forecasting sales and developing budgets dr.pusanisa thechatakerng e-mail: [email protected] 1
TRANSCRIPT
Market Potential and Sales Potential (I)
• The item being marketed (the product, service, idea, person or location)
• Sales for the entire industry in dollars or product• A specific time period• A specific market delineated either geographically,
by type of customer, or both.2
The total expected sales of a given product or service for the entire industry in a specific market over a state of time (total industry concept)
Four elements:
Market Potential and Sales Potential (II)
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Sales potential The maximize share (or percentage) of market potential that an individual firm can reasonably expect to achieve
Ex. Budweiser brand accounted for 40% of the approximately 180 million barrels of beer consumed in the USA in 2004
- Budweiser beer’s sales potential is close to 40% of market in the coming year
Company’s sales potential – specific the product, market, and time period
Market Potential and Sales Potential (III)
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Sales forecast An estimate of sales (in dollars) that an individual firm expects to achieve during a specified forthcoming time period, in a stated market, under a proposed marketing plan
Less than the sales potential for many different reasons
Ex. 4ps < quality, financial problem
Estimating Market Potential and Sales Potential (I)
1. Market-factor Derivation– Market factor
• An item or element in a market that causes the demand for a product or service or
• Related to the demand
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Ex. Bangkok’s population annual as a market factor underlying the demand for sandal. This element is related to the number of sandal that manufacturer can sell
Estimating Market Potential and Sales Potential (II)
Ex. Bangkok’s population annual as a market factor underlying the demand for sandal. This element is related to the number of sandal that manufacturer can sell. The sales potential for sandal as follows:
Estimate number of Bangkok’s pop = 4,000,000
Times: percent who buy sandal = x 0.33 (33%)
Market potential 1,350,000
Times: Potential market share = x 0.30 (30%) Sales potential 396,000
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Market-factor Derivation
Estimating Market Potential and Sales Potential (III)
2. Surveys of Buyer Intention for determining potential– Consists of contacting potential customer and
questioning them about whether or not they would purchase the product or service at the price asked.
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Ex. The manufacturer established that it would be satisfied if it sold 50,000 leather sandal pairs per year. Since the cost of the pair would be higher than that of plastic pair. The manufacturer want to know 2 things. First, how many people would buy product at retail price B.200? Second, What did customers think the price of such a product should be?
Estimating Market Potential and Sales Potential (IV)
• Survey through personal interviews with 240 Bkkpop.• 170 of 240 (approximately 71%) were interested in product.• They indicated that price should be B.130 to capture that size
of market• The average (mean) price quoted (B.145) would eliminate half
of respondents who showed interest in the product.• Still 10 people (4% of market) said they would be interested
in purchasing the product at retail price B.200• Survey showed 1/3 of BKKpop purchase sandal
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Estimating Market Potential and Sales Potential (V)
Estimate number of Bangkok’s pop = 4,000,000
Times: percent who buy sandal = x 0.33 (33%)
Market potential 1,350,000
Times: taking 4% of the result = x 0.04 (4%) Market potential for B.200 leather sandal = 52,800 pairs
>50,000 = o.kYes - based on information obtain directly from peopleNo – cost & time
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Sales Forecasting
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Survey methods:•Executive opinion
•Sales force composite
•Buyers’ intentions
Mathematical methods
•Moving average model
•Exponential smoothing models
•Regression models
Operational method“Must-do” calculations
•Capacity-based calculations
Source of sales forecast data
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Executives & managers-Executive opinion
-Sales force composite
Customers Survey of buyer intention
Historical data
-Moving average models
-Exponential smoothing
-Regression analysis
Company operation-“Must-do” approach
-Capacity-based approached
-Test market
Moving average method
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Forecast salesMonth Actual sales Total sales (3 months)
1 120 - -
2 130 - -
3 110 360 120.00
4 140 380 126.67
5 110 360 120.00
6 130 380 126.67
Exponential Smoothing Models
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Forecast salesMonth Actual sales Total sales (month/s)
1 x 120 = 120 -
2 x 130 = 260 -
3 (6) x 110 = 330 710
4 118.33
5 128.33
6 120.00
P.S 6/710=118.33
Regression Analysis(sales trends into the future)
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10
15
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25
30
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Sales
(millions)
2001 02 03 04 05 1007 09
2010 forecast, 10 yrs base
“Must-Do” Forecasts• Reasonable forecast is the sales that must be
achieved for the firms to reach its break-even point.
• Ex. One new service enterprise budgeted its total overhead costs at $165,000 for the first year. The entrepreneur desired a profit of $60,000, which would represent her salary. Thus, she projected sales at $225,000 for the year and proceeded to plan on that basis
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Capacity-Based Forecasts
• Ex. Restaurant 10 tables, each table for 4 people, only lunch 30 Baht/food with drink, open everyday
• So 10x4 = 40 seat• 40x30x365 = 438,000
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Review the forecasting process (Method)
• Use more than one method• Select the right method
– Short period• Moving average models• Exponential smoothing models
– Long period• Regression models
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Problems (I)
• Indicate what market factor or factors you would use to estimate the market potentials for each of the following products: McGraw-Hill economics textbooks, Chang Beer, 12 plus roll-on, Johnson baby powder, Nike sport shoe, MK Suki.
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Problems (II)
• In, general, how do sales forecast based on surveys differ from forecasts based on mathematic methods?
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Problems (III)
• Tiger company’s monthly sales; Months:January, February, March, April
Sales 250 268 320 345Forecast sales force on May by using moving
average method (3,2,1)
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Problems (IV)
• Tiger company’s monthly sales; Months:January, February, March
Sales 250 268 320 Forecast sales force on April by using
exponential smoothing method (3,2,1)
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