Market Research & Sales Forecasting

8/12/2019 Market Research & Sales Forecasting

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M a r k e t r e s e a r c h - i n t r o d u c t i onTo undertake marketing effectively, businesses need information. Information about customerwants, market demand, competitors, distribution channels etc.

Marketers often complain that they lack enough marketing information or the right kind, orhave too much of the wrong kind. The solution is an effective marketing information system.

The information needed by marketing managers comes from three main sources:

(1) Internal company information

E.g. sales, orders, customer profiles, stocks, customer service reports etc)

(2) Marketing intelligence

This can be information gathered from many sources, including suppliers, customers,distributors. Marketing intelligence is a catchall term to include all the everyday informationabout developments in the market that helps a business prepare and ad!ust its marketing

plans. It is possible to buy intelligence information from outside suppliers "e.g. Mintel, #un $%radstreet, Mori) who set up data gathering systems to support commercial intelligenceproducts that can be profitably sold to all players in a market.

(3) Market research

Management cannot always wait for information to arrive in bits and pieces from internalsources. &lso, sources of market intelligence cannot always be relied upon to provide relevantor uptodate information "particularly for smaller or niche market segments). In suchcircumstances, businesses often need to undertake specific studies to support their marketingstrategy this is market research.

C o n d u c t i n g m a r k e t r e s e a r c h

#epending on the situation facing a business, particularly the resources allocated to marketingresearch, there are four main ways of carrying out market research:

(1) Do it yourself - personally

This is often the case in smaller businesses. 'ere, marketing staff do the research themselves.(ample sies tend to be small which may be appropriate if there are a relatively small numberof customers.

(2) Do it yourself - using a marketing research department

%y employing a marketing research manager, a business may benefit from specialist researchskills.

(3) Do it yourself - using a fieldwork agency

*ften the design of a piece of market research can be completed using internal resources particularly if the business employs a marketing specialist with knowledge of researchtechni+ues. 'owever, the scope of the research "for eample, interviewing a large sample of

Prof. Uma Sankar Mishra, Asst. Professor, IBCS, SOA University, Bhubaneswar


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consumers in various locations) may be beyond the resources of a business. In this case, thefieldwork can be carried out by a marketing research agency.

(4) se the full ser!ices of a marketing research agency

-here resources permit a business can invest in the full range of skills offered by marketing

research agencies. & complete service would include:

/reparation of the market research proposal "survey design, costs, timetable, method offeedback) 0onduct eploratory research #esign the research +uestionnaire (elect the sample 0hoose the survey method "e.g. telephone, postal, facetoface)1 0onduct the interviewing &nalyse and interpret the results /repare a report Make a presentation

There are thousands of market research agencies in the 23 alone who provide such services.

Ty p e s o f m a r k e t r e s e a r c h

The main distinction between the different types of market research is between "ad-hoc"and"continuous"research:

Ad-hoc Market Research

&dhoc research studies focus on specific marketing problems. They collect data at one point intime from one sample of respondents. 4ood eamples of adhoc studies include:

/roduct usage survey

5ew product concept tests "where consumers are asked to trial new brands, productprototypes etc)

&dvertising development "how does the sample of consumers respond to a specific advertisingcampaign6 Most T7 adverts are researched in this way)

0orporate image surveys "often +uite enlightening)

0ustomer satisfaction surveys "these can often turn into continuous research)

Continuous Research

0ontinuous studies interview the same sample of people, repeatedly. The ma!or types ofcontinuous research are:

"onsumer panels



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0onsumer panels are formed by recruiting large numbers of households who provideinformation on their buying over time. 8esearch agency &0 5ielsen has one of the largestconsumer panels in the world, continuously interviewing 9;,orecasting future demand for eisting products &ssessing the potential for new products

(tudy of market trends &nalysis of competitor behaviour and performance &nalysis of market shares

Information about Products

?ikely customer acceptance "or re!ection) of new products 0omparison of eisting products in the market "e.g. price, features, costs, distribution) >orecasting new uses for eisting products Technologies that may threaten eisting products 5ew product development

Information about Pricing in the Market

Estimates and testing of price elasticity &nalysis of revenues, margins and profits 0ustomer perceptions of @!ust or fairA pricing 0ompetitor pricing strategies

Information about Promotion in the Market



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Effectiveness of advertising Effectiveness of sales force "personal selling) Etent and effectiveness of sales promotional activities 0ompetitor promotional strategies

Information about Distribution in the Market

2se and effectiveness of distribution channels *pportunities to sell direct 0ost of transporting and warehousing products ?evel and +uality of aftersales service

S a e s f o r e c a s t i n g

Introduction

(ales forecasting is a difficult area of management. Most managers believe they are good atforecasting. 'owever, forecasts made usually turn out to be wrongB Marketers argue about

whether sales forecasting is a science or an art. The short answer is that it is a bit of both.

Reasons for undertaking saes forecasts

%usinesses are forced to look well ahead in order to plan their investments, launch newproducts, decide when to close or withdraw products and so on. The sales forecasting processis a critical one for most businesses. 3ey decisions that are derived from a sales forecastinclude:

Employment levels re+uired /romotional mi Investment in production capacity

Types of forecasting

There are two ma!or types of forecasting, which can be broadly described asmacroand micro:

Macro forecastingis concerned with forecasting markets in total. This is about determining theeisting level of Market #emand and considering what will happen to market demand in thefuture.

Micro forecastingis concerned with detailed unit sales forecasts. This is about determining aproductCs market share in a particular industry and considering what will happen to thatmarket share in the future.

The selection of which type of forecasting to use depends on several factors:

"9) The degree of accuracy re!uiredD if the decisions that are to be made on the basis of thesales forecast have high risks attached to them, then it stands to reason that the forecastshould be prepared as accurately as possible. 'owever, this involves more cost

") The aaiabiity of data and information in some markets there is a wealth of availablesales information "e.g. clothing retail, food retailing, holidays) in others it is hard to findreliable, uptodate information



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"F) The time hori#on that the saes forecast is intended to coer. >or eample, are weforecasting net weeksC sales, or are we trying to forecast what will happen to the overall sieof the market in the net five years6

"G) The position of the products in its ife cyce$ >or eample, for products at the@introductoryA stage of the product life cycle, less sales data and information may be available

than for products at the @maturityA stage when time series can be a useful forecasting method.

Creating the Saes %orecast for a Product

The first stage in creating the sales forecast is to estimate Market Demand$

#efinition:Market Demand for a product is the total !olume that would *e *ought *y a definedcustomer group+ in a defined geographical area+ in a defined time period+ in a gi!enmarketing en!ironment, %his is sometimes referred to as the Market Demand "ur!e,

>or eample, consider the 23 *verseas Mass Market /ackage 'oliday Industry. -hat is Market#emand6

2sing the definition above, market demand can be defined as:

Defined Customer &roup'0ustomers -ho %uy an &irInclusive /ackage 'olidayDefined &eographica Area'0ustomers in the 23Defined Time Period: & calendar yearDefined Marketing (nironment'(trong consumer spending in the 23 but overseas holidaysaffected by concerns over international terrorism

8ecent data for the 23 *verseas Mass Market /ackage 'oliday market suggests that marketdemand can be calculated as follows:

)umber of Customers in the *+'9H.; million per calendar yearAerage Seing Price per ,oiday'G;

Documents

Market Research & Sales Forecasting