Chapter 6 MKTG

Tools in Sales Forecasting

- Executive Judgement - Surveys - Time Series Analysis - Regression Analysis - Market Tests - Multiple Forecasting Methods

Differentiated Targeting Strategy

- Heterogeneous market - Targeting two or more segments with a marketing mix for each.

Concentrated Targeting Strategy

- Heterogeneous market (individuals or organizations with diverse needs for products in the same class). - Targeting a single market segment using one marketing mix.

undifferentiated targeting strategy

- Should be a homogeneous market (Customers have similar needs for a product). - A single marketing mix directed at the entire market.

Target Market Selection Process

1. Identify the appropriate targeting strategy 2. Determine which segmentation variables to use 3. Develop market segment profiles 4. Evaluate relevant market segments 5. Select specific target markets

Time-Series Analysis

A forecasting method that uses historical sales data to discover patterns in the firm's sales over time and generally involves trend, cycle, seasonal, and random factor analyses

Market Segment

A market segment profile describes the similarities among potential customers within a segment Explains the differences among people and organizations in different segments

Executive Judgment

A sales forecasting method based on the intuition of one or more executives - Unscientific - Quick and inexpensive Works well in situations where demand is relatively stable - Can be skewed by recent experiences - Use of the past to project the future

Segmentation Variables

Characteristics of individuals, groups, or organizations used to divide a market into segments.

Delphi Technique (surveys)

Creating initial forecasts, submitting them to the company for averaging, then refining.

Market Segment Benefits

Determining most attractive segment or segments Potentially useful information for subsequent marketing decisions

Competitive Assessment

Firms must assess competition already in the segments being considered Market segments that seem attractive based on sales estimates may be less so after competitive assessment

Consumer Markets (B2C)

Purchasers are household members who intend to consume or benefit from purchased products and do not buy products to make profits

Business Markets (B2B)

Individuals or groups that purchase a specific kind of product for resale, direct use in producing other products, or use in general daily operations

Cost Estimates

Maintaining the right marketing mix can be expensive Firms must consider the cost of taking a potential product to market

Market Test

Making a product available to buyers in one or more test areas and measuring purchases and consumer responses.

Geodemographic Segmentation (Geographic Variable)

Market segmentation that clusters people in units (zip codes, neighborhoods) based on lifestyle and demographic information.

Breakdown Approach

Measuring company sales potential based on a general economic forecast

Buildup Approach

Measuring company sales potential by estimating how much of a product a buyer will purchase

Regression Analysis

Predicting sales based on finding a relationship between past sales and one or more independent variables.

Sales Forecast

Sales Forecast: The amount of a product a company expects to sell during a specific period at a specified level of marketing activities - Forecasting methods can be scientific or arbitrary and vary in complexity and expense - Depends on costs, product, market characteristics, time span, purpose of forecast, historical sales data and many other variables Forecasts are used in planning, organizing, implementing and controlling a firm's activities

benefit segmentation

The division of a market according to benefits that consumers want from the product - Different than other segmentation methods because the benefits customers seek are their product needs.

Company Sales Potential

The maximum percentage of market share a firm can expect for a product

Market Density (Geographic Variable)

The number of potential customers within a unit of land area

market potential

The total amount of a product that customers will purchase within a specified period

Micromarketing (Geographic Variable)

a market segmentation approach in which firms focus precise marketing efforts on very small geographic markets.

McDonald's uses a segmentation strategy for its sandwiches based on market characteristics such as age, gender, or income. Which of the following segmentation variables is McDonald's using? a) Demographic b) Geographic c) Psychographic d) Product-related e) Education

a) Demographic

The manager at a local recreational vehicle store, Off-Road Rage, believes the next two years will be difficult because of an economic recession. Using this forecast, he determines the effect on the industry's market potential and then estimates how his company's potential sales will look based on this outlook. This manager is using a _________ approach to estimating sales potential. a) breakdown b) recessionary c) buildup d) pyramid e) dimensional

a) breakdown

Population density and city size are _______ variables used for market segmentation. a) geographic b) demographic c) psychographic d) environmental e) geodemographic

a) geographic

A forecasting method that predicts sales based on relationships between past sales and other variables is called a) regression analysis. b) customer forecasting surveys. c) the Delphi technique. d) random factor analysis. e) time series analysis.

a) regression analysis.

A business advantage of the concentrated targeting strategy for any company is that it a) requires less market research and information. b) requires less intensive analysis of customers' characteristics and needs. c) allows a firm to utilize all of its production capacity. d) maintains the firm's flexibility in moving into other market segments. e) allows a firm to develop a special marketing mix for a single market segment.

allows a firm to develop a special marketing mix for a single market segment.

Intuition and expediency are primary characteristics of which of the following sales forecasting methods? a) Surveys b) Executive judgment c) Cycle analysis d) Market tests e) Industry indicators

b) Executive judgment

What is the main problem with using a market test as a forecasting tool? a) Difficult to interpret b) Expensive c) Inaccurate d) Unacceptable to consumers e) Overused

b) Expensive

Subaru is producing a new crossover van with all-wheel drive. Which of the following would be a likely variable for segmenting the market for this new model? a) Religion b) Geographic location c) Income d) Political views e) Ethnicity

b) Geographic location

__________ describe the similarities among potential customers within a market segment and explain the differences among people in different market segments. a) Market segmentation variables b) Market segment profiles c) Segmentation grids d) Market differentiation indexes e) Market concentrations

b) Market segment profiles

The Sara Lee Company is attempting to forecast sales for a new ice cream cake. To come up with an accurate forecast, Sara Lee places the product in Atlanta supermarkets for a period of four months. In this instance, Sara Lee is using which forecasting method? a) Time series analysis b) Market test c) Executive judgment d) Regression analysis e) Survey

b) Market test

Which of the following variables would most likely be used to segment a business market? a) An attitude of the company's CEO b) The geographic location of the company c) The lifestyle of the company's buying agent d) Net income generated by the company e) Common opinions of the company's employees

b) The geographic location of the company

Often, the Delphi technique is used in conjunction with an expert forecasting survey. The major objective is to a) allow an opportunity to obtain diverse expert opinions. b) allow experts to work separately to reach a consensus as to their forecasts. c) reach an accurate sales forecast through the use of multiple sales forecasting techniques. d) determine if the expert forecasting survey is superior to regression analysis. e) assess the extent to which this year's sales forecast is more accurate than that of previous years.

b) allow experts to work separately to reach a consensus as to their forecasts.

Variables such as geographic location, type of organization, customer size, and type of product usage are used to segment ___________ markets. a) consumer b) business c) government d) international e) most target

b) business

Systems such as PRIZM and Acorn provide companies with lifestyle and demographic information about neighborhoods throughout the United States. This information is used to aid a) behavioristic segmentation. b) geodemographic segmentation. c) market density analysis. d) demographic segmentation. e) geographic segmentation.

b) geodemographic segmentation.

General Electric calculates that the total number of light bulbs sold to consumers in the next year by all light bulb producers is 1 billion, given anticipated marketing efforts by the firms involved. This figure represents the industry's a) sales potential. b) market potential. c) target growth rate. d) sales forecast. e) sales objective.

b) market potential.

If a company segments its market on the basis of their reasons for purchasing a particular product, the primary segmentation variable in use is a) lifestyle. b) motives. c) personality. d) benefit expectations. e) personality attributes.

b) motives.

Dell segments its business markets into small business, corporate, government agencies, K-12 schools, and higher education institutions. The primary segmentation variable used in this example is a) geographic location. b) type of organization. c) secondary product use. d) customer size. e) market potential.

b) type of organization.

Many marketers are concerned about the number of potential customers within a certain area of land because of the different requirements to serve dissimilar areas. What is this segmentation variable called? a) Micromarketing b) Population c) Market density d) MSA e) PMSA

c) Market density

While developing a company sales forecast at Safeway, Barb Herrington discovered a pattern in sales volume over the past five years. She likely used which sales forecasting technique? a) Surveys b) Executive judgment c) Time series analysis d) Market tests e) Regression analysis

c) Time series analysis

The division of a market according to what benefits consumers want from the product is called ______ segmentation. a) behavioristic b) product usage c) benefit d) end-purpose e) advantage

c) benefit

The maximum percentage of market potential that an individual firm can expect to obtain for a specific product is the a) sales forecast. b) market potential. c) company sales potential. d) company sales objective. e) market share goal.

c) company sales potential

Justin Franklin's company is interested in locating areas where the average income is high, the average age range is 25-35 years, and the lifestyles of the people involve extreme adventures and dangerous leisure activities. His company would most likely find possible markets through a) U.S. Census Bureau information. b) geographic segmentation variables. c) geodemographic segmentation. d) climate information. e) psychographic segmentation

c) geodemographic segmentation

Demographic variables such as income and occupation, as well as how people spend their time and the importance of things in their surroundings, are all factors considered in ______ segmentation. a) psychographic b) social class c) lifestyle d) personality e) family life cycle

c) lifestyle

Family life cycle is most typically based on a) income. b) geographic location. c) marital status and age of children. d) occupation. e) buying power.

c) marital status and age of children.

Bethlehem Steel provides steel for a variety of uses to its various customers. Customers have different needs for the steel and thus Bethlehem has to prepare the raw steel differently depending on how customers will use it in their production processes. The primary business segmentation variable in this example is a) geographic location. b) customer size. c) product use. d) customer importance. e) organization classification.

c) product use.

The sales prediction technique based on the correlation between sales and other factors—such as population density, per capita income, or family size—is a) executive judgment. b) time series analysis. c) regression analysis. d) a market test. e) an expert survey.

c) regression analysis.

When evaluating market segments, assessment of competitors is important because a) it is difficult to segment a market when it has multiple competitors. b) an absence of competitors usually creates difficulties in accurately measuring segment sales potential. c) sales estimates may cause a segment to appear to be lucrative, but there may be several competitors that together have a large share of that segment. d) a competitive analysis may lead to confusion as to who are the key competitors. e) competition is generally not a major problem as long as a marketer is aware of it.

c) sales estimates may cause a segment to appear to be lucrative, but there may be several competitors that together have a large share of that segment.

Guess? will be spending $22 million on marketing activities next year and expects to sell 30 million pairs of jeans. These 30 million pairs represent the company's a) sales potential. b) market potential. c) sales forecast. d) market sales. e) selected market.

c) sales forecast.

The buildup approach measure of sales potential a) starts with broad estimates of general economic activity. b) ends with an estimate of a single firm's sales of a specific product. c) starts with forecasts about demand for a specific product within a relatively small area. d) does not use sales estimates. e) is seldom employed by industrial firms.

c) starts with forecasts about demand for a specific product within a relatively small area.

Zerex markets its radiator liquid as a coolant in the South and an antifreeze in the North. Which of the following segmentation variables is Zerex using? a) Demographic b) Psychographic c) Life cycle d) Geographic e) Product use

d) Geographic

Which of the following sales forecasting techniques would generally be most suitable for estimating sales of a new product? a) Executive judgment b) Customer surveys c) Time series analysis d) Market tests e) Regression methods

d) Market tests

When research indicated that Bluetooth's products were not reaching the correct target market, marketers of Bluetooth decided to change from demographic segmentation to psychographic segmentation. Which group of new segmentation variables will Bluetooth now be using? a) Geographic location of customers b) Age, sex, and socioeconomic characteristics c) Social class variables d) Personality characteristics, motives, and lifestyles e) Family life cycle, social class, and religion

d) Personality characteristics, motives, and lifestyles

If Baskin-Robbins calculates that it could sell up to 25 percent of all ice cream cones sold in the United States, this percentage would represent the ice cream marketer's a) target growth rate. b) sales forecast. c) sales objective. d) company sales potential. e) market potential.

d) company sales potential

A marketer that targets customers based on marital status and the presence and age of children is using a) behavioristic segmentation. b) lifestyle variables. c) psychographic variables. d) family life cycle. e) phase of life segmentation.

d) family life cycle.

Estimating the cost of entering a market and focusing on a specific target segment is important because a) cost estimates are crucial to estimating sales potential accurately. b) higher costs will keep other potential competitors from entering that particular segment. c) customers are more likely to be attracted to marketers that invest heavily in the target segment. d) the organization's marketers need to know if they can reach the segment at costs equal to or below competitors' costs. e) higher cost generally ensures long-term success.

d) the organization's marketers need to know if they can reach the segment at costs equal to or below competitors' costs.

The forecasting techniques that assume past sales patterns will continue into the future are all variations of a) regression analysis. b) random factor analysis. c) seasonal analysis. d) time series analysis. e) past sales forecasting surveys.

d) time series analysis.

When using personality characteristics as a market segmentation variable, marketers generally a) conduct personality assessments of their potential target market to determine which personality characteristics they possess. b) use research developed by clinical psychologists to determine which personality characteristics consumers using their products are most likely to have. c) use generic characteristics that all members of the population have. d) use a positively viewed characteristic they assume much of their target market has or would like to have. e) conduct a series of focus groups to determine both the positive and negative characteristics members of their target market are perceived to have.

d) use a positively viewed characteristic they assume much of their target market has or would like to have.

Through marketing newsprint to newspaper publishers and glass manufacturers that use it in packing, International Paper segments its market based on a) customer size. b) psychographics. c) demographics. d) use of product. e) geographic location.

d) use of product.

Which of the following forecasting methods is least dependent on historical sales data? a) Regression analysis b) Trend analysis c) Time series analysis d) Cycle analysis e) A market test

e) A market test

Yvonne and Garret are looking at information about how their organization's products could fit potential customers' needs. This information deals with demographic characteristics, product benefits sought, lifestyles, geographic factors, brand preferences, and usage rates. They are most likely looking at a) the sales force survey results. b) the results of sales forecasting. c) a market trend analysis. d) a market segmentation discrimination analysis. e) a market segment profile.

e) a market segment profile.

Alex Wren of Owens Corning Fiberglass talks to Terry Jones, a homebuilder, to find out how much fiberglass insulation he intends to use in building homes during the next year. Albert then multiplies that number by the total number of builders in the territory. He is using a ___________ approach to measure sales potential. a) multivariable b) use of product c) breakdown d) regression e) buildup

e) buildup

Using the breakdown approach to sales potential, estimates are made a) by referring to specific geographic factors. b) by establishing levels of marketing effort that will be required to achieve specific levels of sales. c) without reference to industry marketing efforts. d) without reference to general economic conditions. e) by starting with general economic conditions.

e) by starting with general economic conditions.

Segmentation variables are usually grouped into four categories: a) demographic, geographic, religion, and income. b) geopolitical, income, behavioristic, and psychographic. c) attitudes, lifestyles, behaviors, and gender. d) geographic, demographic, psychographic, and attitudes. e) demographic, geographic, psychographic, and behavioristic.

e) demographic, geographic, psychographic, and behavioristic.

After an organization has determined which of the many segmentation variables it will use, the next step in the target market selection process is a) evaluating each of the relevant market segments. b) selecting the specific target markets. c) reviewing the appropriate marketing strategy. d) analyzing the interaction between segmentation variables. e) developing market segment profiles.

e) developing market segment profiles.

If Campbell were to offer single serving "Soup for One" packages to small household markets, it would be using segmentation based on a) income. b) ethnicity. c) taste. d) geographic considerations. e) family life cycle.

e) family life cycle.

The psychographic variable that includes numerous characteristics related to people's activities, interests, and opinion is a) motive. b) social class. c) personality. d) stage in family life cycle. e) lifestyle.

e) lifestyle.

The total volume of a product, for all firms in an industry, that would be purchased by specific customer groups within a specified time period at a given level of industry-wide marketing activity, is the a) competitor sales potential. b) sales objective. c) forecasted sales. d) company sales potential. e) market potential.

e) market potential.

Retail-site location analyses, unique product offerings, and special advertising campaigns are all examples of the use of a) market density. b) demographic segmentation. c) behavioristic segmentation. d) environmental segmentation. e) micromarketing.

e) micromarketing.

The amount of product a company expects to sell during a specific period at a specified level of marketing activity is called the a) company sales potential. b) revenue estimate. c) company sales prediction. d) market potential. e) sales forecast.

e) sales forecast.

Relying on executive judgment for forecasting may be adequate when a) levels of marketing efforts put forth by competitors vary considerably. b) recent events give the executive specific impressions of product demand. c) product demand is erratic. d) the executive conducts surveys. e) the executive has considerable experience and product demand is relatively stable.

e) the executive has considerable experience and product demand is relatively stable.

three most commonly used psychographic segmentation variables

personality, motives, and lifestyles

A disadvantage of the concentrated targeting strategy is that a) the firm's financial condition is tied to a single and specialized marketing mix. b) large sales volumes cannot be generated. c) production costs may be higher than with other strategies. d) marketing personnel may become dissatisfied with the limited opportunities provided by this approach. e) marketing costs are often higher than for other strategies.

the firm's financial condition is tied to a single and specialized marketing mix.