Transcript Introduction to Product Management & Marketing Planning

Differential Advantage Analysis,
Market Potential & Sales
Forecasting Session 3
By: - Neeraj Gupta
Differential Advantage Analysis
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A useful way to examine competitors
capabilities is to divide the necessary
information into five categories
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Competitors abilities to conceive and design
To produce
To market
To finance
To manage
Differential Advantage Analysis
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Competitors abilities to conceive and design
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Technical resources
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Human Resources
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Concepts
Patents and copyrights
Key people and skills
Use of external technical groups
R&D funding
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Total
Percentage of sales
Consistency over time
Internally generated
Government supplied
Differential Advantage Analysis
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Competitors abilities to conceive and design
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Technological strategy
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Specialization
Competence
Source of capability
Timing: initiate versus imitate
Management processes
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TQM
House of Quality
Differential Advantage Analysis
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Competitors ability to Produce
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Physical resources
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Human Resources
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Capacity
Plant
Equipment
Processes
Degree of integration
Key people and skills
Workforce
Suppliers
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Capacity
Quality
Commitment
Differential Advantage Analysis
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Competitors ability to Market
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Sales Force
Distribution Network
Service and Sales Policies
Advertising
Human Resources
Funding
Differential Advantage Analysis
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Competitors ability to Finance
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Long-Term
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Short-term
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Days of receivables
Inventory turnover
Accounting practices
Human resources
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Cash or equivalent
Line of credit
Cost of debt
Liquidity
Cash flow
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Debt/equity ratio
Cost of debt
Key people and skills
Turnover
Systems
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Budgeting
Forecasting
Controlling
Differential Advantage Analysis
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Competitors ability to Manage
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Key people
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Decision making
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Type
Emphasis
Time span
Staffing
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(i) Location
(ii) Type
(iii) Speed
Planning
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Objectives and priorities
Values
Reward systems
Longevity and turnover
Experience
Replacement policies
Organization
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Centralization
Functions
Use of staff
Customer Analysis Purpose
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Customer analysis is an activity that is or should be
performed by organizations. The Customer Analysis
section of the
business plan assesses the customer segments that
the company serves. In it, the company must:
1. Identify its target customers
2. Convey the needs of these customers
3. Show how its products and services satisfy these
needs
Customer Segmentation
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Segmentation: - Creating clusters in the
market of buyers with similar needs and
preferences
Differentiated Marketing can be operated at
Various Levels
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Segment Marketing: -similar set of wants
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Can be enhanced by providing a naked solution
containing the product and service elements that
all segment members value.
Discretionary elements that some segment
members value.
Niche Marketing: -narrow but attractive,
requiring distinctive mix of market offering.
Sub segment of a segment
Identifying Market segments and Target Market
Positioning
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Market Segment: - group of customers with similar needs,
preferences or buying habits.
 Market divided into smaller groups in which members are similar
with respect to factors that influence demand.
 Major element in success of a company.
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Target market Consists of group of customers for whom
seller designs a particular marketing mix.
Benefits of Segmentation
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Application of the “divide and rule” principle,
or divide the markets and conquer them.
Marketing effort becomes effective and
efficient.
Specific marketing mix can be effectively
designed for specific market segments.
Focussed attention can be given to complex
but attractive segments
Factors Affecting the Feasibility of
Segmentation
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Measurable
Accessible
Substantial
Unique/Differentiable
Appropriate
Actionable
Stable
Evaluating Market Segments
Segment size and growth
 Segment structural
attractiveness
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 Level of competition
 Substitute products
 Power of buyers
 Powerful suppliers
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Company objectives and
resources
Basis of Segmentation
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Geographic
 Region
 City or metro size
 Population density
 Climate
Geo-Demographic
Demographic
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Age and Life-Cycle Stage
 Life Stage
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Gender
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Income
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Generation
 Lifestage Analytic Matrix
 Social class
Benefit Segments- Computers*
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The Germans – “We want the best”
The Indians – “We want the best today and
tomorrow”
The Taiwanese – “We want it cheap with a
name”
The Americans – “We want service too”
*Customer-focused product planning: Personal Computers in India
Jagrook Dawra, Kanupriya Katyal, Vishal Mishra, Seerisha M.
Basis of Segmentation
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Psychographic Segmentation
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Lifestyle
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Time-constrained
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Money-constrained
Personality
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“Brand personality” examples:
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multitasking
Sincere
Exciting
Competent
Sophisticated
Rugged
Values
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Core values
Psychographic Segmentation
Basis of Segmentation-Psychographic
Orientations used for segmentation in VALS
matrix
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Status Oriented: -Value a secure place in
society
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Action Oriented: -desire physical and social
activity, variety and risk taking
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Principle Oriented: -guided in their choices by
their beliefs and principles and not by
feelings, desires and events
Psychographic Segmentation
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ACTULIZERS:
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Successful, sophisticated, take-charge people with high self-esteem.
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Image is important to Innovators
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Established and emerging leaders in business and government
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seek challenges, variety
FULFILLEDS
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Motivated by ideals
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Mature, satisfied, comfortable , and reflective people who value order,
knowledge, and responsibility
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well educated and actively seek out information in the decision-making
Psychographic Segmentation
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ACHIEVERS:
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Motivated by the desire for achievement,
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have goal-oriented lifestyles and a deep commitment to career
and family
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structured around family, their place of worship, and work
EXPERIENCERS
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Motivated by self-expression
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Young, enthusiastic, and impulsive consumers
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seek variety and excitement
Psychographic Segmentation
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BELIEVERS:
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Believers are motivated by ideals
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Conservative, conventional people with concrete beliefs based on traditional,
established codes: family, religion, community, and the nation
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STRIVERS
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trendy and fun loving.
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motivated by achievement, Strivers are concerned about the opinions and
approval of others.
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Money defines success for Strivers, who don’t have enough of it to meet
their desires
Psychographic Segmentation
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MAKERS:
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Makers are motivated by self-expression
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express themselves and experience the world by working on it-building a
house, raising children, fixing a car, or canning
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Practical people who have constructive skills and value self-sufficiency.
STRUGGLERS
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Narrowly focused lives
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with the familiar and are primarily concerned with safety and security
Basis of segmentation
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Behavioral Segmentation
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User status
Usage rate
Loyalty status
 Hard-core loyals
 Split loyals
 Shifting loyals
 Switchers
Buyer-Readiness Stage
Attitudes
Occasions
Benefits an individual or group seeks
 Customer attitude
 Customer needs and degree of self-sufficiency
 Different degree of value added
 Customer behavior and their buying practices
Benefit Segmentation
Basis of Segmentation
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Multi-Attribute Segmentation
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(Geoclustering)
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Four PRIZM clusters
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American Dreams
Rural Industria
Gray Power
Country Squires
Targeting Multiple Segments
Demographic-Psychographics SegmentationParticularly useful in creating audience profiles and consumer
profiles. It reveals important information for segmenting mass
markets, provide meaningful direction as to which type of
promotional appeals are best suited and selecting right kind of
advertising media that is most effective for that target market.
What Demographic and Psychographic
segment is this ad targeted at?
The film opens on a group of guys on their bikes.
Seeing a guy walking along the road, they sing, “Thoda
hi hai age gap, phir bhi pehne monkey cap.
Aaj tumhare saath jawaani, karlo jo chaahe man maani.
It’s now or never.”
Cut to the shot of a husband getting a scolding from his wife as
he stares a young girl. At this our guys continue,
“…bachche-kachche... raashan-paani, kal hogi yehi kahani.
It’s now or never.”
We now see a boss getting mad at his
employees. Jingle: “…Ghar se office, office se ghar...
...Boss ka darr, biwi ka darr. It’s now or never.”
The ad ends on... the shot of the bike and VO:
“Apache. It’s now or never.”
What Demographic and Psychographic
segment is this ad targeted at?
“Chameli meri jaan, gulabo jalan se lal” says a blind
man taking care of his flowers in the garden.
Smelling something that’s not part of the garden, he
exclaims, “gainda, tu kahan se aaya!” and goes
towards a bike.
The blind man removes the garland from the brand new bike.
As his son comes, he questions him, “arey, tune Splendor
chhod di?”
Even as he comes to know that it’s a self-start and
“powerful” bike, he still scolds his son for getting rid of
the Splendor
“125 CC, Quantum Core engine” with a better mileage,
informs the son about the new bike.
He makes the father more comfortable...
...when he tells him that he has bought a Super Splendor.
Cut to the shot of the father who now comes in a
surprisingly new get-up.
As the father and son go on the new Super Splendor,
the VO...
...plays: “New 125 CC Super Splendor Generation
nayi, bharosa wahi.
Marketing Implications
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Marketers facing consumers who have a negative
attitude toward their product must work to identify
the key issues shaping a consumer's attitude then
adjust marketing decisions (e.g., advertising) in an
effort to change the attitude.
For companies competing against strong rivals to
whom loyal consumers exhibit a positive attitude, an
important strategy is to work to see why consumers
feel positive toward the competitor and then try to
meet or beat the competitor on these issues.
Alternatively, a company can try to locate customers
who feel negatively toward the competitor and then
increase awareness among this group.
Customer Needs
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Customer needs are the expectations of the
product buyers.
There are several needs of customers in this
open market and it is also seen that its very
difficult to measure the exact needs and
demands from customers.
Categorise the customer expectations/needs
into:
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General Needs
Emotional Needs
Consumer Buyer Behavior
Consumer Behavior
Processes a consumer uses to
make purchase decisions, as
well as to use and dispose of
purchased goods or services;
also includes factors that
influence purchase decisions
and the product use
Chapter 4 Version 3e
39
What Influences Consumers’ Buying Decision
Process?
Personal
Cultural
Age & Life-Cycle
Stage
Culture
Occupation
Subculture
Economic Situation
Lifestyle
Social Class
Values
Social
Reference
Groups
Personality & SelfConcept
Psychological
Motivation
Perception
Family
Learning
Roles &
Status
Beliefs &
Attitudes
Marketing to a Subculture
Sears is widely considered one of the most successful marketers to the U.S.
Hispanic population. Its Spanish-language Web site features content and
events carefully tailored to Hispanic consumers.
Opinion Leaders
Marketers use buzz marketing by enlisting or even creating
opinion leaders to spread the word about their brands.
Personal Factors:Self-concept
Psychological Factors:Beliefs
Market Potential
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Market or sales potential must be stated for a
given product or group of products fir a given
area for a given period of time, usually a year.
Area potentials can be expressed in both
absolute terms and as a percent of the total
market.
Uses Of Market Potential
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There are three main uses of market potential and
these are:
Allocation of marketing resources
Defining sales techniques
Setting sales quotas: -A sales forecast is a
prediction based on past sales performance and an
analysis of expected market conditions. The true
value in making a forecast is that it forces us to look
at the future objectively. The company that takes
note of the past stays aware of the present and
precisely analyzes that information to see into the
future.
Market Potential
Sales Forecasting
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Sales forecasting is the process of organizing and
analyzing information in a way that makes it possible
to estimate what your sales will be.
A sales forecast is a prediction based on past sales
performance and an analysis of expected market
conditions. The true value in making a forecast is
that it forces us to look at the future objectively.
The company that takes note of the past stays
aware of the present and precisely analyzes that
information to see into the future.
Importance of Sales Forecasting
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Sales forecasting is a self-assessment tool for a company. A
sales forecast reports, graphs and analyzes the pulse of your
business. The future direction of the company may rest on the
accuracy of your sales forecasting.
Companies that implement accurate sales forecasting processes
realize important benefits such as:
 Enhanced cash flow
 Knowing when and how much to buy
 In-depth knowledge of customers and the products they order
 The ability to plan for production and capacity
 The ability to identify the pattern or trend of sales
 Determine the value of a business above the value of its
current assets
 Ability to determine the expected return on investment
Benefits of Sales Forecasting
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Increased revenue
Increased customer retention
Decreased costs
Increased efficiency
Information needed for a Sales Forecast-Internal and External Factors
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External Factors
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Seasonality of the business
Relative state of the economy
Direct and indirect competition
Political events
Styles or fashions
Consumer earnings
Population changes
Weather
Productivity changes
Information needed for a Sales Forecast-Internal and External Factors
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Internal Factors
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Labor problems
Credit policy changes
Sales motivation plans
Inventory shortages
Working capital shortage
Price changes
Change in distribution method
Production capability shortage
New product lines
Internal data analysis for a sales forecast
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Therefore, this data must be prepared on a
consistent basis:
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Accounting records
Financial statements
Sales-call reports
After-sales service demands from clients
How Long and How Often Should One Forecast?
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A sales forecast needs to be performed, reviewed and
compared with actual performance results on a regular
basis.
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Short-range forecasts are for fewer than three months.
Intermediate forecasts have a span of three months to two
years.
Long-range forecasts cover more than two years.
How Sales Forecasting Applies to a New Business
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Statistics show that 80 percent of new business
startups never survive the first three years. Nine out of
10 of those business failures are caused by poor
management decisions. Implementing sales
forecasting forces a new business to base decisions
on facts rather than hunches.
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You need to consider the following:
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How well does your competition satisfy the needs of its potential
customers?
Note the population and economic growth in your location.
Develop a customer profile.
Experienced business people will tell you that a good
rule of thumb is that 20 percent of your customers
account for 80 percent of your sales.
Software as a Tool for Sales Forecasting
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Projections become even more precise when software
programs written specifically for sales forecasting are
utilized.
When shopping for a good software package, look for
the following features:
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Capability to adjust for special factors, i.e., promotion and price
changes
Documents underlying forecasting assumptions
An effective management review and communication step
Historical data-tracking and plotting of current performance
against past trends and future projections
Allows multiple parties (e.g., sales, marketing, manufacturing
and logistics) to enhance, manipulate and use the forecast.
Estimating Market Potential
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Estimating the market or market potential for a new business or business
expansion is critical in determining the economic feasibility of a venture.
Estimating the market potential will determine if the market is large enough
to support your businesses.
Once the estimated market potential has been calculated, it is possible to
determine if the market is large enough to sustain your proposed business
or sustain an addition competitor in the marketplace.
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Key Steps in Estimating Market Potential
 Define your target market and market segments.
 Define the geographic boundaries of your market.
 Derive an average selling price.
 Determine the average annual consumption.
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Estimating Market Potential: MP = N x P x Q;
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MP = market potential
N = number of possible buyers
P = average selling price
Q = average annual consumption
Retail Market Potential
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If you are evaluating a retail establishment, a more
refined method of calculating the retail trade area
market potential is available. The market potential for
a retail establishment provided an estimate of the
maximum total sales potential for a specific retail
operation in a given market.
The key steps in estimating retail market potential
are:
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Define your target market and market segments.
Define the geographic boundaries of your market.
Derive average expenditures for the category.
Determine the average household income for the area and
state.
Estimate market share.
Trade Area Analysis
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Trade Area Analysis is a mean of evaluating the
potential retail sales for a specific retail operation
can be estimated by using a standard formula:
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ES = P x EXP x (ADI/MDI) x MS, where
ES = estimated sales
P = market area population
EXP = average expenditures for retail outlet category
ADI = area estimated average household disposable
income
MDI = Georgia average household disposable income
MS = estimated market share
Target Market
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A target market can be thought of as the customers who are
most likely to buy from you and generally are described using
demographic variables (gender, age, education) as well as
psychographic variables (lifestyle and belief system variables).
The first method of describing your target market segments is
using a set of demographic descriptors like the following:
 Age
 Marital status
 HH income
 Gender
 Race/Ethnicity
 Family life cycle
 Education
 Religious affiliation
Target Market
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Failure to meet these needs will result in loss of business. The
following are a few psychological descriptors:
 Political affiliation
 Socially conscious
 Cutting-edge
 Family-oriented
 Conformist
 Power-wielding
 Trend follower
 Thrill seeker
 "Green"
 Fun-loving
 Fashion-forward
 Sports enthusiast
Target Market
Target Market
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Market or Trade Area: -The market area can be
thought of as the geographic area where the
business intends to operate, i.e., a city block,
between the rivers or the globe.
As a result, it is important to compare your target
market profile, generally described using
demographics, to the population in the market area.
There are a number of ways to define a market
area, some are easy and others are more difficult
and require the services of a marketing professional.
Methods of Defining Target Market
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Geography is the simplest form of defining a market
area.
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Neighborhoods
Zip codes
City or County Boundaries
Metropolitan Statistical Areas
State (multi state) Boarders
Nation
Continent
World
A ring or radius defined market area is performed by
creating a circle a specified number of miles from a
business location. The ring analysis allows a
business to evaluate the demographics of people
residing within a pre-defined distance from specific
business location.
Methods of Defining Target Market
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Drive Time Analyses: Drive time analysis is
a more sophisticated analysis than the radius
analysis as a number of variables are used to
estimate the drive time to a given location.
The analysis takes speed limits, road type,
vehicle, time of days, and congestion values.
Customers may be willing to drive 15 miles,
but given traffic conditions the 15 miles may
take 30 minutes to travel.
Market Size
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Once the market area and target market has been defined, it is
possible to determine the number of potential customers for your
business.
This will allow you to estimate the N (number of potential
customers) in the market potential equation.
The business has concluded its market area is Wake County
which has 101,768 children under 9 years old. Therefore, N =
101,600 potential customers. These numbers were obtained from
the US Census Bureau.
As a result, the 101,600 kindergarten through 3rd graders should
be adjusted downward by multiplying by 68%. This results in an
adjusted market potential of 69,088 potential students. Adjusted
Market Potential = 101,600*68% = 69,088
Market Size
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Consumption or Usage: -You need to
determine how often your target market
segment uses your product or service. This
figure will have a significant impact on the
estimated market potential.
Obviously the more frequently the product is
purchased, the larger the market potential.
Durable goods, products that can be used
over a long period of time, are purchased
less frequently than perishable items.
Estimate Sales Potential
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Survey method
Expert opinion method
Market studied methods
Sales force opinion methods
Statistical methods
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Trend method
Graphical method
Time-series method
Regression method
Estimate Sales Potential
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Trend Method: This method provides a rough trend of the forecast
on the basis of past experience. It does not, however, take into
account the changing environment. It is a simple method for
business forecasting on the basis of past performance.
Graphical Method: According to this method, sales data are plotted
on graph paper and a graph is drawn for a number of years. This is
a simple and inexpensive method.
Estimate Sales Potential
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Time Series Method: This method is used for long periods duly taking
into account cyclical changes, seasonal variation and irregular
fluctuation.
"A time series may be defined as a collection of magnitudes belonging
to different time periods, of some variable or composite variables, such
as production of steel, per capita income, gross national product, price
of tobacoo, or index of industrial production.“ –Ya-uin-chou
The Time Series Method shows the future trends of sales. The various
techniques that can be used for determining these trends are:
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(i) Freehold or Graphical Method
(ii) Semi-Average Method
(iii) Moving Average Method
(iv) Method of Least Squares
Regression Analysis: This is a branch of statistical theory, is popularly
used on the principles of sciences. It helps determine the relationship
among various variables. According to Ya-uin-chou,
"Regression analysis attempt establishing the 'Nature of the
relationship' between variables that is to study the functional
relationship between the variables and thereby provide a mechanism
for prediction, or forecasting".