Chapter 5

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• Top-down approach
• A central person takes responsibility for
forecasting and prepares an overall forecast
• Bottom-up approach
• Common in decentralized firms
• Each part of the firm prepares its own sales
forecast

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• Advantages
• Useful in established firms for established
products
• Results in a more accurate forecast
• Limitations
• Assumes the future will look very like the past
• When product or market characteristics change:
• Statistical models used without adequate judgment
may not keep pace
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• Advantage
• Based on what people actually do
• Limitation
• Not possible for new-to-the-world products

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• Advantage
• Methods can be done with various kinds of
respondents and increasingly done online

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• Limitations
• What people say is not always what they do
• People may not be knowledgeable when asked
their opinion
• What people imagine about a product concept in
a survey:
• May not be what is actually delivered once the
product is launched

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• Advantages
• Used for new product forecasting where:
• Neither statistical methods nor observations are
possible
• Useful for new-to-the-world high-technology
products

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• Limitations
• New product and its pricing are never exactly like
that to which the analogy is drawn
• Market and competitive conditions may vary from
when the analogous product was launched

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• Advantage
• Is quite accurate when there is sufficient
forecasting experience in known market
• Limitation
• Difficult to defend against evidence based
methods

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• Done:
• Under controlled experimental conditions
• In live test markets with real advertising and
promotion and distribution in stores
• Limitations of test markets
• Expensive to conduct
• Competitors can engage in marketing tactics to
mislead the company

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• Chain ratios and indices
• Market potential is estimated and multiplied by
fractional factors
• Predict the portion of the overall market potential
that one firm or product can expect to obtain

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• Explains the adoption of an innovative
product or service over time among a group
of potential buyers
• Useful to managers in predicting the likely
adoption rate for:
• New and innovative goods or services

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• Attitudinal changes experienced by
individuals from:
• The time they first hear about a new product, until
they adopt it

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• Speed of the process depends on:
• Risk
• Relative advantage
• Relative simplicity
• Compatibility with previously adopted ideas and
behavior
• Extent to which its trial can be accomplished on a
small-scale basis
• Ease with which the central idea of the new
product can be communicated
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• Innovators: Venturesome (mạo hiểm, liều
lĩnh) than later adopters
• Receptive to new ideas and have high incomes
• Reduces the risk of a loss arising from an early adoption
• Early adopters: Opinion leaders
• Serve as vital links to members of the early
majority group
• Participate more in community organizations
than do later adopters
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• Early majority: Display less leadership than
early adopters
• Active in community affairs
• Do not like to take unnecessary risks
• Want to be sure that a new product will prove
successful before they adopt it

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• Late majority: Adopt a new product because
they are forced to do so for either economic
or social reasons
• Laggards: Participate less in community
matters than members of the other groups
and stubbornly resist change

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• Psychological biases
• Common sources of error
• Forecasters are subject to anchoring bias
• Capacity constraints are sometimes
misinterpreted as forecasts
• Incentive pay
• Unstated but implicit assumptions can overstate a
well-intentioned forecast

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• Keys to good forecasting
• Make explicit the assumptions on which the
forecast is based
• Use multiple methods

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• Four commonly used market knowledge
systems
• Internal records systems
• Marketing databases
• Competitive intelligence systems
• Systems to organize client contact

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• Intended to address carefully defined
marketing problems or opportunities
• Questions to be asked by a critical user of
marketing research
• What are the research objectives? Will the data to
be collected meet them?

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 • Are the data sources appropriate? Is secondary
data used? Qualitative or quantitative?
• Is the research designed well?
• Are the planned analyses appropriate

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