Marketing Analysis

Question 1

What are the main ways to forecast sales?

Answer 1

Quantitative methods:

Time series analysis
- extrapolation
- moving averages

Qualitative methods

• sales force composite
• Delphi method
• jury of experts

Question 2

describe extrapolation

Answer 2

plot actual past sales figures on a graph and then extrapolate the line into the future along the trends of the past data

Question 3

problem with extrapolation

Answer 3

assumes sales patterns are stable and will remain so in the future but this is not always true

Question 4

describe moving averages

Answer 4

it allows for the identification of underlying factors influencing future sales:

trend
seasonal fluctuations
cyclical fluctuations
random fluctuations

you need to focus on trend and seasonal fluctuations

Question 5

pro of sales force composite

Answer 5

cheap and quick to administer (all internal resources); in direct contact with clients so know their overall purchasing habits and regular variations so can provide reasonable predictions of sales

Question 6

limitation of sales force composite

Answer 6

• sales reps may not be aware of macroeconomic developments or rivals’ actions, which can impact sales significantly
• customers (retail businesses) may overestimate the number of products they hope to buy in the future in hopes of gaining more favourable arrangement w supplier

Question 7

pro of Delphi method

Answer 7

• tested and proven to be more accurate than an unstructured group of experts giving opinions and forecasts
• Since the answers are all anonymous, panelists will feel more comfortable providing their honest answers so opinions more reliable

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Question 8

cons of Delphi method

Answer 8

• slow: if you need to find the solution to a problem or come to a decision quickly, Delphi method is time consuming as it consists of several rounds of distributing, collecting and reviewing questionnaires.

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Question 9

pros of jury of experts method

Answer 9

• quicker and cheaper than Delphi method

Question 10

cons of jury of experts method

Answer 10

• lack external perspective of market conditions and consumer tastes that the Delphi method provides

Question 11

how could sales forecasts help marketing?

Answer 11

if growth is low, could

• reduce prices
• increase promotion
• extend channels of distribution
• NPD
• undertake market development in countries with more positive sales forecasts
• ifsales expected to stagnate might consider diversification

Question 12

how could sales forecasts help HR?

Answer 12

workforce planning!

• make plans for flexible employment contracts if demand is seasonal
• plan redundancies or reduce recruitment if sales expected to fall; change the number and types of employees recruited depending on forecast sales for different products

Question 13

how could sales forecasts help operations?

Answer 13

• if sales forecasts low, reduce risk of excess capacity by rationalisation
• keep inventory levels low
• may want outsourcing for seasona products to vary contracts
• make production more flexible (staff and machinery) to switch to other products during off season periods

Question 14

how could sales forecasts help finance?

Answer 14

• seek short-term financing if net cash flows become negative in off-season periods
• reduce cash outflows where possible during periods of expected low sales
• seek long term finance to develop new products to sell during off-season periods or to replace ones not selling very well

Question 15

need for sales forecasts

Answer 15

needed to help the business plan for future sales, by making different departmental decisions

Question 16

2 specific features of moving average forecasting that are helpful

Answer 16

1. the ASV - plan for quarters with particularly high or low demand
2. the extrapolated trend forecast - plan for general increase or decrease in demand

Question 17

pros of moving average method

Answer 17

1. identifies average seasonal variations so allows more accurate forecasts than simple extrapolation- better functional planning
2. objective, quantitative method based on past data - more likely to be accurate than value judgements from qualitative methods which may be biased

GIVE EXAMPLE OF FUNCTIONAL PLANNING FOR SEASONAL DEMAND E.G. OPERATIONS

Question 18

cons of moving average method

Answer 18

1. no qualitative factors - insight and experience of senior managers important as they may be able to predict changes more accurately and to greater detail than mere numbers; better for longer term forecasts
2. based on past data but market conditions may change unpredictably, so forecasts less reliable especially more long term ones

Question 19

eval for moving averages

Answer 19

1. more external and internal info including qualitative data needs to be considered before making decisions
2. past trend may not extend into future - monitor market to id structural changes in demand
3. forecasting not useful if mgmt doesn’t have skills to interpret the reasons for the trend and make effective decisions
4. more useful for ST forecasts when economic and market conditions relatively stable and more certain
5. if biz is seasonal willl be particularly important to manage cash flow and ensure efficient use of resources
6. may want to introduce an element of probability for the forecast

Question 20

what are the 3 main factors affecting the success of a new product?

Answer 20

1. it has desirable features meeting customer needs
2. has a USP and is unique
3. is marketed effectively to create awareness

Question 21

NPD process

Answer 21

1. idea generation
2. idea screening -assess technical feasibility to produce and market
3. business impact analysis - cost, available resources, existing product portfolio consistency, patents
4. product testing
5. test marketing
6. commercialisation

Question 22

evaluate the use of R&D

Answer 22

SEE DOC

Question 23

impact of PED on pricing decisions

Answer 23

• price discrimination - earn higher total revenue than by charging singular price
• wage increase decisions - if product has price inelastic demand then can increase wages and pass on as higher prices without losing sig sales, increasing revenue

Question 24

impact of YED on business decisions

Answer 24

Booms:
-switch to producing luxury goods with high YED
- new product ranges should be high YED

Recession:
- switch to inferior goods
- existing producers of inferior goods increase output and possibly capacity
- new product launches - marketed as LOW PRICED AND AFFORDABLE GOODS not luxury

REMEMBER: output, employment and stocks

***CHECK DOCUMENT

Question 25

promotional elasticity of demand

Answer 25

% change in quantity demanded / % change in promo spending

Question 26

interpret YED

Answer 26

positive - normal
negative - inferior

less than one - inelastic
greater than one - elastic
positive and between 0 and 1 = normal necessity
positive and greater than 1 = normal luxury

Question 27

impact of PrED on decisions

Answer 27

1. only worthwhile to spend on promo with high PrED

BUT: the value of PrED depends on the effectiveness of promo and how well it was targeted - so it doesn’t necessarily mean ALL promo should be stopped

THIS QUALITATIVE FACTOR IS KEY

Question 28

limitations of elasticity for business decisions

Answer 28

1. assumes ceteris paribus when other factors could have influenced demand instead of price, promo or income like rivals actions
2. only an estimate and may be unreliable - quality of research, how outdated? past can’t predict future
3. ignores other important factors for decisions - rivals, financial resources, skills (e.g. if rivals not promo then you don’t need to, even if there is boom you may not have enough finance to expand production)