Estimating Actual Sales and Market Shares
Estimating Actual Sales and Market Shares
Besides estimating total and area demand, a company will want to know the actual industry sales in its market. Thus it must identify its competitors and estimate their sales.
The industry's trade association will often collect and publish total industry sales, although not listing individual company sales separately. In this way, each company can evaluate its performance against the industry as a whole. Suppose the company's sales are increasing at a rate of 5 per cent a year and industry sales are increasing at 10 per cent. This company is losing its relative standing in the industry.
Another way to estimate sales is to buy reports from marketing research firms that audit total sales and brand sales. For example, Nielsen, AGR and other marketing research firms use scanner data to audit the retail sales of various product categories in supermarkets and pharmacies, and sell this information to interested companies. A company can obtain data on total product category sales as well as brand sales. It can compare its performance with that of the total industry or any particular competitor to see whether it is gaining or losing in its relative standing, 30
forecasting The art of estimating
future demand by anticipating what
Forecasting Future Demand
buyers are likely to do under a given set of conditions.
Having looked at ways to estimate current demand, we now examine ways to fore cast future market demand. Forecasting is the art of estimating future demand by
Forecasting Future Demand • 345
Table 8.8
Common sales forecasting techniques
BASED OK:
METHODS
What, people say
Surveys of buyers' intentions Composite sales force opinions Expert opinion
What people do
Test markets
What people have done
Timeseries analysis
Leading indicators Statistical demand analysis
anticipating what buyers are likely to do under a given set of Conditions, Very few products or servioes lend themselves to easy forecasting. Those that do generally involve a product with steady sales, or sales growth in a stable competitive situ ation. But most markets do not have stable total and company demand, so good
forecasting becomes a key factor in company success. Poor forecasting can lead to excessively large inventories, costly price markdowns, or lost sales due to being out of stock. The more unstable the demand, the more the company needs accu rate forecasts and elaborate forecasting procedures.
Companies commonly use a threestage procedure to arrive at a sales fore cast. First they make an environmental forecast, followed by an industry forvwist, followed by a company sales forecast. The environmental forecast calls for projecting inflation, unemployment, interest rates, consumer spending and saving, business investment, government expenditures, net exports and other
environmental events important to the company. The result is a forecast of gross national product, which is used along with other indicators to forecast industry sales. Then the company prepares its sales forecast assuming a certain share of industry sales.
Companies use several specific techniques to forecast their sales. Table 8.8
lists some of these techniques.' 1 ' All forecasts build on one of three information
bases: what people say, what people do, or what people have done. The first basis what people say involves surveying the opinions of buyers or those close to them, such as salespeople or outside experts. It includes three methods: surveys of buyer intentions, composites of sales force opinions and expert opinion. Building a
forecast on what peopfe do involves another method, that of putting the product into
a test market to assess buyer response. The final basis —'what people have done — involves analyzing records of past buying behaviour or using timeseries analysis or statistical demand analysis.
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