Pricing Studies and Market Potential: Research for Profit-Oriented Pricing

Pricing Studies:

Research can be used to evaluate alternative price approaches for new products before launch or for any proposed changes in prices.

Gabor and Grainger Method:

Different prices for a product are presented to respondents who are then asked if they would buy. A 'buy-response' curve of different prices, with the corresponding number of affirmative purchase intentions, is produced.

Multibrand-Choice Method:

Respondents are shown different sets of brands in the same product category, at different prices, and are asked which they would buy.

Research for profit-oriented pricing

Research for share-oriented pricing

Quantitative approaches

Market Potential:

Maximum total sales level that can be reached in a certain market. It contributes to the overall sales planning process, assigning of marketing budgets, definition of sales territories, and establishing of sales quotas.

Direct Information Method: Real sales of the industry, % by company, historical growth, etc.

Inferred Information: Combination of several macro and microeconomic indexes. Specific surveys (Habits, Buying intentions, brand switching, etc.)

Secondary Sources + Ad Hoc Primary Quantitative Studies

Sales Forecasting and Sales Quotas:

Demand of the product and the profits it will bring. Basis for all planning and control of the company.

Qualitative Methods:

• Jury of executive opinion
• Sales force estimates
• Surveys of customer intentions
• Delphi approach

Quantitative Methods:

• Time series extrapolation
• Trend projection
• Moving average
• Exponential smoothing
• Seasonal and cyclical indexes
• Regression models

Combination of qualitative and quantitative methods

Mechanics of Sales Forecasting:

• Adding new products/customers
• Loading actuals
• Retrieving and validating data
• Formatting data into a helpful view for forecasting
• Identifying changes since last time
• Comparing last actuals with forecast to identify big errors
• Working out forecast VS previous, Last Yr, Budget, etc.
• Finding out what caused peaks and troughs in history
• Consolidating for top-down view
• Distribution/giving visibility

Sales Analysis:

Sales analysis is the detailed examination of a company's sales data and involves assimilating, classifying, comparing, and drawing conclusions. It consists of measuring and evaluating actual sales in relation to goals.

Accumulation of sales analysis information:

• Product lines
• Geographic areas
• Customer classes
• Order sizes
• Time periods
• Methods of sale
• Organizational units
• Sales representatives

Tools:

• Sales-variance analysis: measures the relative contribution of different factors to a gap in sales performance.
• Microsales analysis: looks at specific products, territories, and so forth that failed to produce expected sales.

Uses of Sales Analysis:

The major use for sales analysis is to detect strengths and weaknesses in the sales effort. It shows who the largest customers are, how much is being sold, and where sales are most likely to occur.

Several major broad applications of sales analysis follow:

• Establishment of sales forecasting system
• Development of sales performance measures
• Evaluation of market position
• Production planning and inventory control
• Maintaining appropriate product mixes
• Modifying the sales territory structure
• Planning sales force activities
• Evaluation of salespeople's performance
• Measuring the effect of advertising and other sales promotional activities
• Modifying channels of distribution
• Evaluating channels of distribution