5

Measuring Market Opportunities:

Forecasting and Market Knowledge
Key Questions Before Making a Forecast.
 Purpose of the forecast?
 What specifically needs to be forecast?
 Importance of the past to the future?
 Method(s) to be used for forecasting?
 What could change the forecast?
 Forecast horizon? Long term ≥ 10 yrs; Medium
Term: up to 5 yrs; Short term: up to 1 year.

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 The Sales Forecast.
 Is based on a specific marketing plan.
 Stated as dollars or units.
 Estimate market and sales potential first.
 Establish marketing goals and broad strategies
before making a sales forecast.
 Typically covers a 1-year period.
 Once made, the forecast becomes a key
controlling factor in all operational planning
throughout the company.

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 Forecasting.
 More than a “Sales” thing. Other organizational functions also
forecasts variables that affect their operations
 Commonly used methods
 Statistical forecasting using high volumes of historical or collected
data
 Extrapolations
 Analogs
 Expert judgment/Delphi method
 Top down
 Bottom up
 Most companies use a combination of these

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 Top Down vs. Bottom Up.
Top Down: Assumption - international and national events
affect the future behaviour of local variables
 Forecast of economic conditions and industry trends.
 Determine the product’s market potential

 Determine its sales potential

 Measure the firm’s current or desired market share

 Forecast sales for the firm

Bottom Up: Assumption - local events affect the future

behaviour of global variables
 Develop customers/salespeople input for future demand
 Combine the estimates to get a total forecast.
 Adjust the forecast by managerial insights, competition, and
general economic trends.

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 Discussion Question

1. Of the two main approaches for

sales forecasting - top-down and
bottom-up - which is better? Why?

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 Forecast is Projecting Evidence.
 Evidence from:
 History

 Field/Market research

 Other organizations

 Alternative future possibilities

 Plans, strategies, and actions for future

 Issues

 Changes

 Etc.

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How does one go from methods to math?

 Chain ratio method (how many total xxx?,

how many fit yy criteria?, how many…?)
 Brand or category indices (e.g., best or
worst regions, cities, months, circumstances,
etc. for the occurrence of event xxx)

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Ideas for new products or new ventures:
How fast will customers adopt?

Laggards
and
Non-adopters

Innovators
Late
Early
majority
Early majori
34%
adopters ty
13.5% 34% 16%
2.5%

Source: Adapted with permission from Marketing, 11/e, Acetate 8-8, by Michael J. Etzel, Bruce J. Walker, and William J. Stanton. The McGraw-Hill
Companies, Inc. © 1997. All rights reserved.
 Discussion Question

4. How fast will the adoption curve

move for a particular innovation?

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 6
Targeting Attractive Market Segments
 Discussion Questions

1. What’s a market?
2. What’s a market segment?

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 Objectives of Market
 Identify a Segmentation
homogeneous segment
that differs from other segments
 Specify criteria that define the

segment
 Determine segment size and

potential

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 Defining Market Segments
Three good ways to do it.
 Who the customers are

 Where they are

 How they behave

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 Segmentation variables.
Geographic: Region, country, population
density, climate…
Demographic: Age, gender, income,
occupation, What else???…

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 Segmentation variables.
Psychographics: personality, lifestyles, values,
attitudes…
Behavioral: benefits sought, usage rate, brand
loyalty, end use, readiness to buy, decision
maker(s)…
(George Day, 1980) Top-down approach: start
with the total population and divide it into
segments. Bottom-up approach: start with a
single customer and build on that profile
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 Which Segments to Target? Constructing a
Market Attractiveness/Competitive-Position
Matrix
1. Choose criteria to measure market
attractiveness and competitive

2. Weigh market attractiveness and competitive position

factors to reflect their relative importance.

3. Assess the current position of each potential target

market on each factor.

4. Project the future position of each market based on expected

environmental, customer, and competitive trends

5. Evaluate implications of possible future changes for business

strategies and resources requirements.
 A Useful Tool for Assessing Market
Segments: Segment Rating Chart
WEIGHT RATING (0-10) TOTAL

Market attractiveness factors

Customer needs and behavior .5 10 5.0
Segment size and growth rate .3 7 2.1
Macro trends .2 8 1.6
Total: Market attractiveness 1.0 8.7
Competitive position factors
Opportunity for competitive .6 7 4.2
advantage
Capabilities and resources .2 5 1.0
Industry attractiveness .2 7 1.4
Total: Competitive position 1.0 6.6
 Implications of Alternative Positions Within the
Market-Attractiveness/Competitive-Position
Matrix
Competitive Position
Weak Medium Strong
Build selectively: Desirable Potential Target Desirable Potential Target
• Spec. in limited strengths Invest to build: Protect position:
• Seek to overcome weak. • Challenge for leadership • Invest to grow at max.
High • Withdraw if indications of • Build selectively on digestible rate
Market Attractiveness

sustainable growth are strengths • Concentrate on

lacking • Reinforce vulnerable areas maintaining strength
Limited expansion or Desirable Potential Target
Manage for earnings:
harvest:
• Protect existing strengths Build selectively:
Med. • Look for ways to • Emphasize profitability by
• Invest to improve position
expand w/out high risk; increasing productivity
only in areas where risk is
otherwise min. invest. • Build up ability to counter
low
and focus operations competition
Divest: Manage for earnings: Protect and refocus:
• Sell when possible to • Protect position • Defend strengths
Low maximize cash value • Minimize investment • Seek ways to increase
• Meantime, cut fixed costs & current earnings without
avoid further investment speeding market’s
decline
Sources: Adapted from George S. Day, Analysis for Strategic Market Decisions (St. Paul: West, 1986), p. 204; D. F. Abell and J. S. Hammond, Strategic Market Planning Problems
and Analytical Approaches (Englewood Cliffs, NJ: Prentice Hall, 1979); and S. J. Robinson, R. E. Hitchens, and D. P. Wade, “The Directional Policy Matrix: Tool for Strategic
Planning,” Long Range Planning 11 (1978), pp. 8-15.
 7
Differentiation and Positioning
 What is Positioning?
A couple of definitions
 Creating distinct and valued physical and

perceptual differences between one’s

product and its competitors, as perceived
by the target customer.
 The act of designing the firm’s market

offering so that it occupies a distinct and

valued place in the minds of its target
customers.

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 Other Positioning Strategies
 Re-positioning: changing the identity of a
product, relative to the identity of competing
products, in the collective minds of the target
market.
 De-positioning: attempting to change the
identity of competing products, relative to the
identity of your own product, in the collective
minds of the target market.

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 Positioning Concepts
three types:
 Functional positions
 Solve problems

 Provide benefits to customers

 Get favorable perception by investors and lenders

 Symbolic positions
 Self-image enhancement

 Ego identification

 Belongingness and social meaningfulness

 Affective fulfillment

 Experiential positions
 Provide sensory stimulation

 Provide cognitive stimulation

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Physical vs. Perceptual Positioning Analysis
Exhibit 7.3

Physical positioning Perceptual positioning

• Technical orientation
• Physical characteristics
• Objective measures
• Data readily available
• Physical brand properties
• Large number of dimensions
• Consumer orientation
• Perceptual attributes
• Perceptual measures
• Need for marketing research
• Perceptual brand positions
and positioning intensities
• Limited number of dimensions

• Represents impact of product • Represents impact of product

specs and price specs and communication
• Direct R&D implications • R&D implications need to be
interpreted

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 Product Mix Strategies
Market penetration versus market skimming

Premium Penetra- Super

High
Goods tion Bargain
Quality

Over- Average
Medium Bargain
Pricing Quality

Hit and Shoddy Cheap

Low
Run Goods Goods

High Medium Low

Price

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 Generic Competitive Strategies
Exhibit 7.1

Competitive Advantage

Lower Cost Differentiation

Cost
Differentiation
Broad Target Leadership
Strategy
Strategy
Competitive
Scope Focus
Narrow Focus Strategy
Target Strategy (Differentiation
Based)

Source: Adapted from Michael Porter, Competitive Advantage,New York: The Free Press, 1985, p. 12.
Steps in the Positioning Process
Exhibit 7.4 (1 of 2)

1. Identify a relevant set of competitive products serving a

target market.

2. Identify the set of determinant attributes that define the “product

space” in which positions of current offerings are located.

3. Collect information from a sample of customers and

potential customers about perceptions of each product on the
determinant attributes.

4. Determine product’s current location (positioning) in the product

space and intensity thereof.

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Steps in the Positioning Process
Exhibit 7.4 (2 of 2)

5. Determine customers’ most preferred combination of

determinant attributes.

6. Examine the fit between preferences of market segments and

current position of product (market positioning).

7. Write positioning statement or value proposition to guide

development and implementation of marketing strategy.

8. Position

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 Some Key Questions Concerning
Positioning Decisions
 For whom are they written?
 In what sort of language?

 Should they focus on features or

benefits?
 How many differentiating attributes

should anchor them?

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 8
Marketing Strategies for
New Market Entries
Marketing Strategy: Introduction Stage.
Most important attributes at this stage are: Price & Promotion

Price
High Low

Preemptive
High-Profile
High Penetration
Strategy
Promotion

Strategy

Selective
Low Low-Profile
Penetration
Strategy
Strategy

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Marketing Strategy: Introduction Stage .
1.High-Profile Strategy (High price-High Promotion)
When? - High control over offering
- Low fear of competition

2. Selective Penetration Strategy (High Price-Low Promotion)

When? - High profitability
- High fear of competition

3. Preemptive Penetration Strategy (Low Price-High Promotion)

When? - Strongly felt buyer need
- Easy competitive entry

4. Low-Profile Strategy (Low Price-Low Promotion)

When? - Current Production constraints
- Large potential market

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 How do opportunities evolve
over time?
Product category sales
(real dollars)

Life cycle
extension

Profit/unit
Sales
Profit per unit

Introduction
(real dollars)

Maturity Decline or
extension
Competitive
Growth turbulence
Time (years)
Source: Reprinted with permission from p. 60 of Analysis for Strategic Marketing Decisions, by George Day. Copyright © 1986 by West Publishing
Company. All rights reserved.
Categories of New Products Defined According to
Their Degree of Newness to the Company and
Customers in the Target Market (Exhibit 8.4.)

High
20%
Newness to the company

10%
New product New-to-the
lines world products

Additions to
26% 26% existing product
Revisions/ lines
improvements to
existing products

11% 7% Repositionings
Cost
Low reductions
Low High
Newness to the market
Source: New Products Management for the 1980s (New York: Booz, Allen & Hamilton, 1982).
Business Analysis for New Product.
Product’s
Product’s
relationship
relationshiptoto
existing
existingline
line

Development
Development
Costs
Costs

Available
Available
Personnel
Personneland and
facilities
facilities

Competition
Competitionand
and
Market
Market
acceptance
acceptance
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 Discussion Question

1.Is it better to be a market pioneer,

or a follower?

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 Some Advice for Would-Be Pioneers
 Being a pioneer without the basis for
sustainable competitive advantage is a trap!

 First mover advantage is trumped by

pioneers who are better. Best beats first.
Concentrate on being best.

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 Discussion Question

2. When, and for whom, does it

make sense to pursue a pioneer
strategy?

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 Discussion Question

3. When, and for whom, does it

make sense to pursue a follower
strategy?

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 9
Strategies for Growth Markets