marketing strategy assessing & estimating market demand

Marketing Strategy

Mostafa Ewees (PhD)Stanford University at California

Assistant Professor at German University in Cairo (GUC) EDUCATIONAL CONSULTANT

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Assessing & Estimating Market Demand

Agenda

• The marketing minute (or five):▫ Jessica▫ Muzghan

• Class objectives for this session

• Some theory

• Introduction to Contadina case:▫ Richard▫ Casey

• The Nestle Refrigerated Foods – Contadina Case

• Homework for next class

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The Marketing Minute

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Class objectives• Compare and contrast the different methods of

calculating and forecasting market demand estimates.• Illustrate and evaluate the new product development

process for consumer packaged goods.• Illustrate market research techniques employed to

gauge consumer preferences and demand.• Analyze and interpret research findings to determine

market acceptance for a product.• Identify the different stages in the consumer decision-

making process. • Explain how marketers may implement effective

marketing strategies to influence the decision outcome at each stage of the consumer decision-making process.

Our perspective in this class

The Chain of Marketing

Productivity

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Understanding Customer Behavior

Opportunity Assessment

Marketing Strategy

Marketing Assets

Segmentation

Targeting

Positioning

4Ps:. Product. Price. Distribution. PromotionFinancial Position

The Chain of Marketing Productivity

Some theory

Assessing & Estimating Market

Demand

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Market definitionsMarket demand – total volume that would be bought

by:a defined customer groupin a defined geographical area in a defined time period in a defined marketing environment under a defined marketing program

Market potential – limit approached by market demand as industry marketing expenditures approach infinity for a given marketing environment

Company demand – company’s estimated share of market demand at alternative levels of company effort in a given time period.

Methods for market demand assessment

•Estimates provided by information suppliers (e.g. AC Nielsen)▫Point of sale store scanner data▫Consumer panel data Not available in all the countries Normally expensive

•Analogy method▫Extrapolate from the relationship between

indicators and demand in another country▫What indicators to use?▫Which country to use as comparison?

Methods for market demand assessment

•Top-down: Chain ratio method▫String chain of percentages▫Country data to product-level data

•Bottom-up approach▫Start with: What is required for consumer

to buy product? Identify all potential buyers in each market and estimate their potential purchases

•Cross-sectional regression analysis•Judgmental methods (e.g. composite of

sales force opinions, expert opinions)

Recommendations for market demand assessment

• Simpler methods are frequently preferred• Use several methods simultaneously• Understand why differences may occur• Do a sensitivity analysis• Use interval as opposed to point estimates• Develop customized indicators which are

specific to the product-market in question• Favor observations of behavior over reports

of opinion Don’t be mislead by the numbers! Make

sure you know the reasoning behind them.

The Product Development Process

Concept Development and Testing

Marketing Strategy

Development

Idea Screening

Idea Generation

AnalysisSales, Costs,

Profits

Product Development

MarketTesting

Commerciali-zation

•Unaware•Aware•Interested•Consider•Trial•Repeat

Consumer Decision Making – Hierarchy of Effects Model

Analyzing Consumer Preferences – Concept Testing

• Presenting the product concept, symbolically or physically, to target consumers and getting their reactions▫ Communicability (clear benefits) and believability

▫ Need level – does the product solve a problem of fill a need

▫ Gap level – do other products currently meet this need and satisfy you?

▫ Perceived value – is the price reasonable in relationship to value?

▫ Purchase intention

▫ Who would use this product, when and how often

• Relatively inexpensive, easily understood but:▫ Main problem: If consumers rate the product concept poorly,

how do we fix it?

Analyzing Consumer Preferences – Conjoint Analysis

• Products as a bundle of attributes• Estimate attribute utilities (weights) by

decomposing overall product preference ratings

• Basic idea:▫ By forcing consumers to make trade-offs among

product attributes, we can determine the value of each attribute considered individually.

• Main Steps:▫ Define the product concept▫ Define the relevant attributes; use focus groups and

depth interview Attributes should be actionable

Analyzing Consumer Preferences – Conjoint Analysis

• Main steps:▫ Define the levels of each attribute

Look for extremes (consult R&D) Look for saturation effects (focus groups and interviews)

▫ Choose a sample size and respondent type▫ Perform study▫ Interpretation, and further study

Generate “Ideal” products Generate Elasticities

Value systems are estimated at the individual level Can be useful method for defining market segments based

on differing attributes of importance

The case

Nestle Refrigerated Foods

Contadina

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Would you launch?

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Would you launch?

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Nestle Refrigerated Foods: Contadina

1. Using the BASES model described in Exhibit 9, forecast the estimated demand (trial and repeat) for the two Pizza options under consideration.

2. What can one learn from Exhibits 13, 14, 15?

3. How does the pizza concept test data (Exhibits 19, 20, 21) compare to the pasta concept test data (Exhibit 6)?

4. What is your reading of Exhibits 23 and 24 (include Exhibit 18 if you wish)?

5. In general, how would you compare the pizza opportunity to the pasta opportunity? What are the similarities? Differences?

6. Why was the pasta product so successful?

7. Would you launch the pizza?

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Here I am, stuck in the middle with you?

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What Nestle Refrigerated Foods did next

•Cunliffe launched Contadina Pizza on a national basis without the benefit of a test market

•Product performed below expectations in sales, market share, and profitability

•The marketing mix was changed, but sales did not improve

•Due to inflexible manufacturing capacity, the price could not be cut

•Pricing and product positioning were the main reasons for the product’s subsequent failure

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Class objectives• Compare and contrast the different methods of

calculating and forecasting market demand estimates.

• Illustrate and evaluate the new product development process for consumer packaged goods.

• Illustrate market research techniques employed to gauge consumer preferences and demand.

• Analyze and interpret research findings to determine market acceptance for a product.

• Identify the different stages in the consumer decision-making process.

• Explain how marketers may implement effective marketing strategies to influence the decision outcome at each stage of the consumer decision-making process.

Homework for next classDelivering & Capturing Customer Value

Read: Major Sales: Who Really does the Buying (HBR)

Case: Salesoft (HBS case)The second of eight cases eligible for write-up

Case intro: Lanz CookNiki Craig

Marketing Minute: Renee JohnsonAtif Zaidi

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