Page 113 - Marketing Management

90 PART 2 CAPTURING MARKETING INSIGHTS

relatively more developed than the category in Seattle. Portland’s BDI is 65, which means the brand
is relatively underdeveloped there.
Normally, the lower the BDI, the higher the market opportunity, in that there is room to grow
the brand. Other marketers would argue instead that marketing funds should go into the brand’s
strongest markets, where it might be important to reinforce loyalty or more easily capture addi-
tional brand share. Investment decisions should be based on the potential to grow brand sales.
Feeling it was underperforming in a high-potential market, Anheuser-Busch targeted the growing
Hispanic population in Texas with a number of special marketing activities. Cross-promotions
with Budweiser and Clamato tomato clam cocktail (to mix the popular Michiladas drink), spon-
sorship of the Esta Noche Toca concert series, and support of Latin music acts with three-on-three
soccer tournaments helped drive higher sales. 56
After the company decides on the city-by-city allocation of its budget, it can refine each city al-
location down to census tracts or zip 4 code centers. Census tracts are small, locally defined statis-
tical areas in metropolitan areas and some other counties. They generally have stable boundaries
and a population of about 4,000. Zip 4 code centers (designed by the U.S. Post Office) are a little
larger than neighborhoods. Data on population size, median family income, and other characteris-
tics are available for these geographical units. Using other sources such as loyalty card data,
Mediabrands’s Geomentum targets “hyper-local” sectors of zip codes, city blocks, or even individ-
ual households with ad messages delivered via interactive TV, zoned editions of newspapers, Yellow
Pages, outdoor media, and local Internet searches. 57

INDUSTRY SALES AND MARKET SHARES Besides estimating total potential and area
potential, a company needs to know the actual industry sales taking place in its market. This means
identifying competitors and estimating their sales.
The industry trade association will often collect and publish total industry sales, although it
usually does not list individual company sales separately. With this information, however, each
company can evaluate its own performance against the industry’s. If a company’s sales are increas-
ing by 5 percent a year and industry sales are increasing by 10 percent, the company is losing its
relative standing in the industry.
Another way to estimate sales is to buy reports from a marketing research firm that audits total
sales and brand sales. Nielsen Media Research audits retail sales in various supermarket and drug-
store product categories. A company can purchase this information and compare its performance
to the total industry or any competitor to see whether it is gaining or losing share, overall or brand
by brand. Because distributors typically will not supply information about how much of competi-
tors’ products they are selling, business-to-business marketers operate with less knowledge of their
market share results.

Estimating Future Demand

The few products or services that lend themselves to easy forecasting generally enjoy an absolute
level or a fairly constant trend, and competition that is either nonexistent (public utilities) or sta-
ble (pure oligopolies). In most markets, in contrast, good forecasting is a key factor in success.
Companies commonly prepare a macroeconomic forecast first, followed by an industry fore-
cast, followed by a company sales forecast. The macroeconomic forecast projects inflation, unem-
ployment, interest rates, consumer spending, business investment, government expenditures, net
exports, and other variables. The end result is a forecast of gross domestic product (GDP), which
the firm uses, along with other environmental indicators, to forecast industry sales. The company
derives its sales forecast by assuming it will win a certain market share.
How do firms develop their forecasts? They may create their own or buy forecasts from outside
sources such as marketing research firms, which interview customers, distributors, and other knowl-
edgeable parties. Specialized forecasting firms produce long-range forecasts of particular macroenvi-
ronmental components, such as population, natural resources, and technology. Examples are IHS
Global Insight (a merger of Data Resources and Wharton Econometric Forecasting Associates),
Forrester Research, and the Gartner Group. Futurist research firms produce speculative scenarios;
three such firms are the Institute for the Future, Hudson Institute, and the Futures Group.
All forecasts are built on one of three information bases: what people say, what people do, or what
people have done. Using what people say requires surveying buyers’ intentions, composites of sales
force opinions, and expert opinion. Building a forecast on what people do means putting the product