Market Analysis Fundamentals

Market Analysis

• Available Market: The set of consumers with interest, income, and access to a product or service.

• Target Market: The portion of the qualified available market a company aims to reach. This includes consumers who are currently buying the product.

• Market Demand: The total amount of a product or service that would be bought by a specific group in a defined area and time.

• Market Forecast: A core element of market analysis, projecting future market characteristics and trends within a target market.

• Market Potential: The upper limit of market demand when marketing effort approaches infinity in a given market environment.

• Company Demand: The estimated portion of total market demand a company expects in a specific period based on how their products are perceived compared to competitors. Factors include pricing, communications, and services.

• Company Sales Forecast: The projected sales based on planned marketing and a specific market environment.

• Sales Quota: A sales target for a specific product line, division, or salesperson. It often exceeds estimated sales for motivation.

• Sales Budget: A conservative sales estimate used for making decisions about purchases, production, and cash flow. It typically falls below the sales forecast to minimize excessive risk.

• Company Sales Potential: The upper sales limit a company can reach given its marketing effort in relationship to competitors. The maximum limit of market demand equals the company's potential market sales.

Market Forecasting Methods

• Market-Build Up Method: Identifies all potential buyers and estimates individual purchases to determine overall market potential.

• Forecasting: Assessing anticipated buyer actions based on known conditions. This encompasses analyzing present and future financial factors.

• Surveys: Gather data by inquiring about consumer expectations and financial situations.

• Expert Opinion: Gather forecasts from professionals (dealers, consultants, suppliers); useful for obtaining perspectives.

• Past-Sales Analysis: Forecasting based on prior sales data.

Sales Analysis Methods

• Time-Series Analysis: Separates a series into components (trend, cycle, seasonal, erratic) to project future sales.

• Exponential Smoothing: Projects future sales by combining historical and most recent data, weighted towards the more recent.

• Statistical Demand Analysis: Studies how factors (like income, expenditures, and price) affect sales figures.

• Econometric Analysis: Analyzes a system of equations to statistically determine the different parameters.

• Market-Test Method: Directly testing a product/service in a new channel, necessary when extensive data or experts are scarce.