Chapter 8: Analysing Markets and Marketing
Part 1 of Chapter 8
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- Analysing Markets and Marketing
- Qualitative Forecasting
- Delphi / Oracle Technique
- asks for individual experts views, collates them to an overall agreement, allowing a more accurate prediction of future sales
- Brainstorming
- involves all of the individuals concerned with product or service to come together to predict future sales
- Individual Hunch
- particular manager will be held responsible for the product/ service being considered
- Limitations of qualitative forecasting
- experts may be knowledgeable, but unlikely that they will understand all aspects of the market
- ignoring statistical info may leave a manager open to criticism
- easier to persuade managers if your forecast is based on scientific methods
- many trends & relationships are broadly consistent over time so quantitative is usually more accurate
- Reasons for qualitative forecasting
- when character of individuals is important
- when factors influencing sales are not easily quantifiable
- when trends have changed, it would be unwise to predict on basis of past statistics
- no clear statistical indication of future sales
- in case of new product or business, no previous information would be had, so would need to ask for opinion
- attempts to overcome limitations of quantitative forecasting by introducing human understanding methods of prediction based on personal opinion, often described as 'hunches'
- Delphi / Oracle Technique
- Quantitative Forecasting
- Limitations of quantitative forecasting
- past trends do not always continue into the future
- correlation changes over time
- external influences can vary over time
- corporate objectives may be amended, so sales targets become more or less important
- internal policies or actions may change
- market research used may lack reliability
- forecasts become more difficult the further they are projected into the future
- quantitative techniques ignore specialist understanding of market, staff possess
- relies on the assumption that the past normally provides an accurate prediction of the future
- methods of prediction based upon statistical information
- Test Marketing
- Benefits of test marketing
- results are relatively accurate predictor of future popularity, as they are based upon actual customer purchases
- useful way of gauging popularity of product without incurring huge costs of a national launch
- Drawback of test marketing
- fewer firms use this, as it can lead to copies being made by competitors
- delay in launching product may reduce profit being made
- 'newness' of product may encourage people to purchase it once
- firms may want test markets to succeed and make special offers which are difficult to maintain in the long term
- introduction of a product to a certain geographical area, in order to assess its likely success or effectiveness go marketing methods being used
- firm will use these results to make statistical forecast of future sales
- firm will assume results will be repeated across the whole country
- Benefits of test marketing
- Analysis of trends / moving averages / extrapolation
- Trend
- underlying pattern of change indicated within a set of numerical data
- Extrapolation
- using previous patterns of numerical data in order to predict valued in the future
- Moving Average
- calculation of the mean of a set of data covering a defined period of time
- Trend
- Correlation
- statistical technique used to establish the strength of a relationship between 2 sets of values
- line of best fit (regression line) used to forecast sales
- negative correlation
- when one increases the other decreases
- perfect correlation
- all points lie on the line of best fit
- positive correlation
- when one variable increases so does the other
- negative correlation
- Limitations of quantitative forecasting
- Qualitative Forecasting
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