Questions:1.What is market analysis?

2.What might be analysed?

3.Why is it so important to businesses?

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Answers:1.Detailed examination of the features of a market.

2.Size, value, growth, segments, competition.

3.Predict future trends, identify patterns in sales, gather evidence for devising new strategies.

Analysing Markets and Marketing

By the end of the lesson you should be able to:

1.Explain the reasons for market analysis.

2.To identify and use different methods for analysing markets.

3.Assess how businesses use their own marketing data to analyse markets.

Learning Objectives

What methods can a business use to predict

what is going to happen in the future?

Fig 1. Graph show wild fluctuations Fig 2. The same graph showing the underlying trend

Moving Averages

Data covering a period of time may be subject to underlying trend:

Sunday, 6 April 2008 The trend itself

Cyclical fluctuations

Random fluctuations

Moving Averages

What do they help businesses find? Underlying trend Predict future trends Moving averages smooth out

data

Moving averages plot the trend of sales on a weekly, monthly or quarterly basis.

Moving Averages

Annual sales of Clippity Clocks Ltd — clock manufacturer

Year Clock sales (£000’s)

Three-year moving total

Three-year moving average

2000 1,500 — —

2001 1,550 4,550 ÷ 3 = 1,517

2002 1,500 4,700 ÷ 3 = 1,567

2003 1,650 4,725 ÷ 3 = 1,575

2004 1,575 4,820 ÷ 3 = 1,607

2005 1,595 4,870 ÷ 3 = 1,623

2006 1,700 5,100 ÷ 3 = 1,700

2007 1,805 5,270 ÷ 3 = 1,757

2008 1,765 5,470 ÷ 3 = 1,823

2009 1,900 5,545 ÷ 3 = 1,848

2010 1,880 —

Example

Complete Question 1 on the moving averages worksheet.

Annual sales of Crazy Eyes - Answers

Year Sales(£000’s

)

Three-year moving total Three-year moving average

2001 400 - -

2002 600 1,700 ÷ 3 566.66

2003 700 1,950 ÷ 3 650.00

2004 650 2,050 ÷ 3 683.33

2005 700 2,200 ÷ 3 733.33

2006 850 2,500 ÷ 3 833.33

2007 950 3,000 ÷ 3 1,000.00

2008 1200 3,050 ÷ 3 1,016.66

2009 900 3,300 ÷ 3 1,100.00

2010 1200 —

What is extrapolation? Using past and present

data t0 make a prediction of future trends.

If businesses assume that this trend will continue, future sales figures can be predicted.

What are the benefits/ drawbacks?

Extrapolation

Benefits: Help with marketing and

distribution strategies, help set sales targets, budgets, workforce and production planning.

Drawbacks: In high-technology, fast

paced or dynamic markets – extrapolation is less useful or misleading.

Year 00 01 02 03 04 05

Average daily sunshine (hours) (x)

3.96 4.15 3.75 4.00 4.80 4.75

Sales of sun cream (£m) (y)

32 37 32 33 40 40

The following data show the average daily sunshine (hours) over the past 6 years and the amount spent on sun cream (£) during the same period.

Plot this data on a scatter graph

What do you notice?

A statistical technique used to establish the strength of the relationship between two variables.

Correlation

Positive Correlation

x

x

x

x

x

x

x

x

x

Sales of Blu-ray players

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f B

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ay d

iscs

Negative Correlation

x

x

x

x

x

x

x

x

x

Average household income

Sal

es o

f T

esco

Val

ue p

rodu

cts

Zero Correlation

x

x

x

x

x x

x

x

x

x

x

x

x

Sales of stamps

Sal

es o

f lu

xury

car

s

Correlation Skiwear Advertising and Sales

Correlation between skiwear advertising and sales

What correlation would you expect from the following?1.Baked bean sales and sofa sales2.Unemployment and sofa sales3.House sales and sofa sales

Positive or Negative?

Pros Cons

Identify relationship between variables

Shows link not cause and effect

Inform decisions e.g. marketing expenditure

Strong correlation may be caused by other factors

Correlation

What are the Pros and Cons to correlation?

What is test marketing? A firm will replicate the

elements of product launch including promotion, distribution and price, to a geographic region or demographic group to judge the viability of the product in the market before a full scale launch.

Can you think of any possible drawbacks to this method?

Test MarketingUsing own

marketing data

How would primary research be used? Could be used in decision-

making. Determine future marketing

campaigns.

Why might marketing data be incorrect or misleading?

Primary ResearchUsing own

marketing data

How can firms use IT to collect and analyse data? Businesses can now collect

data through store cards, online questionnaires or blogs.

Write down one benefit and one drawback to collecting and analysing data in this way.

The use of information technology in analysing

markets

Benefits:Information processed

quickly, build an electronic database, profile of customers.

Drawbacks:Information overload can slow down the decision making process, quick

access to information may cause decision-makers to

over react.

Complete the case study based on a blooming business (AQA P63).

A blooming business

Draw a correlation diagram to show a positive

correlation.

What can you remember?

What is a drawback of test marketing?

What can you remember?

Draw a correlation diagram to show a negative

correlation.

What can you remember?

What is meant by extrapolation?

What can you remember?

What is the purpose of calculating moving

averages?

What can you remember?

What is a benefit of using IT to analyse markets?

What can you remember?

By the end of the lesson you should be able to:

1.Explain the reasons for market analysis.

2.To identify and use different methods for analysing markets.

3.Assess how businesses use their own marketing data to analyse markets.

Learning Objectives