A marketing information system (MIS) consists of people, equipment, and procedures to gather, sort, analyze, evaluate, and distribute needed, timely, and accurate information to marketing decision makers. The company’s marketing information system should combine what managers think they need, what they really need, and what is economically feasible. (Facebook)

3 Components of a Modern Marketing Information System (MIS)
Internal company records (ICR) Marketing intelligence activities (MIA) Marketing research (MR)

4 Internal records Internal reports of orders; Sales; Prices; Costs; Inventory levels; Receivables; Payables. Internal records use the order-to-payment cycle, sales information systems, databases, data warehousing, and data mining to obtain this list of information.

5 Marketing intelligence
Marketing intelligence system: a set of procedures and sources that managers use to obtain everyday information about developments in the marketing environment. The internal records system supplies results data, but the marketing intelligence system supplies happenings data. Marketing managers collect marketing intelligence by reading books, newspapers, and trade publications; talking to customers, suppliers, distributors, and other company managers; and monitoring online social media (Consumer Behavior Video)

6 Improving marketing intelligence
Motivate sales force to report new developments Motivate intermediaries to pass along intelligence Hire external experts to collect intelligence Network internally and externally Set up a customer advisory panel Take advantage of government-related data Purchase information from outside research vendors Collect marketing intelligence on Internet Marketing intelligence gathering must be legal and ethical.

7 Marketing Intelligence on the internet
Independent customer goods and service review forums Distributor or sales agent feedback sites Combo sites offering customer reviews and expert opinions Customer complaint sites Public blogs Of course, companies can use many of these sources to monitor their own customers, products, services, and brands. Customer-service forums linked on a company’s home page are a very useful tool.

8 Communicating & Acting on Marketing intelligence
The competitive intelligence function works best when it is closely coordinated with the decision-making process Given the speed of the Internet, it is important to act quickly on information gleaned online

9 Communicating & Acting on Marketing intelligence
When ticket broker StubHub detected criticism of its brand after confusion arose about refunds for a rain delayed Yankees–Red Sox game, it quickly offered appropriate discounts and credits. The director of customer service observed, “This [episode] is a canary in a coal mine for us.”

10 Analyzing the Macro environment
Needs and Trends Fad Trend Megatrend

11 Analyzing the Macroenvironment
A fad is “unpredictable, short-lived, and without social, economic, and political significance”. Apple products (macs, i-phones, etc), Xbox, etc. A direction or sequence of events with momentum and durability, a trend is more predictable and durable than a fad; trends reveal the shape of the future and can provide strategic direction. The style of bell bottom jeans. A megatrend is a “large social, economic, political, and technological change [that] is slow to form, and once in place, influences us for some time—between seven and ten years, or longer” . Globalization;  Technological Development, Nanotechnology

12 Identifying the Major Forces
Six major forces in the broad environment Firms must monitor six major forces in the broad environment: demographic, economic, social-cultural, natural, technological, and political-legal. Their interactions will lead to new opportunities and threats. Demographic Natural Economic Technological Socio-cultural Political-legal

13 The Demographic Environment
World population growth is explosive: The world’s population on July 1, 2012, was estimated at 7,027,349,193, forecasted to rise to 8.82 billion by 2040 and exceed 9 billion by 2045. There is a global trend toward an aging population. In 1950, there were only 131 million people 65 and older; in 1995, their number had almost tripled to 371 million. By 2050, one of 10 people worldwide will be 65 or older. Marketers generally divide the population into six age groups: preschool children, school-age children, teens, young adults age 20 to 40, middle-aged adults 40 to 65, and older adults 65 and older. Some marketers focus on cohorts, groups of individuals born during the same time period who travel through life together.

14 The Demographic Environment
Ethnic and racial diversity varies across countries. As of the 2010 Census, the U.S. population was: White (72 percent), Black or African American (13 percent), American Indian and Alaskan Native (0.9 percent), Asian (5 percent), Hispanic (16 percent). The population in any society falls into five educational groups: illiterates, high school dropouts, high school diplomas, college degrees, and professional degrees. The traditional U.S. household included a husband, wife, and children under 18 (sometimes with grandparents). The U.S. family has been steadily evolving toward less traditional forms. More people are divorcing, separating, choosing not to marry, or marrying later. Each type of household has distinctive needs and buying habits.

15 The Economic Environment
CONSUMER PSYCHOLOGY INCOME DISTRIBUTION INCOME, SAVINGS, DEBT, CREDIT

16 The Economic Environment
Purchasing power depends on consumers’ income, savings, debt, and credit availability as well as the price level. As the recent economic downturn vividly demonstrated, fluctuating purchasing power strongly affects business, especially for products geared to high-income and price-sensitive consumers. Marketers must understand consumer psychology and levels and distribution of income, savings, debt, and credit.

17 The Socio-cultural Environment
From our sociocultural environment we absorb, almost unconsciously, a world view that defines our relationships to ourselves, others, organizations, society, nature, and the universe.

18 The Socio-cultural Environment
Core cultural values Values are passed from parents to children and reinforced by social institutions, Japanese culture Subcultures Groups with shared values, beliefs, preferences, and behaviors emerging from their special life experiences or circumstances. In the United States, subcultures might include hippies, Goths, fans of hip hop or heavy metal and even bikers - the examples are endless. Marketers have always loved teenagers because they are trendsetters in fashion, music, entertainment, ideas, and attitudes.

19 The natural environment
Corporate environmentalism Opportunities await those who can reconcile prosperity with environmental protection. Corporate environmentalism recognizes the need to integrate environmental issues into the firm’s strategic plans. Trends for marketers to be aware of include the shortage of raw materials, especially water; the increased cost of energy; increased pollution levels; and the changing role of governments.

20 The Technological Environment
Accelerating pace of change Unlimited opportunities for innovation Varying R&D budgets In many markets, the next technological breakthrough seems right around the corner. Increased regulation of technological change

21 The Technological Environment
Medical researchers hope to use stem cells for organ generation and hybrid positron emission tomography (PET) and magnetic resonance imaging (MRI) to dramatically improve diagnosis. Environmental researchers are exploring plasma arc waste disposal to harness lightning and turn garbage into glass or a gaseous energy source. Too many companies seem to be putting their money into copying competitors’ products with minor improvements. Government has expanded its agencies’ powers to investigate and ban potentially unsafe products. Safety and health regulations have increased for food, automobiles, clothing, electrical appliances, and construction.

22 The Political-Legal Environment
LAWS GOVERNMENT AGENCIES PRESSURE GROUPS

23 The Political-Legal Environment
The European Commission has established new laws covering competitive behavior, product standards, product liability, and commercial transactions for the 28 member nations of the European Union. The United States has many consumer protection laws covering competition, product safety and liability, fair trade and credit practices, and packaging and labeling, but many countries’ laws are stronger. The consumerist movement organized citizens and government to strengthen the rights and powers of buyers in relationship to sellers. Privacy issues and identity theft will remain public policy hot buttons as long as consumers are willing to swap personal information for customized products—from marketers they trust.

24 Forecasting and Demand Measurement
Market demand measures Potential market The potential market is the set of consumers with a sufficient level of interest in a market offer. Available market The available market is the set of consumers who have interest, income, and access to a particular offer. Eligible adults constitute the qualified available market—the set of consumers who have interest, income, access, and qualifications for the market offer.

25 Forecasting and Demand Measurement
Market demand measures Target market The target market is the part of the qualified available market the company decides to pursue. Penetrated market The penetrated market is the set of consumers who are buying the company’s product.

26 Demand measurement vocabulary
Total market demand. Market demand for a product is the total volume that would be bought by a defined customer group in a defined geographical area in a defined time period in a defined marketing environment under a defined marketing program.

27 Market demand vocabulary
Market share Market share is a higher level of selective demand for a company’s product. It pays to compare the current and potential levels of market demand. The result is the market-penetration index. A low index indicates substantial growth potential for all the firms. A high index suggests it will be expensive to attract the few remaining prospects. Generally, price competition increases and margins fall when the market-penetration index is already high.

28 Market demand vocabulary
Primary demand = Someone has identified a need for the first time, often using your help. To sell and market your solution use education, exploration of problems, and explain and demonstrate how you have the solution. Selective demand = Someone has identified the need or problem on her own and is already seeking a solution before you came along. To sell and market to someone with selective demand, first determine how you can better serve your prospect’s needs and communicating this clearly to him, before he goes to someone else!

29 Market demand vocabulary
A financial advisor would create “primary demand” in someone when he teaches the powerful, compounding effects of interest and why it is so important to begin investing today. An organizational development consultant would be facing “selective demand” if he had to convince a company why his approach to improving productivity was better than what the competition used. An executive coach would create “primary demand” if she first helped someone overcome a problem in productivity, then determined other problems that existed, and finally offered to help solve these problems.

30 Market demand vocabulary
A wellness center, that teaches relaxation techniques through yoga, would gain a strong competitive advantage and win more “selective demand” if their marketing focused on how they were better capable than their competition to solve the health concerns of their customers and prospects. Comparing current and potential market shares yields a firm’s share-penetration index. If this index is low, the company can greatly expand its share. Holding it back could be low brand awareness, low availability, benefit Deficiencies, or high price. A firm should calculate the share-penetration increases from removing each factor to see which investments produce the greatest improvement.

31 Demand measurement vocabulary
Market forecast Market potential Company demand . Company sales forecast Company sales potential

32 Demand measurement vocabulary
Only one level of industry marketing expenditure will actually occur. The market demand corresponding to this level is called the market forecast. Market potential: Companies interested in market potential have a special interest in the product-penetration percentage, the percentage of ownership or use of a product or service in a population. The lower the product-penetration percentage, the higher the market potential, although this also assumes everyone will eventually be in the market for every product.

33 Demand measurement vocabulary
Company demand is the company’s estimated share of market demand at alternative levels of company marketing effort in a given time period. The company sales forecast is the expected level of company sales based on a chosen marketing plan and an assumed marketing environment. Company sales potential is the sales limit approached by company demand as company marketing effort increases relative to that of competitors. The absolute limit of company demand is, of course, the market potential.

34 Estimating Current Demand
Total market potential is the maximum sales available to all firms in an industry during a given period, under a given level of industry marketing effort and environmental conditions. A common way to estimate total market potential is to multiply the potential number of buyers by the average quantity each purchases and then by the price. A variation on this method is the chain-ratio method, which multiplies a base number by several adjusting percentages.

35 Estimating Current Demand
Total market potential Chain-ratio method

36 Estimating Current Demand
Area market potential Market-buildup method

37 Estimating Current Demand
The market-buildup method calls for identifying all the potential buyers in each market and estimating their potential purchases. It produces accurate results if we have a list of all potential buyers and a good estimate of what each will buy. Unfortunately, this information is not always easy to gather.

38 Brand development index (BDI)
The brand development index or BDI quantifies how well a brand performs in a market, compared with its average performance among all markets. That is, it measures the relative sales strength of a brand within a specific market (e.g., the Pepsi brand among 10–50-year-olds).

39 Brand development index (BDI)
Percentage of a brand's sales in a particular area in relation to the percentage of the country's population in that area. If a brand has 10 percent of sales, for example, in an area where the 20 percent of country's people live then its BDI in that area is 50= (10 x 100 ÷ 20). BDI indicates where significant groups of a brand's customers live and helps direct marketing efforts.

40 Brand development index (BDI)

41 brand development index (BDI)
The first two columns show its percentage of U.S. brand and category sales in these six cities. Column 3 shows the brand development index (BDI), the index of brand sales to category sales. Seattle has a BDI of 114 because the brand is relatively more developed than the category in Seattle. Portland’s BDI is 65, which means the brand is relatively underdeveloped there.

42 Estimating Current Demand
Industry sales and market share The industry trade association will often collect and publish total industry sales, although it usually does not list individual company sales separately. Another way to estimate sales is to buy reports from a marketing research firm that audits total sales and brand sales.

43 Estimating future demand
All forecasts are built on one of three information bases: what people say, what people do, or what people have done. Using what people say requires surveying buyers’ intentions, composites of sales force opinions, and expert opinion. Building a forecast on what people do means putting the product into a test market to measure buyer response. To use the final basis—what people have done—firms analyze records of past buying behavior or use time-series analysis or statistical demand analysis.

44 Estimating future demand
Forecasting is the art of anticipating what buyers are likely to do under a given set of conditions. For major consumer durables such as appliances, research organizations conduct periodic surveys of consumer buying intentions, ask questions like Do you intend to buy an automobile within the next six months?, and put the answers on a purchase probability scale.

45 Figure 4.1 The Marketing Research Process

Which type of market includes the set of consumers who have interest income access and qualifications for the market offer?

What is the term for identifying all the potential buyers in each market and estimating their potential purchases?

Is a direction or sequence of events that has some momentum and durability it reveals the shape of the future and can provide strategic direction?

What is the term for part of the available market a company decides to pursue?