Page 168 - Foundations of Marketing

Target Markets: Segmentation and Evaluation | Chapter 5 135

the company and the market, experts prepare and present forecasts or answer questions. Using
experts is a quick way to get information and is relatively inexpensive. However, because they
work outside the fi rm, these forecasters may be less motivated than company personnel to do
an effective job.
A more complex form of the expert forecasting survey incorporates the Delphi technique.
In the Delphi technique , experts create initial forecasts, submit them to the company for
averaging, and have the results returned to them so they can make individual refi ned forecasts.
When making calculations using the Delphi technique, experts use the averaged results to
eradicate outliers and to refi ne predictions. The procedure may be repeated several times until
the experts, each working separately, reach a consensus. Because this technique gets rid of
extreme data, the ultimate goal in using the Delphi technique is to develop a highly reliable
sales forecast.

Time Series Analysis

With time series analysis , the forecaster uses the firm’s historical sales data to discover Delphi technique A procedure
a pattern, or patterns, in sales over time. If a pattern is found, it can be used to forecast in which experts create initial
sales. This forecasting method assumes that past sales patterns will continue into the future. forecasts, submit them to the
The accuracy, and thus usefulness, of time series analysis hinges on the validity of this company for averaging, and
then refine the forecasts
assumption.
In a time series analysis, a forecaster usually performs four types of analyses: trend, time series analysis
cycle, seasonal, and random factor. Trend analysis focuses on aggregate sales data, such as A forecasting method that uses
historical sales data to discover
the company’s annual sales fi gures, covering a period of many years to determine whether
patterns in the firm’s sales over
annual sales are generally rising, falling, or staying about the same. Through cycle analysis ,
time and generally involves
a forecaster analyzes sales fi gures (often monthly sales data) for a three- to fi ve-year period
trend, cycle, seasonal, and
to ascertain whether sales fl uctuate in a consistent, periodic manner. When performing a random factor analyses
seasonal analysis , the analyst studies daily, weekly, or monthly sales fi gures to evaluate the
trend analysis An analysis that
degree to which seasonal factors, such as climate and holiday activities, infl uence sales. In a
focuses on aggregate sales data
random factor analysis , the forecaster attempts to attribute erratic sales variations to random, over a period of many years
nonrecurring events, such as a regional power failure, a natural disaster, or political unrest in a to determine general trends in
foreign market. After performing each of these analyses, the forecaster combines the results to annual sales
develop the sales forecast. Time series analysis is an effective forecasting method for products cycle analysis An analysis of
with reasonably stable demand, but not for products with erratic demand. sales figures for a three- to five-
year period to ascertain whether
Regression Analysis sales fluctuate in a consistent,
periodic manner
Like time series analysis, regression analysis requires the use of historical sales data. In seasonal analysis An analysis
regression analysis , the forecaster seeks to find a relationship between past sales (the depen- of daily, weekly, or monthly
dent variable) and one or more independent variables, such as population, per capita income, sales figures to evaluate the
or gross domestic product. Simple regression analysis uses one independent variable, whereas degree to which seasonal
factors influence sales
multiple regression analysis includes two or more independent variables. The objective of
regression analysis is to develop a mathematical formula that accurately describes a relation- random factor analysis
An analysis attempting to
ship between the firm’s sales and one or more variables. However, the formula indicates only
attribute erratic sales variations
an association, not a causal relationship. Once an accurate formula is established, the analyst
to random, nonrecurrent events
plugs the necessary information into the formula to derive the sales forecast.
regression analysis A method
Regression analysis is useful when a precise association can be established. However,
of predicting sales based on
a forecaster seldom fi nds a perfect correlation. Furthermore, this method can be used only
finding a relationship between
when available historical sales data are extensive. Thus, regression analysis is not useful for
past sales and one or more
forecasting sales of new products. independent variables, such as
population or income
Market Tests market test Making a product
available to buyers in one or
A market test involves making a product available to buyers in one or more test areas and more test areas and measuring
measuring purchases and consumer responses to the product, distribution, promotion, and purchases and consumer
price. Test areas are often mid-sized cities with populations of 200,000 to 500,000 , but they responses to marketing efforts

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