Resources

Student notes Tables Wollinski p133-135 Eidos Lara Croft article Graph paper Calculators

Analysing Markets

Tomb Raider

1. 2. 3. 4. 5.

How much was wiped off projected sales? How many copies have been sold? What are some of the reasons cited? Why did Eidos revise its sales assumptions for Underworld and other video games? What are the consequences for the business of getting the sales forecast wrong?

What the spec says

Analysing Markets and Marketing
Reasons for analysing markets should include:
gathering evidence for devising a new strategy, identifying significant patterns in sales.

reasons for, and the value of, market analysis methods of analysing trends the use of information technology in analysing markets difficulties in analysing marketing data

Candidates should be familiar with moving averages, test markets and extrapolation as methods of measuring and forecasting sales. Candidates should understand how correlation can be used in analysing markets.

Objectives
Explain the role of analysing markets in sales forecasting Outline four quantitative methods of market of analysing market trends Consider benefits and drawbacks of different methods

Sales forecasting
What do you need to know to forecast accurately? Why is it important to get it right? What things can impact your sales forecast? How can make your forecast as accurate as possible? How might forecasting impact other areas of the business?

Main approaches
Test Markets Moving averages Extrapolation Correlation

Test Marketing
Launching a product in a limited part of the market, usually a geographical area Used to predict sales on the assumption that the results will be repeated across the whole country Relatively accurate predictor of popularity Not nearly as expensive as a national launch

New,launch of Vio in the US is an exciting New Coke? The

development for consumers there," said a spokesperson for Coca-Cola GB. "We are Coca-Cola trials sweet, fizzy, milky 'vibrancy' drink in three constantly listening to consumers to ensure we US cities Soft drinks giant provide them with innovative new beverages that launches new Vio drink in New York but no word meet their preferences and needs. However we yet on whether it will reach the UK currently have no plans to launch Vio in any country in Europe."
It may not quite sound the real thing but consumers are being asked to decide whether milk goes better with sparkling water, cane sugar and fruit flavouring. Coca-Cola is trialling a new carbonated "vibrancy" drink and it will depend on Americans' tastebuds whether other countries experience what the company claims is "a refreshing sensory experience". The soft drinks giant has so far launched its new Vio products only in New York, but milk-based products are popular in Asian markets such as Hong Kong and Japan.

Test Marketing dangers

Copy cat moves by competitors
Reduces lead time

Market move fast and delaying the national launch may mean missing the boat Novelty value people buy it once
BOGOF!

Loads of effort on test marketing (special deals etc.) not followed through in real life

Got it?
Now for something completely different. You need
Graph paper Pencil Ruler Table

Moving averages
Plot the graph of data
Reflection what can we interpret for this data

Smooth the data moving averages What can interpret? Plot the moving average data Review moving averages as a model pros and cons

Sales Data
Sales 000 January February March April May June July August September October 9 12 15 15 18 21 9 18 21 24 3 month moving average

Sales Data
Sales 000 January February March April May June July August September October 9 12 15 15 3 month moving average

Task 1 Plot the data on graph paper What can we interpret from this data? Can you see a trend?

s e as l

18 21 9 18 21 24

months

Calculate the moving average

This looks at several periods at a time and averages out the data

Sales Data
Sales 000 January February March April May June July August September October 9 12 15 15 18 3 month moving average

E.g. 21 (Jan+Feb+Mar)/3 Then 9 (Feb+Mar+Apr)/3 18

21 24

Write this in the centre of your table and the value in the far right column

Sales Data
Sales 000 January February March April May June July August September October November December 9 12 15 15 18 21 9 18 21 24 12 24 3 month moving average

Now replot a new graph next to your previous one (9+12+15)/3

(12+15+15)/3 (15+15+18)/3 (15+18+21)3What can we interpret from (18+21+19)/3 (21+9+18)/3 this data? Can (9+18+21)/3 (18+21+24)/3 (21+24+12)/3 (24+12+24)/3

12 14 16 18 16 16 16 21 19 20

you see a trend?

Calculate the moving average

This looks at several periods at a time and averages out the data Hi/Lo figures are smoothed by the averaging process The underlying trend is clearer

Examiners note
Unlikely you would be asked to do this in an exam The data might be provided that show a trend and/or seasonal variations that have already been calculated Or you may be required to interpret a graph

Extrapolation
trend

x x x x x xx x xx x months Present

Identify the trend and project forwards Only likely to be effective if market conditions continue to develop in the future Extrapolated as they have done in trend the past Risky in markets where technology is Future developing rapidly

s e as l

Kodak and digital cameras CD manufacturers and MP3 players Beef and BSE

Correlation
Attempts to identify whether there is any correlation between different variables and the level of sales What would influence you to buy?

Correlation
If marketers can identify the key factors that determine the demand for their goods, and they can estimate what is happening to these factors, they can estimate total market sales and their likely sales Positive correlation means a direct link, e.g. advertising Negative means inverse relationship, e.g. price increase

N.B. Correlation identifies apparent link but does not show cause and effect

s e as l

advertising

ec r p i

sales

Time for a breather

Analysing Markets and Marketing
Reasons for analysing markets should include:
gathering evidence for devising a new strategy, identifying significant patterns in sales.

reasons for, and the value of, market analysis methods of analysing trends the use of information technology in analysing markets difficulties in analysing marketing data

Candidates should be familiar with moving averages, test markets and extrapolation as methods of measuring and forecasting sales. Candidates should understand how correlation can be used in analysing markets.

Objectives
Explain the role of analysing markets in sales forecasting Outline four quantitative methods of market of analysing market trends Consider benefits and drawbacks of different methods

The use of IT in analysing markets

Forecasting can be done much more quickly and regularly Can multiply the number of strategies and compare to see which is best Can link databases and sales records to spot correlations and patterns Knowledge Management Loyalty cards

Homework
Read Case Study: Unilever Ice Cream Complete Practice Exercise 4 Qs1-9

The Hot Seat!

You have 3 mins to think of a question based on todays material In the meantime the hot seat selector will pick 3 individuals to sit in the hot seat to answer the questions you put to them!