Market potential and sales forecasting
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Market Potential and Sales Forecasting. Chapter 06. Forecasts versus Potential. Five major uses of potential estimates. To make entry/exit decisions To make resource level decisions To make location and other resource allocation decisions To set objectives and evaluate performance

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Market Potential and Sales Forecasting

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Market Potential and Sales Forecasting

Chapter 06


Forecasts versus Potential


Five major uses of potential estimates

  • To make entry/exit decisions

  • To make resource level decisions

  • To make location and other resource allocation decisions

  • To set objectives and evaluate performance

  • As an input to forecasts


Deriving Potential Estimates


Useful Sources for Potential Estimates

  • Government Sources

  • Trade Associations

  • Private Companies

  • Financial and Industry Analysts

  • Popular Press

  • The Internet


New or Growing Product Potential

  • Relative Advantage

  • Compatibility

  • Risk


Methods of Estimating Market and Sales Potential

  • Determine who are the potential buyers or users of the product

  • Determine how many are in each potential group of buyers defined by step 1

  • Estimate the purchasing or usage rate


Market Potential: Electric Coil


Uses of Sales Forecasts

  • To answer “what if” questions

  • To help set budgets

  • To provide a basis for a monitoring system

  • To aid in production planning

  • By financial analysts to value a company


Scenario-Based Forecasts


Judgment-based Forecasting Methods

  • Naïve extrapolation

  • Sales force composite

  • Jury of expert opinion

  • Delphi method

  • Electronic Markets


Summary of Forecasting Methods


Graphical Eyeball Forecasting


Customer-Based Methods

  • Market Testing

    • Situations in which potential customers are asked to respond to a product or product concept

  • Market Surveys

    • A form of primary market research in which potential customers are asked to give some indication of their likelihood of purchasing a product


Time-Series Forecasting Methods

  • Moving Averages

  • Exponential Smoothing

  • Regression Analysis


Potential Customers by Industry and Size


Sample Data


Times-Series Extrapolation


Time-Series Regression Example


Trial over Time for a New Product


Model-Based Methods

  • Regression analysis

  • Leading indicators

  • Econometric models


Forecasting Method Usage


Use of New-Product Forecasting Techniques by All Responding Firms


Developing Regression Models

  • Plot sales over time

  • Consider the variables that are relevant to predicting sales

    • Customer status and traits

    • “Our” marketing programs

    • Competitive behavior

    • General environment

  • Collect data

  • Analyze the data


Cereal Sales Data (monthly)


Cereal Data


Cereal Data Correlation Matrix*


Regression Results: Cereal Data*


Format for Reporting a Regression Model Based Forecast


The Impact of Uncertain Predictors on Forecasting


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