Page 108 - Marketing Management

COLLECTING INFORMATION AND FORECASTING DEMAND | CHAPTER 3 85

Forecasting and Demand

Measurement

Understanding the marketing environment and conducting marketing research (described in
Chapter 4) can help to identify marketing opportunities. The company must then measure and
forecast the size, growth, and profit potential of each new opportunity. Sales forecasts prepared
by marketing are used by finance to raise cash for investment and operations; by manufacturing
to establish capacity and output; by purchasing to acquire the right amount of supplies; and by
human resources to hire the needed workers. If the forecast is off the mark, the company will face
excess or inadequate inventory. Since it’s based on estimates of demand, managers need to define
what they mean by market demand. Although DuPont’s Performance Materials group knows
DuPont Tyvek has 70 percent of the $100 million market for air-barrier membranes, they see
greater opportunity with more products and services to tap into the entire $7 billion U.S. home
construction market. 52

The Measures of Market Demand
Companies can prepare as many as 90 different types of demand estimates for six different product
levels, five space levels, and three time periods (see Figure 3.2). Each demand measure serves a
specific purpose. A company might forecast short-run demand to order raw materials, plan
production, and borrow cash. It might forecast regional demand to decide whether to set up
regional distribution.
There are many productive ways to break down the market:
• The potential market is the set of consumers with a sufficient level of interest in a market
offer. However, their interest is not enough to define a market unless they also have sufficient
income and access to the product.
• The available market is the set of consumers who have interest, income, and access to a
particular offer. The company or government may restrict sales to certain groups; a
particular state might ban motorcycle sales to anyone under 21 years of age. Eligible
adults constitute the qualified available market—the set of consumers who have interest,
income, access, and qualifications for the market offer.
• The target market is the part of the qualified available market the company decides to
pursue. The company might concentrate its marketing and distribution effort on the
East Coast.
• The penetrated market is the set of consumers who are buying the company’s product.

World |Fig. 3.2|
Space U.S.A.
Level Region Ninety Types of
Territory
Customer Demand Measurement
(6 × 5 × 3)
All sales

Industry sales
Company sales
Product
Level
Product line sales
Product form sales

Product item sales
Short run Medium run Long run
Time Level