Agriculture Reference
In-Depth Information
The
Delphi approach
provides another useful tool for developing sales forecasts.
Here, a panel of experts is asked to develop a forecast for the area of interest. These esti-
mates are then pooled, reviewed, and any differences across the experts studied. The estima-
tion process is repeated until a
consensus forecast
is achieved. This approach can be very
useful when a forecast is needed quickly. The Delphi approach is also useful as a means to
evaluate forecasts developed using other methods. Of course, experts can be wrong and the
perspective of the panel members must be carefully considered when evaluating an expert
opinion or Delphi forecast. This same method can also be used for forecasts of the general
economic environment and the total market.
In some situations, especially with new products, a
test market
provides a useful way to
collect data on potential sales. Here, an experiment is set up by selecting a test city or area
with characteristics similar to the target market. The product is introduced, and the sales
results are measured. These results are then generalized to the target market of interest.
Such information is valuable as it refl ects actual consumer purchase decisions and not just
attitudes toward purchase decisions as might be gathered through a survey.
On the other hand, test markets can be expensive, and it can be diffi cult to control all the
outside factors that might infl uence sales of the product. For example, a juice maker might
run a test market for a new 16-ounce juice product in Des Moines, Iowa. While the experi-
ment is running, the area is hit by an unprecedented heat wave and competitors have produc-
tion trouble, leaving them unable to meet market demand. The fi rm with the new juice
product now has to decide which sales were the result of the heat and the lack of competition,
and which sales were the result of an appealing new product. Market researchers work hard
to control for these kinds of events during the design of the test market experiment.
Competitor analysis
A thorough understanding of the competition is an important part of formulating any market-
ing strategy. Although it is usually unwise to simply react to competition, it is equally unwise
to ignore competitors. Even the most dominant fi rms are often vulnerable to competitive
encroachment from niche players, international competitors, or more traditional competitors
with new technology or products. In fact, some marketing experts theorize that the larger and
more successful a fi rm is, the more likely it is to fail. The argument is that large, successful
fi rms often become complacent with their success, perpetuating the way of doing business
that helped them become successful, and losing the edge that helped get them there. As mar-
kets and consumers change, old approaches become increasingly outdated, and smaller,
more aggressive fi rms may begin to take over the market. Clearly, even successful fi rms
must continually monitor competition.
One simple but effective method for analyzing competition is completing a formal
strength and weakness analysis for each competitor. This tool simply involves listing the key
strengths and weaknesses of a competitor in the same way fi rm strengths and weaknesses
were analyzed earlier. With the list of strengths and weaknesses in hand, the marketer then
focuses on the opportunities or threats each competitor presents. The fi nal step in using this
information is to develop a marketing strategy that capitalizes on the competitor's weak-
nesses and takes advantage of any opportunity that competitor vulnerabilities present.
In the example shown in
Table 8.1,
a small regional farm machinery dealer, Prairie View
Equipment, has noted several key facts about Red River Tractor and Implement that can
have important implications for Prairie View's marketing plan. Red River is owned by
a national equipment manufacturer. Based in part on a careful assessment of Red River's
