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'
    • 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
      • 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
      • 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


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