Analysis for Marketing Planning

Market Sensing:
Measuring Marketing Opportunities
Industry Analysis
What is Market Sensing?
 Open-minded inquiry about market,
competitors, and customers
 Disseminating the information
 Making sense about the information
 Using the information to make strategic
decisions
 Evaluating outcomes
Measuring Marketing Opportunities
 Potentials
 Market potential

 Area potential

 Sales potential
Comparing Potential to Actual

Market Potential
Primary (Basic)
Demand Gap
Market Demand
Selective (Company)
Demand Gap
Company Demand
Why Estimate Potentials?
 To evaluate market opportunities, i.e.,
entry/exit decisions
 To make resource-level decisions
 To make location, salesforce, and
advertising decisions
 To set objectives and evaluate performance
 To help with developing forecasts
How to Estimate Potentials
 Often relies on:
 Assumptions.
 Published data (industry publications,
gov’t sources).
 Variables that correlate closely to market
potential.
Market Potential
 MP=N x P x Q
 MP=market potential
 N=number of possible buyers
 P=average selling price
 Q=average number purchased by each
buyer
Example: What’s the market
potential for CD’s?
Assumptions:
Everyone in U.S. > 14 years buys, on
average, 4 CD’s per year at ave. price of
$14/CD
Area Potential
General Sales and Marketing Management
buying power index:

Area potential = 0.2 x (% of area population)

+ 0.3 x (% of area retail
sales) + 0.5 x (% of area
disposable income)
Sales Potential
 Market potential x potential market share
Demand: Forecasts
 To answer “what-if” questions
 To help set budgets
 To provide a basis for a monitoring system
 To aid in production planning
 To help financial analysts value a company
Planning Assumptions
 Forecasts are based on assumptions about:
 customer behavior
 past and planned product strategies
 competitor actions
 the environment

 Forecast a range of possible outcomes

Subjective or Judgment-Based
Forecasting Methods
 Naïve extrapolation

 Sales force composite

 Jury of expert (executive) opinion

Customer-Based Forecasting
Methods
 Market surveys

 Market tests
 Sales Extrapolation Forecasting
Methods
Moving Average
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 1st Qtr
2000 2000 2000 2000 2001

$500K $600K $700K $600K $633.3K

Average =
$600K Average =
$633.3K Average =
$644.4K
 Percent Rate of Change
1st Qtr 1st Qtr
1998 1999

$100K $125K

To predict sales for 1st quarter 2000:

% change=25%
Sales = $125K + ($125K x .25)
= $125K + $31.25K
= $156.25K
Regression

Sales = b0 + b1(time)
(base + trend)

Sales = b0 + b1(advertising) + b3(price) +

b4(competitors’ prices) + b5(competitors’
advertising) + b6(disposable income)
 Leading Indicators
Estimating Market Share
 Market share index =
product awareness x (70%)
product attractiveness x (65%)
intention to buy x (60%)
product availability x (60%)
product purchase (50%)
= 8%
Market Development Index
 What’s the potential for the market to
develop?

MDI= current market demand X 100

maximum market potential
Interpreting MDI
 MDI < 33
 Considerable market growth potential.
 Can grow market with high prices and
basic benefits.
 MDI 33-67
 Growth is possible, but need to offer
more product variations and lower prices;
expanded distribution.
 MDI>67
 Still room for market growth, but more
difficult.
 Need very customer-focused solutions.
Industry Analysis
 Why is industry analysis an essential
component of marketing planning?
Market Attractiveness
 Size, growth, & competitive intensity of a
market

 Is the industry sufficiently attractive to

warrant investment in it?
What are the Bases for Industry
Analysis?
 Aggregate market factors

 Competitive factors

 Environmental factors
Five Forces Model
New Entrants

Threat of new entrants

Industry
Competitors
Bargaining Bargaining
Suppliers power of power of
Buyers
suppliers buyers
Intensity of
Rivalry

Threat of substitutes

Substitutes
Attractiveness to Entrants
High Low

Market Factors

Size Large Small

Growth High Slow
Stage in life cycle Early Late
Cyclicity Low High
Seasonality Low High
Market spending Low High
Profits High Low
Financial ratios High Low

Competitive Factors

Concentration Low High

Power of Buyers Low High
Power of Suppliers Low High
Rivalry Low High
Pressure from substitutes Low High
Capacity utilization High Low
Threat of entry Low High