Technopreneurship 101

Marketing Plan
Planning
“A systematic process of forecasting the future business
environment and deciding on the most appropriate goals,
objectives and positions for best exploiting that environment.”

• Planning is an activity and a process = formalised

• The marketing PLAN;
“Provides clear and unambiguous statement [of intent] about the strategies
and actions that will be implemented, by whom, when and with what
[anticipated/required] outcomes.”

For Educational Purposes only

 1. Mission
Phase One
– Goal
Planning framework
Setting 2. Corporate Objectives McDonald (2007)

3. Marketing Audit
• Environmental analysis: PESTLE,
Phase Two SWOT
– Situation 4. SWOT Analyses
Review
• Understanding customers: Buyer
Behaviour
5. Assumptions

• Segmentation, targeting and

6. Marketing objectives & = Core
Phase strategies strategy positioning
Three – • 4P’s/ 7P’s Marketing Mix
Strategy 7. Estimated results
Formation
8. Alternative plans & mixes

Phase Four 9. Budget

– Resource
Allocation & 10. 1st yr detailed Measurement
Monitoring implementation plan & Review
Marketing Plan
• A marketing plan is a written plan that is used to guide an
organization’s marketing activities for a period of one year or less.
• It is quite detailed and specific, and it helps an organization
coordinate the activities and people that play a role in marketing.

For Educational Purposes only

Differences between Strategic and Marketing
Planning
• Marketing plans are what most experts call “tactical” or short term.
• However, it is not enough just to have annual marketing plans. Long-
term “strategic” plans are needed.
• These multiyear plans are more general and less detailed than tactical
plans. They ensure that long-term marketing objectives are attained.

For Educational Purposes only

Differences between Strategic and Marketing
Planning
• There must be a close fit between the strategies and objectives of the firm
in the strategic market plan (a long-term marketing plan covering five or
more years).
• Strategic planning attempts to answer three important questions;
• Where are we now?
• What opportunities are emerging in a changing world?
• Where do we want to be in 5 or more year’s time?
• How do we get there?
• What decisions do we have to make now to get to where we want to be?

For Educational Purposes only

 Differences between Strategic and Marketing
Planning
• Strategic planning involves decisions that are made by the management
of an organization as it pursues its mission and objectives.
• These decisions include the types of products to offer and in what
markets to sell them, the allocation of resources to that end, the
establishment of policies and procedures, and the appropriate
distribution of employee responsibilities.
• This decision-making process is influenced by events occurring in the
internal and external environments of the firm.

For Educational Purposes only

Differences between Strategic and Marketing
Planning
• It is a long-term plan to enhance the firm’s competitive position or a plan
that encloses the firm’s primary strategies, especially those related to its
product or services and market.
• While marketing plans take an in-depth look at the organization’s
marketing mix and contain detailed budgets and timetables,
strategic market plans are more concerned with the external environment
and the opportunities and challenges in the medium and long term.
• Marketing plans are also concerned with environment but rather in the
short run.

For Educational Purposes only

Vision and Mission
• Strategic planning should be founded on the mission and the values of
the organization.
• Corporate values drive the purpose and strategy of a company.
• Key areas that shapes the mission or values of the firm include;
• Why a company exists
• What the company believes in
• The competitive position and distinctive competence
• The policies and behavior patterns that underpin the distinctive competence and
value system

For Educational Purposes only

Vision and Mission
• The vision of a firm is expressed in the “mission statement” which
communicates what the company stands for.
• A mission statement is then sets the agenda for the company’s strategy.
• What makes a good mission statement?
• Compelling
• Inspiring
• Clear, measurable objectives
• Concise

For Educational Purposes only

Vision and Mission Examples
• [Semiconductor Equipment] will become a world leader in supplying
lithography automation and productivity enhancement products for
the semi-conductor industry through innovative design and unique
customer insights.
• The mission of [Website Management Technologies] is to help
businesses engaging in e-commerce achieve their sales and customer
service objectives by enabling a better understanding of Web site
visitors’ behavior.

For Educational Purposes only

Benefits of a Marketing Plan
• A marketing plan is one of the most useful tools for any organization. A
written plan has the following five key benefits:
• Activities matched with target markets
• Consistency of objectives and target-market priorities
• Assistance in measuring marketing success
• Continuity in long term planning
• Minimizing the risk through analysis of internal and external environment

For Educational Purposes only

 Activities matched with target markets
• The marketing plan ensures that activities are focused only on chosen
target markets.
• One of the steps involved in writing the marketing plan is detailing the
marketing mix on specific markets.
• This way helps to prevent spending a lot of money on unattractive
target markets.

For Educational Purposes only

Consistency of objectives and target market
priorities
• The plan ensures that the level of effort is consistent with the marketing
objectives for each target market and the relative size of each market.
• Generally, the higher the objectives, the greater the required effort. For
example, it does not make sense for an organization to spend 80 percent
of its marketing budget on a target market that contribute only 20
percent to its sales or profits.

For Educational Purposes only

 Assistance in measuring marketing success
• According to the objectives and achievements, marketing managers
measure and evaluate success.
• A marketing plan plays an important role in
• controlling how the activities are going on and,
• evaluating if the objectives have been achieved.

For Educational Purposes only

Continuity in long-term planning
• Several marketing plans make up one strategic market plan.
• Marketing plans complement strategic market plans and provide a
link between short-and long-term planning.
• They ensure that an organization’s long-term objectives are always
kept in focus.

For Educational Purposes only

Minimizing the risk through analysis of the internal and
external environment
• The marketing plans allow managers to identify the areas of strength
and weaknesses.
• So that an advantage can be taken from the strengths and also
company can minimize the weaknesses. In addition, threats and
opportunities can be assessed.

For Educational Purposes only

For Educational Purposes only
For Educational Purposes only
For Educational Purposes only
For Educational Purposes only
Contents of a Marketing Plan
• There are two parts in the marketing plan. The rationale and
implementation plan.
• The marketing plan rationale explains all of the analysis, assumptions and
decisions on which the marketing plan is based. It describes the target
markets, and marketing objectives selected for the period.
• The implementation plan details the marketing budget, staff
responsibilities, activities, timetable, and methods of controlling,
measuring, and evaluating activities.
• In other words, the function of the implementation plan is to specify all
the required activities, responsibilities, costs, time schedules, and control
and evaluation procedures.
For Educational Purposes only
Stages of A Marketing Plan
Marketing Plan Rationale
1. Executive summary
2. Current marketing situation
3. Business situation analysis
4. Creating the objectives
Implementation Plan
5. Marketing strategy formulation
6. Creating action programs
7. Financial Projections
8. Monitoring and evaluating the plan

For Educational Purposes only

Marketing Plan - Executive summary
• The planning document opens with a short summary of the
plan’s main goals and recommendations.
• In spite of the fact that it appears first, it is actually the final section to
be written. It must be clear, concise and easy to understand.
• Permits senior management to grasp major thrust.
• Briefly states contents of the whole plan.
• Main goals and recommendations.
• Make it dynamic and exciting to capture the reader’s interest.
• Like all other sections, it is written in the third person.
For Educational Purposes only
 Marketing Plan - Executive summary
This section should address a number of issues like
 What is the business concept or model?
 How is this business concept or model unique?
 Who are the individuals starting this venture?
 How will they make money and how much?

(2-3 pages), This section of the plan is prepared after the total plan is
written. Executive summary stimulates the interest of the reader
(employee, supplier, distribute or investor) in the whole document.

For Educational Purposes only

Marketing Plan - Current marketing situation
• It is necessary to gather enough information about the external
company environment in order to form a business and market picture
of current and future pressure and trends.
• First of all, the information collected should form the basis of a PEST
investigation. PEST analysis is an examination of the political,
economic, social and technological changes which may affect the
company and the market.

For Educational Purposes only

Marketing Plan - Current marketing situation
• Following information should be collected as part of the external audit;
• Business/Economic Environment
• Economic - inflation, fuel costs, exchange rates, average salaries.
• Political - taxation, duty, regulation, tourism policies.
• Social - demographics, values, lifestyle.
• Technology - Innovations, new systems.
• Companies - level of investment, takeovers, promotion expenditures, profits.
• Market environment
• This section should present data on the total market – size and growth of the target market.
In addition, data concerning customer needs, perceptions, and buying-behavior trends.
• Competitive situation
• Here major competitors are identified and described in terms of their size, goals, market
share, product quality, marketing strategies etc.

For Educational Purposes only

 Situation Audit
External Macro Environment Micro Environment
Factors Political Competitors
Economic
Suppliers
Social/Cultural
Technological Distributors
Legal Customers/Market Trends
Environmental
(CSR/Green/Ethics)
Internal Position Capability
Factors Financial Situation Organizational Structure
Market Position
Management and
Operations
Marketing Research
Workforce
Products Capability for Change
Pricing
Selling and Distribution
Advertising and Sales Promotion

For Educational Purposes only

Marketing Plan - Current marketing situation
• The information should be gathered on the basis of how they affect the
company.
• Relevant background/facts on firm, sales, costs, the market, profits,
history, growth, products, services, channels/ distribution, share of
market, and competitors.

For Educational Purposes only

Marketing Plan - Business situation analysis
• This is the so-called SWOT analysis. In particular, this is the analysis of
the company’s major;
• Strengths,
• Weaknesses,
• Opportunities
• Threats

For Educational Purposes only

Marketing Plan - Business situation analysis
• Strengths are expressed as inherent advantages in the organization’s
product or operation in relation to competitors. For example,
products with increasing shares of growing markets, location,
architectural style, professional skills of the working people etc. Once
identified, strengths can be promoted to potential customers.
• Weaknesses are opposite the strengths. For example, it may range
from old fashioned products in declining markets to impolite customer
contact staff. Weaknesses and strengths are often matters of
perception rather than “fact” and may be identified with consumer
research only.

For Educational Purposes only

Marketing Plan - Business situation analysis
• Opportunities may arise from elements of the business under direct
control such as particular product. In addition, they may arise from
shifts in the external environment that a firm may exploit. For example,
Club Med seized an opportunity to develop its particular holiday
concepts (freedom, activities) with an image in a way no other operator
matched in the 70s.
• Threats may also be presented by internal elements within the
businesses control or by external events such as exchange rate changes,
rising oil prices or acts of international terrorism.

For Educational Purposes only

Marketing Plan - objectives and targets
• Objectives are a combination of what is expected of the company by its
shareholders or directors.
• The selected target markets should be discussed, along with the
reasons for choosing them. The objectives for each target market
should be spelled out.
• They have to be results oriented, stated in numerical terms, and time
specific.
• At this stage, the plan should briefly review the segmentation approach
used to divide market.

For Educational Purposes only

 product
introduction
or innovation
team sales or
organization market share

Marketing
Objectives projected
advertising profitability

distribution pricing

For Educational Purposes only

Marketing Implementation Plan - Marketing
strategy formulation (what to do)
• At this section, the broad marketing strategy must be outlined.
• This section should cover what target markets will be attracted, the
required positioning strategy to attract these markets and marketing
mix variables that will be used to attract the targeted groups.
• This section outlines broad marketing thrusts to achieve the business
objectives.

For Educational Purposes only

Marketing Implementation Plan - Marketing
strategy formulation (what to do)
• Marketing Strategies
• Select Target Segments
• Marketing Mix --- 4P’s
• Positioning
• Distribution
Strategies
• The Game Plan

For Educational Purposes only

Marketing Implementation Plan - Marketing
strategy formulation (what to do)
Target Segments - Target-Market Profile

Geographics (Ex: Lives within the ZIP codes 97401, 97402 and 97405)

Demogaphics (Ex: Civil Status, Age, # of children, Condominium or home owner, Education
experiences, annual family income)

Psychographics (Ex: Values time and considers it their single most limited resource; Excited
about accepting and using innovative ideas and products; Consistent Web users; Prefer the
Internet over magazines and newspapers for information they trust; Increasing resources
invested into safety and security issues; Beginning to plan for their future.)

Behaviors (Ex: leaders in product selection and respond to the opinions of

the “industry experts” when making purchase decisions; This group can be a powerful, unpaid
sales force resulting from the referral network they build and use; This group will first look to
the Internet to acquire this information.).
For Educational Purposes only
Marketing Implementation Plan - Marketing
strategy formulation (what to do)
• Developing a marketing mix enables an entrepreneur to map out how
to accomplish marketing initiatives.
• The five marketing strategies used to reach a market: product, place,
price, promotion, and people

For Educational Purposes only

Marketing Mix-Product Strategy
• The product strategy deals with the goods or services your business will
provide.
• Product considerations include:
• features and benefits
• branding, packaging, and labeling
• selection
• positioning
• mix
• A product’s brand, package, and label serve as strategies for
maintaining customer loyalty.

For Educational Purposes only

 Marketing Mix-Place Strategy
• The place strategy deals with how you will deliver your goods and services to
customers.
• There are three ways to distribute a product:
•Intensive distribution
•Selective distribution
•Exclusive distribution - placement of a product where its number of sales outlets are limited to one
per area placement of a product where its number of sales outlets are limited to one per area
• Place strategy considerations include:
•channels of distribution
•intensity of distribution
•transportation
•location, layout, and availability

For Educational Purposes only

Marketing Mix-Place Strategy
• To formulate a place strategy, the entrepreneur needs to understand
the channel of distribution.
Channels of Distribution

Direct
Producer Consumer

Indirect
Producer Intermediary Consumer

For Educational Purposes only

Marketing People Strategy
• The people strategy involves assembling, preparing, and maintaining the
people who will help the business achieve success
• How many employees will there be? What will they do?
• What are the skills required to complete job responsibilities?
• What will their hours be (part-time, shift, etc.)?
• What will they be paid?

For Educational Purposes only

Marketing Mix-Price and
Promotion Strategy
• The price strategy is a financial decision and a marketing strategy that
affects the customer’s motivation to buy.
• The promotion strategy is designed to tell potential customers about
a business’s products and their characteristics, benefits, and
availability.

• marketing tactics--activities that are taken to carry out a marketing

plan.

For Educational Purposes only

Marketing Mix-Price and Promotion Strategy
• Pricing is the single most important factor affecting profits.
• Pricing a product/service includes consideration of the following assumptions:
• the customer is central to the business;
• the business operates in a competitive marketplace;
• pricing is a reflection of the demand and others’ prices;
• pricing must be adequate to return a profit to owners.
• Price is what a business gets not what it wants.
• The prices of other products/services limit pricing freedom.
• To set prices:
(1) determine floor (the lowest you are willing to go) and ceiling (the highest price you know of) prices,
(2) evaluate price sensitivities of customers,
(3) select a strategy and
(4) set the price.

For Educational Purposes only

Creating marketing-mix programs (how to do)
• Action programs consist of the program of the activities on four
controllable variables -marketing mix- promotion, distribution,
product, price that are undertaken to influence and motivate buyers to
choose targeted volumes of particular products.
• A marketing-mix program expresses exactly what activities will take
place on a week by week basis for each target market.
• Specific product, promotional, pricing, and distribution tactics / activities.
• Includes timing and calendar

For Educational Purposes only

Creating marketing-mix programs (how to do)
• Specific product, promotional, pricing, and distribution
tactics / activities.
• Includes timing and calendar

For Educational Purposes only

Marketing Strategies and Programs

For Educational Purposes only

Marketing Mix

For Educational Purposes only

For Educational Purposes only
Financial Projections
• Financial Projections (Projected Profit and Loss)
• Builds a supporting budget
• Forecasted sales volume
• Average price and expenses

For Educational Purposes only

Monitoring and evaluating the plan
• It is impossible to have efficient evaluation without first establishing
precise objectives against which to measure results. Then, it would
be possible to monitor results for each market under at least six
headings:
• Weekly flow of bookings against planned capacity.
• Sales response related to any advertising activity.
• Customer awareness of advertising messages measured by research surveys.
• Sales response to any price discounts.
• Sales response to any merchandising efforts by travel agents.
• Customer satisfaction with product quality measured by customer satisfaction
questionnaires.

For Educational Purposes only

Product Positioning – Position in the Market
• The location of a product or service alongside
key competitors in the mind of the consumer
• The way customers perceive a product relative
to competing products
• Refers to the place the product occupies in the
customer’s perceptual map of the market
• A product’s position ultimately depends on the
attitudes of people in the target market.
• Firms will seek to position their products to
increase sales
For Educational Purposes only
Product Positioning – Positional Map
• The visual representation of a brand within
a specific market place showing its
positioning relative to the competition
• Defines the market in terms of the way
buyers perceive key characteristics of
competing products
• Shows how products compete in the mind
of the consumer and suggests how a
product can be positioned to maximize
sales
For Educational Purposes only
Business Strategy - Differentiation
• Have a feature or benefit that nobody else has
• If you’re the only business selling that particular product,
the consumer has no option but to buy from you
• Product Differences should be…..
• Relevant / Important to the buyers • Profitable
• Distinctive • Difficult to copy
• Clear
• Visible
• Communicable
• Possible for the company to produce / engineer

For Educational Purposes only

Business Strategy – Cost Leader / Cheaper
• Compete by being the lowest cost producer
• If you can produce your product / service cheaper, you can sell it cheaper
• As a result, if your product is similar to the competition’s yet it is
cheaper, they will likely buy from you

For Educational Purposes only

For Educational Purposes only
Sales Forecast
• Estimation of sales, in a future period under an assumed set of
economic and other factors
• Sales forecast help an organization to determine accurately the market
demand for products, customer tastes & usage patterns
• It predicts, how much of a company’s particular product can be sold
during a future period under a given market program & assumed set of
factors
• Sales forecasting, according to Cundiff and Still, is “an estimate of sales
during a specified future period which is tied to a proposed marketing
plan and which assumes a particular set of uncontrollable and
competitive forces.”

For Educational Purposes only

Steps in Sales Forecasting

1. Defining the objectives to be achieved.

2. Dividing various products into homogeneous groups.
3. Analysing the importance of various factors to be studied for sales forecasting.
4. Selecting the method.
5. Collecting and analysing the related information.
6. Drawing conclusions from the analysis made.
7. Implementing the decisions taken.
8. Reviewing and revising the sales forecasting from time to time.

Cont….

For Educational Purposes only

Sales Forecasting Methods
• Qualitative Methods
• User Expectations
• Jury of Executive opinion Method
• Sales force Composite
• Delphi technique
• Market test
• Quantitative Methods
• Time series analysis
• Moving average
• Exponential Smoothing
• Regression and correlation analysis

For Educational Purposes only

Qualitative Methods - Users expectation
• Normally carried for industrial products, having less number of customers & product
is well defined.
• Here customer requirements are found out by directly meeting the customers
• Through simples questionnaires
• Advantages:
• Direct contact with customers
• Disadvantage:
• Under/overestimate the requirement without considering the changes in
business environment

For Educational Purposes only

Qualitative Methods - Sales Force Composite
This method is also called BOTTOM-UP approach or GRASS ROOTS approach
• Derived by taking an estimate of expected sales in the forecast period from each
salesperson
• Forecast here is based upon experience and expectations of the sales person
• Advantages:
• Done by salespeople who are closest to market
• Detailed estimates(customer, product, territory)
• Disadvantage:
• salesperson might sometimes over or under estimate
• The salesperson might not consider the overall environment while
forecasting
• Can have familiarity bias

For Educational Purposes only

Qualitative Methods - Jury of Executive opinion
Method
• Oldest, simplest & most widely used method.
• This method includes getting the views of TOP EXECUTIVES regarding
Sales.
• Sales forecasts are either taken by average of all individual opinions or
through discussions
• Executive opinions are based either on some forecasting method or based on
experience, judgement & intuition.
• A study of 150 companies found that 86% companies use this method.

For Educational Purposes only

Qualitative Methods - Jury of Executive opinion
Method
• Advantages:
• Quick and easy
• Less expensive
• Popular among small & mediun type companies

• Disadvantages:
• Unscientific
• Subjective
• Difficult to break down the sales into sub units (region, branches)
• inaccuracies may be there as these people are not in direct contact with the market
• Can have familiarity bias

For Educational Purposes only

Qualitative Methods - Delphi Technique
This method is developed by Rand Corporation during late 1940.
• Experts(within & outside the organization) are asked to forecast the sales of an organization
• Experts are usually from universities, govt. institutions, industry etc
• Opinion of all experts are combined and an average figure is taken out
• Experts are kept informed about the general opinion of the group, so that they an modify
their decision
• This continues till consensus is reached
• Advantages:
• Useful for new products
• Disadvantage:
• Difficulty in getting a panel of experts
• Longer time for getting consensus
• Break down into product territories is not possible

For Educational Purposes only

Qualitative Methods - Market Test
• used for forecasting sales for new product where no historical data is available.
• Here, the product is tested in a limited area to find out about consumer acceptance
of the product
• Based on sales in that particular market, future sales are forecasted
• Generally those cities are chosen which represent the country as a whole
• Customer’s reaction in that particular market is taken as a base for forecasts of
overall sales of the product in the country as a whole
• Advantages:
• Forecasting sales for new products
• Helps co. to decide whether to launch the product nationally
• Disadvantage:
• If the repurchase period is long, it is difficult for the co.to wait for results

For Educational Purposes only

Qualitative Methods - Market Test
3 major methods used are:
• Full blown Test Markets
• Controlled Test Marketing
• Stimulated Test Marketing
• Full Blown Test Markets
• The Company chooses 2 to 6 representative cities, does full promotional campaign, similar to what
would be done at National level.
• Duration varies from few months to 1 yr depending upon repurchase period of new product
• buyers surveys are carried out to know about consumer attitude, usage and satisfaction towards
the product.
• If results show high trails & repurchase rate product is launched nationally
• If results show high trail & low repurchase rate product is redesigned or dropped
• If results show low trail & high repurchase rate product is acceptable
• If results show low trail & low repurchase rate product is left out permanently

For Educational Purposes only

Qualitative Methods - Market Test
• Controlled Test Marketing:
• Company hires a research firm & gets the panel of stores at specified geographical location
• Research firm delivers the new product to the panel stores, arranges for the promotion at stores &
measures the sales also.
• Research form also interviews the sample consumers to know the perception about the new product.
• Stimulated Test Marketing:
• In this 30-40 shoppers are selected based upon their brand Familiarity, preference in a particular
product category (Ex: Babycare)
• They are shown print advertisements & commercials of well know brands and also of new product.
• The shoppers are given small amount of money & asked to buy any item in the store.
• Researches notes how many buy the new product & how many competing product
• Later consumers are interviewed to find reasons for buying or not buying after usage of product
their satisfaction Level &repurchase intention
• New product is not exposed to competitors

For Educational Purposes only

Qualitative Methods - Market Test
• For industrial products the test marketing is done by:
• Alpha testing(within the organization)
• Beta testing(outside the organization)

• Example: infosys did beta testing for its banking software, to check if it’s fit for
multiple billion dollar US market
• Another method cos can use is Industry Trade Shows

For Educational Purposes only

Quantitative Methods - Time Series Analysis/ Decomposition
method
• Here future trends are estimated based on organization's past performance
• Method normally used for long term forecasts i.e. 10yrs & above
• Sales are broken down into 4 major components
• Trends
• Cyclic variations
• Seasonal
• Erratic events
• Sales = T X C X S X I where T=Long term variations, C=Cyclical variations,
S=Seasonal changes, I=Irregular/unexpected changes in environment
• Companies like Coca Cola use this method.

For Educational Purposes only

Quantitative Methods - Time Series Analysis/ Decomposition
method
• Assuming that previous yrs sales have been broken down as follows:
• Growth of 3% due to population(trend)
• Increased terrorist activities sales are expected to reduce sales by 5%(erratic event)
• 10% reduction in sales due to recession in demand(cyclic)
• 15% increase due to festive season in last quarter (seasonal)
• Sales for 2009 were 956 million
• Forecast for the next sales are:
• Trend component shows sales will be 985(956*1.03)
• Sales reduced due to erratic component will be 936(985*.95)
• Sales reduced due to cyclic component will be 842(936*.90)
• Quarterly sales will be 210(842/4)
• Increase in sales in last quarter 242(210*1.15)
• Sales in rest of 3 quarters 200 million (842
• Advantages:
• Conceptually sound
• Disadvantage:
• Difficult to break the data into various components

For Educational Purposes only

Quantitative Methods - Moving Average
• Sales are forecasted based on sales of previous year.
• Average of sales for several periods is used for projecting future sales.
• when a forecast is developed for next period, the sales in the oldest period is dropped from the average and is replaced
by sales in the newest period, hence the name is moving average

• Formula:
• Sales forecast for next yr = actual sales for past 3 or 6 yrs/no of yrs(3 or 6)
• If company operates in stable environment 2 or 3 yr average is most useful
• If a firm. In a industry operates in cyclic variations, the moving average should use data equal to length of cycle
• Advantages:
• Relatively simple
• Easy to calculate
• Widely used for short term/medium term sales forecasts

• Disadvantages:
• Cannot predict long term sales forecasts accurately
• Historical data is required
• Unable to predict the upturn or down turn in market

For Educational Purposes only

 Moving Averages forecast
Year Actual sales 3 yr moving avg 6 yr moving
1997 840

1998 880

1999 864

2000 832 861

2001 862 858

2002 948 852

2003 956 880 871

2004 922 890

For Educational Purposes only

Quantitative Methods - Exponential Smoothing
• It is refinement of moving average method.
• Under this method greater weightage is attached to sales in recent periods compared to sales of
earlier periods
• Best suited for short term forecasting when market is relatively stable.
• Usually of great help in updating quarterly forecasts.
• Sales forecast for next year =(L)actual sales this yr + (1-L) this yr sales forecast
where L is smoothing or probability weighting factor

Sales of 2004 will be 0.2*956+0.8*880=895

• Advantages:
• Simple to operate
• Useful when data has a trend or seasonal pattern
• Disadvantage:
• Smoothing constant is arbitrary
• Long term & new product forecasting is not possible

For Educational Purposes only

Quantitative Methods - Ratio/Naïve method
• Based upon the assumption that what happened in immediate past will
happen in immediate future
• Sales forecast fo next year=actual sales for this year*(actual sales of this
yr/actual sales of last yr)
Sales for 2004 will be 956*(956/948)=964 million
• Advantages:
• SIMPLE TO CALCULATE
• Requires less data
• Good for short term forecasts
• Disadvantage:
• Accuracy will be less if past sales have fluctuated considerably

For Educational Purposes only

Selecting a forcasting method
• Accuracy
• For short term forecasts exponential method is accurate for
long term regression analysis is useful
• Costs
• Type of data available
• Requirement of software
• Experience of the company

For Educational Purposes only

How to increase forecasting accuracy
• Use multiple forecasting Methods
• Identify suitable method
• Regression analysis
• Obtain a range of forecasts
• Minimum estimate
• Maximum
• Intermediate

• Use software tools

For Educational Purposes only

Difficulties associated with Forecasting
• Lack of qualified & trained personnel
• Changing consumer attitudes
• Fashion & fads
• Lack of adequate sales history

For Educational Purposes only

Factors affecting or Influencing sales forecasting

1. Business Environment

2. Conditions within the industry

3. Internal Conditions of the business Enterprise

4. Socio Economic Conditions

5. Factors Affecting Export Trade

For Educational Purposes only

References
• Kotler, P.; Bowen, J. and Makens, J. (1999). Marketing for Hospitality
and Tourism (2nd ed.). Prentice Hall: NJ.
• Kotler, P. and Armstrong, G. (2006) Principles of Marketing (11th ed.).
Prentice Hall: NJ.
• Middleton, V. T. C. (2004) Marketing in Travel and Tourism (3rd ed).
Elsevier: Oxford.
• Middleton, V. T. C.; Fyall, A.; Morgan, M. And Ranchhod A. (2009).
Marketing in Travel and Tourism (4th ed). Butterworth-Heinemann:
Oxford.

For Educational Purposes only