Chapter 8.

Organizational
Demand Analysis
BA 303 - L.P.Chew

OUR TERMINOLOGY…
POTENTIAL= POSSIBILITIES
FORCAST = EXPECTATIONS
MARKET = INDUSTRY
SALES = COMPANY
The formulation of market strategy
is planned on the basis of the
marketing potential associated with
each of the firm's target segments

Once marketing strategy

plans are set, a sales
forecast can be developed
and then used to guide
tactical production,
advertising, and logistics
Chapter 8. Organizational
Demand Analysis

• pivotal role of market potential

analysis and sales forecasting in
planning and controlling marketing
activities, and to provide a firm
understanding of the various
approaches for measuring potential
and forecasting sales.
Chapter 8. Organizational
Demand Analysis
• chapter focuses on the different
approaches for calculating market and
sales potentials
• qualitative and quantitative forecasting
approaches are discussed in terms of the
applicability to various forecasting
situations. Executive judgment, sales force
composite, and the Delphi method are the
qualitative forecasting methods
Chapter 8. Organizational
Demand Analysis
• Quantitative methods, including time
series analysis and causal techniques
• Executive judgment, sales force
composite, and the Delphi method are the
qualitative forecasting methods
• These qualitative methods are most
effectively applied to forecasts for new
products or in situations where little
historical data exists
Methods of Sales Forecasting (1)
1. Simple Trend Analysis—sales
Analysis forecast based on
firm’s recent performance.
2. Market Share Analysis—similar
Analysis to trend
analysis but assumes market share will
stay the same.
3. Jury of Executives—company
Executives experts predict
sales.
4. Sales Force Surveys—salespeople share
experiences and customer feedback.
5. Consumer Surveys—measure
Surveys attitudes, purchase
intentions, expectations, consumption rates, and
SWOT.
Methods for Sales Forecasting (2)
6. Chain-Ratio Method—firm
Method starts with general
market information and then computes a series of
more specific information. Combined data yield a
sales forecast.
7. Market Build Up Method—firm
Method gathers data from
small, separate market segments and aggregates
them.
8. Test Market—sales
Market estimate from short-run,
geographically limited sales of new products.
9. Advanced Statistical Analyses—methods
Analyses for
sales forecasting that include computer simulations
TIME SERIES
• Time series models are based on the
accuracy of historical sales patterns
when sales trends are not likely to
change in the future. Time series
models are most useful when market
forces are relatively stable within
forecasting horizon.
Moving averages/ exponential
smoothing
• Moving averages is a method based
upon a specified historical period
to forecast the value for a future
period.
• When differential weights are
desired, such as for recent years,
exponential smoothing can be used.
Multiple regressions models
• Multiple regressions models, employed
when a number of factors have an
impact on sales, allow managers to
forecast industry sales, as well as
incorporate the expected effects of any
controllable marketing variables which
are likely to be significant when
forecasting company sales.
Sales penetration is the degree to
which a company achieves its sales
potential. A high level of sales
penetration
• usually means
there is little room for growth.
1. Sales penetration = Actual sales/Sales
potential.
2. A firm with high sales penetration must
realize that diminishing returns may occur if it
attempts to convert remaining nonconsumers,
since costs may outweigh revenues. Other
segments may be better opportunities.
LINDELL MANUFACTURES INK
FOR FOUR TYPES OF PRINTERS IN
FIVE STATES.
HISTORICAL SALES DATA SHOWS
THAT INK COSTS THESE
PRINTERS .1% OF EACH SALES
DOLLAR.
• HOW MUCH INK DID THEY CONSUME IN THE MOST RECENT
YEAR THAT YOU ARE ABLE TO FIND IN OUR LIBRARY. I
SUGGEST THAT YOU USE THE 1997 CENSUS OF
MANUFACTURESOR THE MOST CURRENT ANNUAL SURVEY
OF BUSINESS (MANUFACTURES).
LINDELL MANUFACTURES INK
FOR FOUR TYPES OF PRINTERS IN
FIVE STATES.
. • PLEASE CONSULT YOU PACKET FOR A LIST
OF SECONDARY DATA SOURCES TO ACCESS
INCLUDING THE AFOREMENTIONED. KEY:
USE $ VALUE OF SHIPMENTS.
• YOU MAY WORK WITH THE SIC CODES, RATHER
THAN THE NAICS CODES, BECAUSE THEDATA
MAY BE EASIER TO FIND IN SIC, WHILE WE ARE
IN TRANSITION FROM SIC TO NAICS
LINDELL MANUFACTURES INK
FOR FOUR TYPES OF PRINTERS IN
FIVE STATES.
• STATES.....PENNSYLVANIA, OHIO, MICHIGAN, INDIANA AND
. ILLINOIS
• SIC / NAICS CODES OF PRINTERS.........

• 2711- NEWSPAPERS

• 2721- MAGAZINES

• 2732- BOOK

• 2751- COMM LTR HD PRESS. PRINTING

LINDELL MANUFACTURES INK.

• A- WHAT WAS THE TOTAL INK/PRINTER MARKET FOR

THIS FIVE STATE REGION?

• B- WHAT IS THE TOTAL MARKET BY STATE?

• C- WHAT IS THE RELATIVE MARKET FOR EACH

STATE?

• D- HOW WOULD YOU PROJECT THE $ MARKET FOR

THE COMING YEAR 2002?