Marketing Analysis Flashcards
What are the main ways to forecast sales?
Quantitative methods:
Time series analysis
- extrapolation
- moving averages
Qualitative methods
- sales force composite
- Delphi method
- jury of experts
describe extrapolation
plot actual past sales figures on a graph and then extrapolate the line into the future along the trends of the past data
problem with extrapolation
assumes sales patterns are stable and will remain so in the future but this is not always true
describe moving averages
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
pro of sales force composite
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
limitation of sales force composite
- 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
pro of Delphi method
- 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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cons of Delphi method
- 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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pros of jury of experts method
- quicker and cheaper than Delphi method
cons of jury of experts method
- lack external perspective of market conditions and consumer tastes that the Delphi method provides
how could sales forecasts help marketing?
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
how could sales forecasts help HR?
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
how could sales forecasts help operations?
- 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
how could sales forecasts help finance?
- 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
need for sales forecasts
needed to help the business plan for future sales, by making different departmental decisions
2 specific features of moving average forecasting that are helpful
- the ASV - plan for quarters with particularly high or low demand
- the extrapolated trend forecast - plan for general increase or decrease in demand
pros of moving average method
- identifies average seasonal variations so allows more accurate forecasts than simple extrapolation- better functional planning
- 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
cons of moving average method
- 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
- based on past data but market conditions may change unpredictably, so forecasts less reliable especially more long term ones
eval for moving averages
- more external and internal info including qualitative data needs to be considered before making decisions
- past trend may not extend into future - monitor market to id structural changes in demand
- forecasting not useful if mgmt doesn’t have skills to interpret the reasons for the trend and make effective decisions
- more useful for ST forecasts when economic and market conditions relatively stable and more certain
- if biz is seasonal willl be particularly important to manage cash flow and ensure efficient use of resources
- may want to introduce an element of probability for the forecast
what are the 3 main factors affecting the success of a new product?
- it has desirable features meeting customer needs
- has a USP and is unique
- is marketed effectively to create awareness
NPD process
- idea generation
- idea screening -assess technical feasibility to produce and market
- business impact analysis - cost, available resources, existing product portfolio consistency, patents
- product testing
- test marketing
- commercialisation
evaluate the use of R&D
SEE DOC
impact of PED on pricing decisions
- 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
impact of YED on business decisions
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
promotional elasticity of demand
% change in quantity demanded / % change in promo spending
interpret YED
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
impact of PrED on decisions
- 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
limitations of elasticity for business decisions
- assumes ceteris paribus when other factors could have influenced demand instead of price, promo or income like rivals actions
- only an estimate and may be unreliable - quality of research, how outdated? past can’t predict future
- 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)
