Ch 4+Conducting+Marketing+Research+and+Forecasting+Demand

8/13/2019 Ch 4+Conducting+Marketing+Research+and+Forecasting+Demand

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4

CONDUCTING MARKETING RESEARCH AND

FORECASTING DEMAND

DETAILED CHAPTER OUTLINE

In addition to monitoring a changing marketing environment,

marketers also need to develop specific knowledge about

their particular markets. Good marketers want information to

help them interpret past performance as well as plan futureactivities. Marketers need timely, accurate, and actionable

information on consumers, competition, and their brands.

MARKETING RESEARCH SYSTEM

Marketing managers often commission formal marketing

studies of specific problems and opportunities.

A) They may request a(n):

1) Market survey.

2) Product-preference test.

3) a!es forecast "y re#$on.

%) Advert$s$n# eva!uat$on.


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&) 't $s the o" of the market$n# researcher to produce $ns$#ht $nto

the customers att$tudes and "uy$n# "ehav$or.

*) +e def$ne marketing research as the systemat$c des$#n,

co!!ect$on, ana!ys$s, and report$n# of data and f$nd$n#s re!evant to a

spec$f$c market$n# s$tuat$on fac$n# the company.

) Most !ar#e compan$es have market$n# research departments.

) At sma!!er compan$es, market$n# research $s often carr$ed out

"y everyone $n the company.

/) *ompan$es norma!!y "ud#et market$n# research at one to t0o

percent of company sa!es.

) Market$n# research f$rms fa!! $nto three cate#or$es:

1) Syndicated-service research firms.

2) Custom marketing research firms.

3) Specialty-line marketing research firms.

) ma!! compan$es can h$re the serv$ces of a market$n# research

f$rm or conduct research $n creat$ve and afforda"!e 0ays, such as:


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1) Engaging students or professors to design and carry out

projects.

2) Using the Internet.

3) Checking out rivals.

') Most compan$es use a com"$nat$on of market$n# research

resources to study $ndustr$es, compet$tors, aud$ences, and channe!

strate#$es.

eview !ey "efinitions here# marketing research, syndicated-

service research firms, custom marketing research firms, and

specialty-line marketing research firms

THE MARKETING RESEARCH PROCESS

$ffective marketing research involves si% steps.

&igure '.( shows these si% steps.

Step 1: Define the Probe!" the De#i$ion Atern%ti&e$" %n' the

Re$e%r#h Ob(e#ti&e$

Marketing management must be careful not to define the

problem too broadly or too narrowly for the marketing

researcher.

A) ome research $s ep!oratory4$ts #oa! $s to shed !$#ht on the

rea! nature of the pro"!em and to su##est poss$"!e so!ut$ons or

ne0 $deas.


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&) ome research $s descr$pt$ve4$t seeks to ascerta$n certa$n

ma#n$tudes.

*) ome research $s causa!4$ts purpose $s to test a cause-and-

effect re!at$onsh$p.

Step ): De&eop the Re$e%r#h P%n

)he second stage of the marketing research calls for

developing the most efficient plan for gathering the needed

information.

A) The market$n# mana#er needs to kno0 the cost of the research

p!an "efore approv$n# $t.

&) es$#n$n# a research p!an ca!!s for dec$s$ons on the:

1) ata sources.

2) 5esearch approaches.

3) 5esearch $nstruments.

%) amp!$n# p!an.

6) *ontact methods.


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D%t% So*r#e$

)he research can gather secondary data, primary data, or

both.

A) Secondary data are data that 0ere co!!ected for another

purpose and a!ready e$st.

&) *rimary data are data fresh!y #athered for a spec$f$c purpose

or for a spec$f$c research proect.

*) 5esearchers usua!!y start out the$r $nvest$#at$on "y eam$n$n#

secondary data.

) econdary data prov$des a start$n# po$nt and offers the

advanta#es of !o0 cost and ready ava$!a"$!$ty.

178 *hapter %: *onduct$n# Market$n# 5esearch and /orecast$n#

emand

) Most market$n# research proects $nvo!ve some pr$mary data

co!!ect$on.

eview !ey "efinitions here# secondary data and primary

data

Re$e%r#h Appro%#he$

*rimary data can be collected in five main ways# through

observation, focus groups, surveys, behavioral data, and

e%periments.


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Ob$er&%tion% Re$e%r#h

A) /resh data can "e #athered "y o"serv$n# the re!evant actors

and sett$n#s.

+o#*$ Gro*p Re$e%r#h

A) A focus group $s a #ather$n# of s$ to ten peop!e 0ho are

carefu!!y se!ected "ased on certa$n demo#raph$c, psycho#raph$c,

or other cons$derat$ons and "rou#ht to#ether to d$scuss var$ous

top$cs of $nterest at !en#th.

&) A profess$ona! research moderator prov$des quest$ons and

pro"es "ased on a d$scuss$on #u$de or a#enda to ensure that the

r$#ht mater$a! #ets covered.

*) Moderators attempt to track do0n potent$a!!y usefu! $ns$#hts as

they try to d$scern the rea! mot$vat$ons of consumers and 0hy they

are say$n# and do$n# certa$n th$n#s.

) The sess$ons are typ$ca!!y recorded.

S*r&e, Re$e%r#h

Companies undertake surveys to learn about people+s

knowledge, beliefs, preferences, and satisfaction, and to

measure these magnitudes in the general population.

-eh%&ior% D%t%


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Customers leave traces of their purchasing behavior in store

scanning data, catalog purchases, and customer databases.

Much can be learned by analying these data.

A) *ustomers actua! purchases ref!ect preferences and often are

more re!$a"!e than statements offered to market$n# researchers.

E.peri!ent% Re$e%r#h

)he most scientifically valid research is e%perimental

research.

A) The purpose of eper$menta! research $s to capture cause-and-

effect re!at$onsh$ps "y e!$m$nat$n# compet$n# ep!anat$ons of the

o"served f$nd$n#s.

&) per$ments ca!! for:

1) e!ect$n# matched #roups of su"ects.

2) u"ect$n# them to d$fferent treatments.

3) *ontro!!$n# etraneous var$a"!es.

%) *heck$n# 0hether o"served response d$fferences are

stat$st$ca!!y s$#n$f$cant.

Re$e%r#h In$tr*!ent$


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Marketing researchers have a choice of three main research

instruments in collecting primary data# uestionnaires,

ualitative measures, and mechanical devices.

/*e$tionn%ire$

uestionnaire consists of a set of uestions presented to

respondents.

A) &ecause of $ts f!e$"$!$ty, the quest$onna$re $s "y far the most

common $nstrument used to co!!ect pr$mary data.

&) 9uest$onna$res need to "e carefu!!y deve!oped, tested, and

de"u##ed "efore "e$n# adm$n$stered.

1) The researcher carefu!!y chooses the quest$ons, 0ord$n#, and

sequence.

2) The form of the quest$on can $nf!uence the response.

3) Market$n# researchers used "oth c!osed-end and open-end

quest$ons.

)able '.( provides e%amples of both types of uestions.

/*%it%ti&e Me%$*re$

Some marketers prefer more ualitative methods for gauging

consumer opinions because consumer actions do not always

match their answers to survey uestions.


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A) /ualitative research techniues are re!at$ve!y unstructured

measurement approaches that perm$t a ran#e of poss$"!e

responses.

&) 9ua!$tat$ve research techn$ques are a creat$ve means of

ascerta$n$n# consumer percept$ons that may other0$se "e d$ff$cu!t

to uncover.

*) &ecause of the freedom afforded "oth researchers $n the$r

pro"es and consumers $n the$r responses, qua!$tat$ve research can

often "e a usefu! f$rst step $n ep!or$n# consumers "rand and

product percept$ons.

) There are a!so dra0"acks to qua!$tat$ve research:

1) The $ndepth $ns$#hts have to "e tempered "y the fact that the

samp!e s$e $s !$m$ted.

2) 9uest$on of $nterpretat$on.

eview !ey "efinitions here# focus groups and ualitative

research techniues

Me#h%ni#% De&i#e$

Mechanical devices are occasionally used in marketing

research.

A) a!vanometers.


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&) Tach$stoscope.

*) Aud$ometers.

S%!pin0 P%n

fter deciding on the research approach and instruments, the

marketing researcher must design a sampling plan. )his calls

for three decisions#

A) Sampling unit# 0ho is to be surveyed1 ef$ne the tar#et

popu!at$on that 0$!! "e samp!ed.

&) Sample sie# 2ow many people should be surveyed1 ;ar#e

samp!es #$ve more re!$a"!e resu!ts than sma!! samp!es.

*) Sampling procedure# 2ow should the respondents be

chosen1 Pro"a"$!$ty samp!$n# a!!o0s the ca!cu!at$on of conf$dence

!$m$ts for samp!$n# error.

)able '.3, part shows the three types of probabilitysampling.

)able '.3, part 4, describes three types of non-probability

samples.

Cont%#t Metho'$

5nce the sampling plan has been determined, the marketing

researcher must decide how the sub6ect should be contacted#

mail, telephone, personal, or online interview.


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M%i /*e$tionn%ire

)he mail uestionnaire is the best way to reach people who

would not give personal interviews or whose responses might

be biased or distorted by the interviewers.

A) Ma$! quest$onna$res requ$re s$mp!e and c!ear!y 0orded

quest$ons.

&) The response rate $s usua!!y !o0 and


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*ersonal interviewing is the most versatile method.

A) The $nterv$e0er can ask more quest$ons and record add$t$ona!

o"servat$ons a"out the respondent.

&) 't $s the most epens$ve method.

*) u"ect to $nterv$e0er "$as or d$stort$on.

) Persona! $nterv$e0$n# takes t0o forms:

1)rranged interviews.

2) Intercept interviews.

eview !ey "efinitions here# arranged and intercept

interviews

Onine Inter&ie

)here is an increase in the use of online methods. )here are

so many ways to use the 78et9 to do research.

A) A company can $nc!ude a quest$onna$re on $ts +e" s$te.

&) P!ace a "anner on some frequent!y v$s$ted s$te such as ahooB


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*) The company can sponsor a chat room or "u!!et$n "oard.

) ost a rea!-t$me pane! or v$rtua! focus #roup.

) ;earn a"out ho0 $nd$v$dua!s 0ho v$s$t $ts s$te "y fo!!o0$n# ho0

they clickstream throu#h the +e" s$te.

/) Cn!$ne product test$n# $s a!so #ro0$n# and prov$d$n# $nformat$on

much faster than trad$t$ona! market$n# research techn$ques used to

deve!op ne0 products.

Step 2: Coe#t the Infor!%tion

)he data collection phase of marketing research is generally

the most e%pensive and the most prone to error.

A) 'n the case of survey, four maor pro"!ems ar$se:

1) ome respondents 0$!! not "e at home and must "e contacted

a#a$n and a#a$n.

2) Cther respondents 0$!! refuse to cooperate.

3) Cthers 0$!! #$ve "$ased or d$shonest ans0ers.

%) ome $nterv$e0ers 0$!! "e "$ased or d$shonest.


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&) ata co!!ect$on methods are rap$d!y $mprov$n# thanks to

computers and te!ecommun$cat$ons.

*) ome research f$rms $nterv$e0 from a centra!$ed !ocat$on and

enter $nformat$on d$rect!y $nto a computer.

2@2 *hapter %: *onduct$n# Market$n# 5esearch and /orecast$n#

emand

Step 3: An%,4e the Infor!%tion

)he ne%t-to-last step in the process is to e%tract findings from

the collected data. )he researcher tabulates the data and

develops freuency distributions.

A) Avera#es and measures of d$spers$on are computed for the

maor var$a"!es.

&) The researcher 0$!! a!so app!y some advanced stat$st$ca!

techn$ques and dec$s$on mode!s $n hope of d$scover$n# add$t$ona!

f$nd$n#s.

Step 5: Pre$ent the +in'in0$

)he researcher should present findings that are relevant to

the ma6or marketing decisions facing management.

Step 6: M%7e the De#i$ion

)he managers who commissioned the research need to weigh

the evidence.

)able '.: summaries the seven characteristics of good

marketing research.


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A) A #ro0$n# num"er of or#an$at$ons are us$n# a market$n#

dec$s$on support system to he!p market$n# man#ers make "etter

dec$s$ons.

&) A marketing decision support system ;M"SS< $s def$ned as a

coord$nated co!!ect$on of data, systems, too!s, and techn$ques 0$th

support$n# soft0are and hard0are, "y 0h$ch, an or#an$at$on

#athers, $nterprets re!evant $nformat$on from "us$ness and

env$ronment, and turns $t $nto a "as$s for market$n# act$on.

*) A c!ass$c eamp!e $s the *A;;P;A> mode! that he!ps

sa!espeop!e determ$ne the num"er of ca!!s to make, per per$od, to

each prospect and current c!$ents.

eview !ey "efinitions here# marketing decision support

system

O&er#o!in0 -%rrier$ to the U$e of M%r7etin0 Re$e%r#h

In spite of the rapid growth of marketing research, many

companies still fail to use it sufficiently or correctly, for

several reasons#

A) A narro0 concept$on of the research.

&) Dneven ca!$"er of researchers.

*) Poor fram$n# of the pro"!em.


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) ;ate and occas$ona!!y erroneous f$nd$n#s.

) Persona!$ty and presentat$ona! d$fferences.

2@ 3 *hapter-"y-*hapter 'nstruct$ona! Mater$a!

MEASURING MARKETING PRODUCTI8ITY

n important task of marketing research is to assess the

efficiency and effectiveness of marketing activities.

A) Marketers, $ncreas$n#!y, are "e$n# he!d accounta"!e for the$r

$nvestments and must "e a"!e to ust$fy market$n# epend$tures to

sen$or mana#ement.

&) Market$n# research can he!p address th$s $ncreased need for

accounta"$!$ty.

*) T0o comp!ementary approaches to measure market$n#

product$v$ty are:

1) Market$n# metr$cs to assess market$n# effects.

2) Market$n# m$ mode!$n# to est$mate causa! re!at$onsh$ps and

ho0 market$n# act$v$t$es affects outcomes.

M%r7etin0 Metri#$

Marketing metrics is a set of measures that help firms to

uantify, compare, and interpret marketing performance.


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A) Market$n# metr$cs can "e used "y "rand mana#ers to des$#n

market$n# pro#rams.

&) Market$n# metr$cs can "e used "y sen$or mana#ers to dec$de

on f$nanc$a! a!!ocat$ons.

*) Many market$n# metr$cs re!ate to customer-!eve! concerns such

as the$r att$tudes and "ehav$or.

) Cthers re!ate to "rand-!eve! concerns such as market share,

re!at$ve pr$ce prem$um, or prof$ta"$!$ty.

)able '.' is a sample marketing metrics .

) /$rms are a!so emp!oy$n# or#an$at$ona! processes and

systems to make sure that the va!ue of a!! of these d$fferent metr$cs

$s ma$m$ed "y the f$rm.

/) A summary set of re!evant $nterna! and eterna! measures can

"e assem"!ed $n a marketing dashboard for synthes$s and

$nterpretat$on.

) As $nput to the market$n# dash"oard, compan$es can prepare

t0o market-"ased scorecards that ref!ect performance and prov$de

poss$"!e ear!y 0arn$n# s$#na!s.


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) A customer-performance scorecard records ho0 0e!! the

company $s do$n# year after year on such customer-"ased

measures.

1) >orms shou!d "e set for each measure.

)able '.= shows such customer-based measures.

') The second measure $s ca!!ed a stakeholder-performance

scorecard.

1) A#a$n, norms shou!d "e set for each measure and mana#ement

shou!d take act$on 0hen performance fa!!s outs$de of these norms.

Me%$*rin0 M%r7etin0 P%n Perfor!%n#e

Marketers today have better marketing metrics for measuring

the performance of marketing plans. )hey can use four tools

to check on plan performance# sales analysis, market-share

analysis, marketing e%pense-to-sales analysis, and financial

analysis.

S%e$ An%,$i$

Sales analysis consists of measuring and evaluating actual

sales in relation to goals. )wo specific tools are used in sales

analysis.

A) Sales-variance analysis measures the re!at$ve contr$"ut$on of

d$fferent factors to a #ap $n sa!es performance.


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&) Microsales analysis !ooks at spec$f$c products, terr$tor$es, and

so forth that fa$!ed to produce epected sa!es.

eview !ey "efinitions here# marketing metrics, marketing

dashboard, customer-performance scorecard, stakeholder-

performance scorecard, sales-variance analysis, and

microsales analysis

M%r7et9Sh%re An%,$i$

Company sales do not reveal how well the company is

performing relative to competitors. &or this purpose,

management needs to track its market share. Market share

can be measured in three ways#

A) 5verall market share $s the companys sa!es epressed as a

percenta#e of tota! market share.

&) Served market share $s $ts sa!es epressed as a percenta#e of

the tota! sa!es to $ts served market.

1) 'ts served market $s a!! the "uyers 0ho are a"!e and 0$!!$n# to

"uy the product.

2) erved market share $s a!0ays !ar#er than overa!! market share.

*) elative market share can "e epressed as market share $n

re!at$on to $ts !ar#est compet$tor.

) *onc!us$ons from market share ana!ys$s are su"ect to certa$nqua!$f$cat$ons:


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1) The assumpt$on that outs$de forces affect a!! compan$es $n the

same 0ay $s often not true.

2) The assumpt$on that a companys performance shou!d "e

ud#ed a#a$nst the avera#e performance of a!! compan$es $s not

a!0ays va!$d.

3) 'f a ne0 f$rm enters the $ndustry, then every e$st$n# f$rms

market share m$#ht fa!!.

%) omet$mes a market-share dec!$ne $s de!$"erate!y en#$neered to

$mprove prof$ts.

6) Market share can f!uctuate for many m$nor reasons.

) A usefu! 0ay to ana!ye market-share movement $s $n terms of

four components:

Cvera!!

Market E *ustomer F *ustomer F *ustomer F Pr$ce

hare penetrat$on !oya!ty se!ect$v$ty se!ect$v$ty

+here:

1) Customer penetration $s the percenta#e of a!! customers 0ho

"uy from the company.


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2) Customer loyalty $s the purchases from the company "y $ts

customers epressed as a percenta#e of the$r tota! purchases from

a!! supp!$ers of the same products.

3) Customer selectivity $s the s$e of the avera#e customer

purchase from the company epressed as a percenta#e of the s$e

of the avera#e customer purchase from an avera#e company.

%) *rice selectivity $s the avera#e pr$ce char#ed "y the company

epressed as a percenta#e of the avera#e pr$ce char#ed "y a!!

compan$es.

M%r7etin0 E.pen$e9to9S%e$ An%,$i$

nnual plan control reuires making sure that the company is

not overspending to achieve its goals.

A) The key rat$o to 0atch $s marketing e%pense-to-sales ratio

&) The per$od-to-per$od f!uctuat$ons $n each rat$o can "e tracked on

a control chart

&igure '.3 shows a control chart.

*) The "ehav$or of success$ve o"servat$ons even 0$th$n the upper

and !o0er contro! !$m$ts shou!d "e 0atched.

) >ote that $n /$#ure %.2 the !eve! of epense-to-sa!es rat$o rose

stead$!y from the n$nth per$od on0ard.


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+in%n#i% An%,$i$

)he e%pense-to-sales ratios should be analyed in an overall

financial framework to determine how and where the

company is making its money. Marketers are increasingly

using financial analysis to find profitable strategies beyond

sales building.

A) Mana#ement uses f$nanc$a! ana!ys$s to $dent$fy factors that

affect the companys rate of return on net worth.

&igure '.: shows the main factors of financial control.

&) The return on net 0orth $s the product of t0o rat$os, the

companys return on assets, and $ts financial leverage.

*) The return on assets $s the product of t0o rat$os, the profit

margin, and the asset turnover

) The market$n# eecut$ve can seek to $mprove performance $n

t0o 0ays:

1) 'ncrease the prof$t mar#$n "y $ncreas$n# sa!es or decreas$n#

costs.

2) 'ncrease the asset turnover "y $ncreas$n# sa!es or reduc$n#

assets that are he!d a#a$nst a #$ven !eve! of sa!es.


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eview !ey "efinitions here# overall market sales, served

market share, relative market share, customer penetration,

customer loyalty, customer selectivity, price selectivity,

marketing e%pense-to-sales ratio, control chart, rate of return

on net worth, return on assets, financial leverage, profit

margin, and asset turnover

Profit%biit, An%,$i$

A) *ompan$es shou!d measure the prof$ta"$!$ty of:

1) Products.

2) Terr$tor$es.

3) *ustomer #roups.

%) e#ments.

6) Trade channe!s.

G) Crder s$es.

&) Th$s $nformat$on can he!p mana#ement determ$ne 0hether any

products or market$n# act$v$t$es shou!d "e epanded, reduced, or

e!$m$nated.

M%r7etin09Profit%biit, An%,$i$


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)able '.> shows the *?@ statement for the lawnmower

e%ample.

Step 1: I'entif,in0 +*n#tion% E.pen$e$

A) Assume that the epenses !$sted $n Ta"!e %.G are $ncurred to

se!! the product, advert$se $t, pack and de!$ver $t, and "$!! and co!!ect

for $t.

&) The f$rst task $s to measure ho0 much of each epense 0as

$ncurred $n each act$v$ty.

)able '.A shows the allocation of the salary e%pense to these

four activities.

Step ): A$$i0nin0 +*n#tion% E.pen$e$ to M%r7etin0 Entitie$

A) The net task $s to measure ho0 much funct$ona! epense 0as

assoc$ated 0$th se!!$n# throu#h each type of channe!.

)able '.B shows the amount of sales made in each channel.

&) Advert$s$n# epense can "e avera#ed across a!! one hundredads.

*) Packa#$n# and de!$very epense $s a!!ocated accord$n# to the

num"er of orders p!aced "y each type of channe!, the same for

"$!!$n#, and co!!ect$on epenses.


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Step 2: Prep%rin0 % Profit %n' Lo$$ St%te!ent for E%#h

M%r7etin0 Entit,

profit-and-loss statement can now be prepared for each

type of channel.

)able '. shows this profit and loss statement per channel.

A) Ta"!e %.7 sho0s that the f$rm $s !os$n# money throu#h the

#arden supp!y stores and $s mak$n# a!most a!! of $ts money from

the department stores.

Deter!inin0 Corre#ti&e A#tion

In general, marketing-profitability analysis indicates the

relative profitability of different channels, products,

territories, or other marketing entities.

Dire#t 8er$*$ +* Co$tin0

@ike all information tools, marketing-profitability analysis canlead or mislead marketing e%ecutives, depending on how well

they understand its methods and limitations.

A) The $ssue of 0hether to a!!ocate fu!! costs or on!y d$rect and

tracea"!e costs $n eva!uat$n# a market$n# ent$tys performance $s a

far more ser$ous ud#menta! e!ement affect$n# prof$ta"$!$ty ana!ys$s.

&) Three types of costs have to "e d$st$n#u$shed:

1) "irect costsDthese are costs that can "e ass$#ned d$rect!y to

the proper market$n# ent$t$es.


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2) )raceable common costsDthese are costs that can "e

ass$#ned on!y $nd$rect!y, "ut on a p!aus$"!e "as$s to the market$n#

ent$t$es.

3) 8on-traceable common costsDthese are common costs

0hose a!!ocat$on to the market$n# ent$t$es $s h$#h!y ar"$trary.

*) >o one d$sputes $nc!ud$n# d$rect costs $n market$n# cost

ana!ys$s.

) There $s a sma!! amount of controversy a"out $nc!ud$n#

tracea"!e common costs.

) The maor controversy concerns 0hether the non-tracea"!e

common costs shou!d "e a!!ocated to the market$n# ent$t$es.

1) uch a!!ocat$on $s ca!!ed the full-cost approach and $t ar#ues

that a!! costs must u!t$mate!y "e $mputed $n order to determ$ne true

prof$ta"$!$ty.

2) Th$s ar#ument confuses the use of account$n# for f$nanc$a!

report$n# 0$th $ts use for mana#er$a! dec$s$on-mak$n#.

/) /u!! cost$n# has three maor 0eaknesses:


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1) The re!at$ve prof$ta"$!$ty of d$fferent market$n# ent$t$es can sh$ft

rad$ca!!y 0hen one ar"$trary 0ay to a!!ocate non-tracea"!e common

costs $s rep!aced "y another.

2) The ar"$trar$ness demora!$es mana#ers, 0ho fee! that the$r

performance $s ud#ed adverse!y.

3) The $nc!us$on of non-tracea"!e common costs cou!d 0eaken

efforts at rea! cost contro!.

) *ompan$es are sho0$n# a #ro0$n# $nterest $n us$n# market$n#-

prof$ta"$!$ty ana!ys$s or $ts "roader vers$on, act$v$ty-"ased cost

account$n# (A&*), to quant$fy the true prof$ta"$!$ty of d$fferent

act$v$t$es.

) The contr$"ut$on of A&* $s to refocus mana#ements attent$on

a0ay from us$n# on!y !a"or or mater$a! standard costs to a!!ocate

fu!! cost, and to0ard captur$n# the actua! costs of support$n#

$nd$v$dua! products, customers, and other ent$t$es.

eview !ey "efinitions here# direct costs, traceable common

costs, non-traceable common costs, and full-cost approach

M%r7etin0 Mi. Mo'ein0

Marketing mi% models analye data from a variety of sources

to understand more precisely the effects of specific marketing

activities.

A) Mu!t$var$ate ana!yses are conducted to sort throu#h ho0 each

market$n# e!ement $nf!uences market$n# outcomes of $nterest suchas "rand sa!es or market share.


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&) The f$nd$n#s from market$n# m$ mode!$n# are used to a!!ocate

or rea!!ocate epend$tures.

*) A!thou#h market$n# m$ mode!$n# he!ps to $so!ate effects, $t $s

!ess effect$ve at assess$n# ho0 d$fferent market$n# e!ements 0ork

$n com"$nat$on.

+ORECASTING AND DEMAND MEASUREMENT

5ne ma6or reason for undertaking marketing research is to

identify market opportunities. 5nce the research is complete,

the company must measure and forecast the sie, growth,

and profit potential of each market opportunity.

A) a!es forecasts are used "y f$nance to ra$se the needed cash

for $nvestment and operat$ons.

&) &y the manufactur$n# department to esta"!$sh capac$ty and

output !eve!s.

*) &y purchas$n# to acqu$re the r$#ht amount of supp!$es.

) &y human resources to h$re the needed num"er of 0orkers.

) a!es forecasts are "ased on est$mates of demand.

Me%$*re$ of M%r7et De!%n'


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Companies can prepare as many as E different types of

demand estimates.

&igure '.' 8inety )ypes of "emand

A) emand can "e measured for s$ d$fferent product !eve!s.

&) /$ve d$fferent space !eve!s.

*) Three d$fferent t$me !eve!s.

) ach demand measure serves a spec$f$c purpose.

) /orecasts a!so depend on 0h$ch type of market $s "e$n#

cons$dered.

/) The s$e of the market h$n#es on the num"er of "uyers 0ho

m$#ht e$st for a part$cu!ar market offer.

) Thepotential market $s the set of consumers 0ho profess a

suff$c$ent !eve! of $nterest $n a market offer.

) The available market $s the set of consumers 0ho have

$nterest, $ncome, and access to a part$cu!ar offer.

') The target market $s the part of the qua!$f$ed ava$!a"!e market

the company dec$des to pursue.


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H) Thepenetrated market $s the set of consumers 0ho are "uy$n#

the companys product.

I) These def$n$t$ons are a usefu! too! for market p!ann$n#.

1) 'f the company $s not sat$sf$ed 0$th $ts current sa!es $t can:

a. Attract a !ar#er percenta#e of "uyers from $ts tar#et market.

". ;o0er the qua!$f$cat$ons of potent$a! "uyers.

c. pand $ts ava$!a"!e market "y open$n# d$str$"ut$on e!se0here or

!o0er $ts pr$ce.

d. 5epos$t$on $tse!f $n the m$nds of $ts customers

eview !ey "efinitions here# potential market, available

market, target market, and penetrated market

A 8o#%b*%r, for De!%n' Me%$*re!ent

)he ma6or concepts in demand measurement are marketdemand and company demand. 0ithin each, we distinguish

among a demand function, a sales forecast, and potential.

M%r7et De!%n'

)he marketer+s first step in evaluating marketing

opportunities is to estimate total market demand.


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A) Market demand for a product $s the tota! vo!ume that 0ou!d "e

"ou#ht "y a def$ned customer #roup, $n a def$ned #eo#raph$ca!

area, $n a def$ned t$me per$od, $n a def$ned market$n# env$ronment,

under a def$ned market$n# pro#ram.

&) Market demand $s not a f$ed num"er, "ut rather a funct$on of

the stated cond$t$ons.

*) /or th$s reason, $t can "e ca!!ed the market demand function.

&igure '.= ;a< shows the underlying conditions of the

dependence of total market demand.

) The hor$onta! a$s sho0s d$fferent poss$"!e !eve!s of $ndustry

market$n# epend$ture $n a #$ven t$me per$od.

) The vert$ca! a$s sho0s the resu!t$n# demand !eve!.

/) The curve represents the est$mated market demand assoc$ated

0$th vary$n# !eve!s of $ndustry market$n# epend$ture.

) ome "ase sa!es (ca!!ed the market minimum) 0ou!d take

p!ace 0$thout any demand-st$mu!at$n# epend$tures.

) $#her !eve!s of $ndustry market$n# epend$tures 0ou!d y$e!d

h$#her !eve!s of demand, f$rst at an $ncreas$n# rate, then at a

decreas$n# rate.


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') Market$n# epend$tures "eyond a certa$n !eve! 0ou!d not

st$mu!ate much further demand, thus su##est$n# an upper !$m$t to

market demand ca!!ed the market potential.

H) The d$stance "et0een the market m$n$mum and the market

potent$a! sho0s the overa!! marketing sensitivity of demand.

I) An e%pansible market $s very much affected $n $ts tota! s$e "y

the !eve! of $ndustry market$n# epend$tures.

;) A non-e%pansible market $s not much affected "y the !eve! of

market$n# epend$tures.

1) Cr#an$at$ons se!!$n# $n an non-epans$"!e market must accept

the markets s$e and d$rect efforts to 0$nn$n# a !ar#er market

share for $ts products.

M) The compar$son of the current !eve! of market demand to the

potent$a! demand !eve! $s ca!!ed the market penetration inde%

1) A !o0 market penetrat$on $nde $nd$cates su"stant$a! #ro0th

potent$a! for the f$rm.

2) A h$#h market penetrat$on $nde su##ests that there 0$!! "e

$ncreased costs $n attract$n# the fe0 rema$n$n# prospects.

3) enera!!y, pr$ce compet$t$on $ncreases and mar#$ns fa!! 0hen

the market penetrat$on $nde $s h$#h.


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>) A company shou!d a!so compare $ts current market share to $ts

potent$a! market share, ca!!ed share penetration inde%

21 1 *hapter-"y-*hapter 'nstruct$ona! Mater$a!

1) A !o0 share penetrat$on $nde $nd$cates that the company can

#reat!y epand $ts share.

2) A f$rm shou!d ca!cu!ate the share penetrat$on $ncreases that

0ou!d occur 0$th $nvestments to see 0h$ch $nvestments 0ou!d

produce the #reatest $mprovement $n share penetrat$on.

C) 't $s $mportant to remem"er that the market demand funct$on $s

not a p$cture of market demand over t$me.

P) 5ather, the curve sho0s a!ternat$ve current forecasts of market

demand assoc$ated 0$th a!ternat$ve poss$"!e !eve!s of $ndustry

market$n# effort $n the current per$od.

eview !ey "efinitions here# market demand, market demand

function, market minimum, market potential, marketing

sensitivity of demand, e%pansible market, non-e%pansible

market, market share, market penetration inde%, and share

penetration inde%

M%r7et +ore#%$t

5nly one level of industry marketing e%penditure will actually

occur. )he market demand corresponding to this level is

called the market forecast.


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M%r7et Potenti%

)he market forecast shows e%pected market demand, not

ma%imum market demand. &or the latter, we have to visualie

the level of market demand resulting from a 7very high9 levelof industry marketing e%penditure.

A) Market potential $s the !$m$t approached "y market demand as

$ndustry market$n# epend$tures approach $nf$n$ty for a #$ven

market$n# env$ronment.

&) The phrase =for a #$ven market env$ronment? $s cruc$a!.

1) *ompan$es cannot do anyth$n# a"out the pos$t$on of the market

demand funct$on "ut each can $nf!uence $ts part$cu!ar !ocat$on on

the funct$on 0hen $t dec$des ho0 much to spend on market$n#.

&igure '.= ;b< Market "emand &unctions

*) *ompan$es $nterested $n market potent$a! have a spec$a!

$nterest $n theproduct penetration percentage that $s the

percenta#e of o0nersh$p or use of a product or serv$ce $n a

popu!at$on.

) *ompan$es assume that the !o0er the product penetrat$on

percenta#e, the h$#her the market potent$a!J assum$n# everyone

0$!! eventua!!y "e $n the market for every product.

Co!p%n, De!%n'


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A) Company demand $s the companys est$mated share of market

demand at a!ternat$ve !eve!s of company market$n# effort $n a

#$ven t$me per$od.

&) The companys share of market demand depends on ho0 $ts

products, pr$ces, commun$cat$ons, serv$ces, and so on are

perce$ved re!at$ve to compet$tors.

*) A!! th$n#s equa!, the companys market share 0ou!d depend on

the s$e and effect$veness of $ts market epend$tures re!at$ve to

compet$tors.

Co!p%n, S%e$ +ore#%$t

A) The company sales forecast $s the epected !eve! of company

sa!es "ased on a chosen market$n# p!an and an assumed

market$n# env$ronment.

&igure '.= shows the company sales on the vertical a%is and

the company marketing effort on the horiontal a%is.

&) The company sa!es forecast does not esta"!$sh a "as$s fordec$d$n# 0hat to spend on market$n#.

*) Cn the contrary, the sa!es forecast $s a resu!t of an assumed

market$n# epend$ture !eve!.

) A sales uota $s the sa!es #oa! set for a product !$ne, companyd$v$s$on, or sa!es representat$ve.


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) A sales budget $s a conservat$ve est$mate of the epected

vo!ume of sa!es and $s used pr$mar$!y for mak$n# current

purchas$n#, product$on, and cash f!o0 dec$s$ons.

/) The sa!es "ud#et $s "ased on the sa!es forecast and $s

#enera!!y set s!$#ht!y !o0er than the sa!es forecast.

eview !ey "efinitions here# market potential, product

penetration percentage, company demand, company salesforecast, sales uota, sales budget

Co!p%n, S%e$ Potenti%

Company sales potential is the sales limit approached by

company demand as the company marketing effort increases

relative to that of competitors.

A) The a"so!ute !$m$t of company demand $s the market potent$a!.

&) 'n most cases, company sa!es potent$a! $s !ess than market

potent$a!.

1) ach compet$tor has a hard core of !oya! "uyers 0ho are not

very respons$ve to other compan$es efforts to 0oo them.

E$ti!%tin0 C*rrent De!%n'

Marketing e%ecutives want to estimate total market potential,

area market potential, and total industry sales and market

shares.


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Tot% M%r7et Potenti%

)otal market potential is the ma%imum amount of sales that

might be available to all the firms in an industry during a

given period, under a given level of industry marketing effort

and environmental conditions.

A) A common 0ay to est$mate tota! market potent$a! $s:

1) st$mate the potent$a! num"er of "uyers F.

2) The avera#e quant$ty purchased "y a "uyer F.

3) The pr$ce pa$d.

&) The most d$ff$cu!t component to est$mate $s the num"er of

"uyers for the spec$f$c product or market.

*) A var$at$on $s ca!!ed the chain-ration method, which involves

multiplying a base number, "y severa! adust$n# percenta#es.

Are% M%r7et Potenti%

Companies face the problem of selecting the best territories

and allocating marketing budget optimally among these

territories.


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A) Therefore, $t needs to est$mate the market potent$a! of d$fferent

c$t$es, states, and nat$ons.

&) T0o maor methods of assess$n# area market potent$a! are:

1) The market-"u$!dup method that $s used "y "us$ness marketers.

2) The mu!t$p!e-factor $nde that $s used pr$mar$!y "y consumer

marketers.

M%r7et9-*i'*p Metho'

A) The market-buildup method ca!!s for $dent$fy$n# a!! the

potent$a! "uyers $n each market and est$mat$n# the$r potent$a!

purchases.

&) Th$s method produces accurate resu!ts $f 0e have a !$st of a!!

potent$a! "uyers and a #ood est$mate of 0hat each 0$!! "uy.

*) An eff$c$ent method of est$mat$n# area market potent$a!s makes

use of the North merican Industry Classification !ystem "NIC!#.

M*tipe9+%#tor In'e. Metho'

A) The method most common!y used $n consumer markets $s a

stra$#htfor0ard $nde method.


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&) A s$n#!e factor $s rare!y a comp!ete $nd$cator of sa!es

opportun$t$es thus $t makes sense to deve!op a mu!t$p!e-factor

$nde, 0$th each factor ass$#ned a 0e$#ht.

*) Many compan$es compute other area $ndees as a #u$de to

a!!ocat$n# market$n# resources.

)able '.(E shows the percentage of F.S. brand and category

sales and column : shows the 4"I.

) The brand development inde% ;4"I< that $s an $nde of "rand

sa!es to cate#ory sa!es.

) After the company dec$des on the c$ty-"y-c$ty a!!ocat$on of $ts

"ud#et, $t can ref$ne each c$ty a!!ocat$on do0n to census tracts or

$pK% code centers.

/) Census tracts are sma!!, !oca!!y def$ned stat$st$ca! areas $n

metropo!$tan areas and some other countr$es.

) ata on popu!at$on s$e, med$an fam$!y $ncome, and other

demo#raph$c $nformat$on $s ava$!a"!e for these un$ts.

In'*$tr, S%e$ %n' M%r7et Sh%re$

4esides estimating total potential and area potential, a

company needs to know the actual industry sales taking

place in its market. )his means identifying competitors and

estimating sales.


40/44

A) The $ndustry trade assoc$at$on 0$!! often co!!ect and pu"!$sh tota!

$ndustry sa!es.

1) +$th th$s $nformat$on, a company can eva!uate $ts performance

a#a$nst the 0ho!e $ndustry.

&) Another 0ay to est$mate sa!es $s to "uy reports from a

market$n# research f$rm that aud$ts tota! sa!es and "rand sa!es.

1) These aud$ts #$ve the company va!ua"!e $nformat$on a"out $ts

tota! product-cate#ory sa!es as 0e!! as "rand sa!es.

2) 't can compare $ts performance to the tota! $ndustry or any

part$cu!ar compet$tor to see 0hether $t $s #a$n$n# or !os$n# share.

*) &us$ness #oods marketers typ$ca!!y have a harder t$me

est$mat$n# $ndustry sa!es and market shares than consumer #oods

marketers, and 0$!! therefore operate 0$th !ess kno0!ed#e of the$r

market share resu!ts.

E$ti!%tin0 +*t*re De!%n'

ery few products or services lend themselves to easy

forecasting. In most markets, total demand and company

demand are not stable. Good forecasting becomes a key

factor in company success. )he more unstable the demand,

the more critical is forecast accuracy, and the more elaborate

is forecasting procedure.


41/44

A) *ompan$es #enera!!y use a three-sta#e procedure to prepare a

sa!es forecast.

1) They prepare a macroeconom$c forecast.

2) An $ndustry forecast.

3) *ompany sa!es forecast.

&) *ompan$es can do forecasts $nterna!!y or "uy forecasts from

outs$de sources.

*) A!! forecasts are "u$!t on one of three $nformat$on "ases:

1) +hat peop!e say.

2) +hat peop!e do.

3) +hat peop!e have done.

S*r&e, of -*,er$; Intention$

&orecasting is the art of anticipating what buyers are likely to

do under a given set of conditions. 4ecause buyer behavior is

so important, buyers should be surveyed.


42/44

A) Apurchase probability scale asks the "uyers $ntent$ons 0$th$n

a #$ven t$me per$od, !$ke a year.

&) /or "us$ness, "uy$n# f$rms can carry out "uyer-$ntent$on surveys

re#ard$n# cap$ta! equ$pment.

*) A =#rassroots? forecast$n# procedure deta$!s est$mates "roken

do0n "y product, terr$tory, customer, and sa!es rep.

Co!po$ite of S%e$ +or#e Opinion$

$ach sales representative estimates how much each current

and prospective customer will buy of each of the company+s

products

E.pert Opinion

Companies can obtain forecasts form e%perts, including

dealers, distributors, suppliers, marketing consultants, andtrade associations.

A) Many compan$es "uy econom$c and $ndustry forecasts from

0e!!-kno0n econom$c-forecast$n# f$rms.

&) Cccas$ona!!y, compan$es 0$!! $nv$te a #roup of eperts to

prepare a forecast.

1) $roup%discussion method.

2) &ooling of individual estimates.


43/44

3) 'elphi method.

P%$t S%e$ An%,$i$

Sales forecasts can be developed on the basis of past sales.

A) )ime-series analysis cons$sts of "reak$n# do0n past t$me

ser$es $nto four components:

1) Trend.

2) *yc!e.

21G *hapter %: *onduct$n# Market$n# 5esearch and /orecast$n#

emand

3) easona!.

%) rrat$c and proect$n# these components $nto the future.

&) $%ponential smoothing cons$sts of proect$n# the net per$ods

sa!es "y com"$n$n# an avera#e of past sa!es and the most recent

sa!es, #$v$n# more 0e$#ht to the !atter.

*) Statistical demand analysis cons$sts of measur$n# the $mpact

!eve! of each of a set of causa! factors on the sa!es !eve!.


44/44

) $conometric analysis cons$sts of "u$!d$n# sets of equat$ons

that descr$"e a system, and proceed$n# to f$t the parameters

stat$st$ca!!y.

M%r7et Te$t Metho'

0hen buyers do not plan their purchases carefully or e%perts

are not available or reliable, a direct-market test is desirable.

A) A direct-market test $s espec$a!!y des$ra"!e $n forecast$n# ne0

product sa!es or esta"!$shed product sa!es $n a ne0 d$str$"ut$onchanne! or terr$tory.

eview !ey "efinitions here# total market potential, area

market potential, total industry sales, chain-ration method,

purchase probability scale, time-series analysis, e%ponential

smoothing, statistical demand analysis, econometric

analysis, and direct-market test

Documents

Ch 4+Conducting+Marketing+Research+and+Forecasting+Demand