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

Market Potential and Sales Forecasting

Chapter 06


Forecasts versus potential

Forecasts versus Potential


Five major uses of potential estimates

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

Deriving Potential Estimates


Useful sources for 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

New or Growing Product Potential

  • Relative Advantage

  • Compatibility

  • Risk


Methods of estimating market and sales potential

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

Market Potential: Electric Coil


Uses of sales forecasts

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

Scenario-Based Forecasts


Judgment based forecasting methods

Judgment-based Forecasting Methods

  • Naïve extrapolation

  • Sales force composite

  • Jury of expert opinion

  • Delphi method

  • Electronic Markets


Summary of forecasting methods

Summary of Forecasting Methods


Graphical eyeball forecasting

Graphical Eyeball Forecasting


Customer based methods

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

Time-Series Forecasting Methods

  • Moving Averages

  • Exponential Smoothing

  • Regression Analysis


Potential customers by industry and size

Potential Customers by Industry and Size


Sample data

Sample Data


Times series extrapolation

Times-Series Extrapolation


Time series regression example

Time-Series Regression Example


Trial over time for a new product

Trial over Time for a New Product


Model based methods

Model-Based Methods

  • Regression analysis

  • Leading indicators

  • Econometric models


Forecasting method usage

Forecasting Method Usage


Use of new product forecasting techniques by all responding firms

Use of New-Product Forecasting Techniques by All Responding Firms


Developing regression models

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 Sales Data (monthly)


Cereal data

Cereal Data


Cereal data correlation matrix

Cereal Data Correlation Matrix*


Regression results cereal data

Regression Results: Cereal Data*


Format for reporting a regression model based forecast

Format for Reporting a Regression Model Based Forecast


The impact of uncertain predictors on forecasting

The Impact of Uncertain Predictors on Forecasting


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