So this middle block past sales data ah will be absent in that case. And we will rely on
secondary data and ah survey of primary data. This survey ah often for new product takes
ah you know as we have discussed this . How you spend time with the customer; how
you use ethnographic methods ah and how you ah have different kinds of ah surveys based
on focus groups? Question your survey and so on. So, this is some kind of ah primary
data that you generate to do some statistical analysis and come up to some kind of an estimate.
The secondary data will be coming from published material and so on. We will just now show
you that , but a point I wanted to make here that sometimes a product may be new to the
company. Ah, But not new to the world; which means
some sales record will be available or can be some guesstimates can be made of similar
products sold by competitors or products which are almost associated or products that are
going to be substituted by your better product .
So, that sales data can also be used and these inputs will then be then ah analyzed through
statistical methods and some kind of managerial judgment. This is very very important because
just blindly relying on statistical ah modeling and ah analysis can often lead to some very
funny results . So, managerial judgment is extremely important
to temper and to select and to filter your ah processes that are coming out from the
mathematical or statistical ah modeling; not the other way round. Sometimes people feel
that the computer is more reliable than the human being which often will actually lead
you to a very bad ah situation. So, that is how you have arrived at the potential estimate.
Ah, I will briefly discuss some of the statistical techniques ah that we use ah. And then of
course, ah the details can be learnt by you in some other kind of modules ah which are
related to statistical techniques and analysis and so on. And these days of course, we can
analyze a very large number of ah data sets. So, that is called a big data or ah analytics
ah ah with big data. All that are you can take up in some other courses that are also
available from NPTEL. . So, useful sources for secondary data are
Government Publications, Trade Journals, Financial and Industry Analysis, Popular Press, The
Internet. And you can also generate some very good data by ah attending the trade related
or that particular domain related conferences exhibitions and so on.
So, the method remains more or less the same; whether you go to an exhibition, whether you
attend a conference, whether you are doing some survey you have to determine who are
the target buyers of the product and of course, determine how many are in each potential group
of buyers ah defined in the step one that is the target buyer . So, as we said that
you have to very sharply defined your initial ah foray. .
So, therefore, you have to you may decide of a ah certain that in eastern region you
are going to launch a product that is one kind of segmentation as we discussed geographical.
Within that you can do some kind of psychographic or ah profiling ah for ah selection of your
segment. That also a technique we have discussed. And then, you can actually have different
buckets and you can say ok, I will start with this particular ah very finely defined segment
. Then I will go to the next segment. So, you can have kind of a roadmap, how you are
going to tackle ah the different sub segments within your first target segment .
And ah important to know is also the rate at which ; that means, the frequency you a
purchase. Because finally, your estimate will be ah the number of buyers into the frequency
of their buying that will give you a time based estimate that how many you can ah sell
ah within the first 6 months, first 1 year. Ah Of course, the challenge of ah identifying
the first 100 customers will always remain and ah in many products that is something
important because once that flow happens as we will see in a a a next session that that
determination finding them. But there are some scientific approaches to that how you
find your first 100 customers depending on the kind of product that you are launching
those we will discuss in the ah subsequent session.
But the third point here, that you have to determine not only the number of people who
will buy, also their usage rate. Let us ah apply these principles to an example
say a Electric Mosquito Repellant right ah. So, you need to find how many ah your initial
estimate? Now you have to use some amount of common sense and ah available data .
So, for example, obviously, this is an Electric Mosquito Repellent you will only therefore,
look at ah those geographical areas where, ah electricity is available. And then, ah
ah particularly Mosquito Repellents are used at night . So, you have to see the whether
night supplies are available; because in some distant areas ah you know priority is given
to agriculture . So, normally electricity is available ah during
at certain time early in the morning, but it may not be available in the evening. In
the evening on the other hand, you may have some other alternate sources like solar power
etcetera . But even then, ah you must even that is ok
for Mosquito Repellents . So, you have to see where it is available. Then, as I said
maybe you start with ah ah say North India and within North India.
Suppose, your factory is located in ah ah Kanpur and you are therefore, ah you will
start because it is near your factory, you will have access to ah the dealers etcetera.
So, you are starting in the North India; in the Kanpur, Luck now, Allahabad, ah ah Varanasi
in that this particular area. Even there you have to decide ah where will be your first
foray. So, maybe you say ok I will start with Luck now .
Then, electric ah mosquito repellants ah the usage will depend on ah the population . But,
obviously, there is these people are already having some ah mosquito repellents right.
So therefore, you have to make an estimate of who are the likely new buyers? Because
people who are already having, people do not buy a mosquito repellent every ah day. They
buy cartridges ah regularly , but they may not buy the machine .
So, if you are creating a forecast, you might like to create a forecast for your machine
as well as ah for your cartridge. If you are creating a cartridge, which will fit into
all other types of machines. Then, of course, you have to see ah ah what
are the channels to the market; how many dealers you can convince to carry your product and
how many people you can reach directly ah to for them to try it out and see that?
Suppose, you have created a product which is horrible and which does not give out any
toxic fume and it is very ah good for or not good at least safe for ah ah humans to breathe
in And therefore, ah you are trying to ah make some estimate based on these factors.
This is your product is better , but to convince ah people that how better it is, you will
have to therefore, reach out. And so, you make some estimate that how many people you
can reach out to and based on that . So, I with this brief introduction; ah I leave
this particular problem to your ah further thinking and imagination and application of
the concepts that we have already discussed. So, why not ah you think about a mosquito
repellent? Suppose, you have created a mosquito repellent which is superior to the current
solutions available in the market. It is a ah some kind of a green product which
ah actually reduces ah less electricity or which actually is ah that can be used in ah
with a very low availability of power. Say for example, from ah solar it does not draw
very much from the battery ah. So, it can coexist with ah the lights and other things
essential supplies that are taken in ah areas where electricity is is scarce .
And ah you want to now ah decide how many ah you can sell in the first 6 months . So,
focus on your own area. So, that you have you can think about, you can go out, you can
ah look at shops, you can talk to people and make an estimate and write a ah 1 page ; give
you a rational of the numbers ah that you feel can be sold in the first 1 year, first,
ah first 2nd – 3rd year or at least in the first 2 years you you try to make an estimate
. Alternatively, so, this is like your product
is similar to the existing products except that it is ah a safe product, safer product
compared to products that are now available in the market which are mostly ah chemical
based. And many people are now reacting to ah those
products because they feel that ah the fumes ah no doubt, they drive away mosquitos or
make the mosquitos ah less virulent ; but also the fume is not good for human beings
. Now, suppose ah there is at and as you know,
these the current mosquito, they are called Repellent. That means, they are repelled mosquitoes.
The mosquitoes go away, but the soon as you switch it off or your liquid is finished or
your coil has burnt out ; then, ah you know the mosquitoes can come in .
Now, suppose you have created ah this may be a better ah exercise for you. Suppose,
you have created a mosquito attractor. . So, the mosquitoes get attracted and ah they die
ah within your machine. It is the same size as the current mosquito repellants , but it
attracts mosquitoes and the mosquitoes get into the system and by some means forget about
how it will be done. There are already ah people who are developing
such products ah and you can even check it out on ah some of these ah web based ah ah
e-commerce sites like Flip kart or Amazon and so on. You will see there are ah new types
of this mosquito ah absorbers which are coming .
So, it is a new product ah with a new concept right and you think ah and apply your mind
and go out and talk to people and make an estimate, how many you think ah you can ah
sell in your area. And you can choose a very small area. You can choose a a part of your
ah town; you can choose ah some hollows where you can walk around, talk to shops and try
to make an estimate . So, I want you to engage in this because if
you do once ah it does not matter how good it is , but the process itself will throw
up some questions which you can then post in the forum. And then, we can ah discuss
and that will give you some good result . There is no better way to understand a new
topic rather than ah better than engaging. Engage, go out, go out of the office, go out
of the building, ah go out of your home and ah interact in the marketplace and that is
how you will really understand . So, in reality the way actually we you can
see therefore, ah you will understand when you get into this ah game. And you try the
first exercise that we just discussed; you will see that the your forecast will depend
on company actions. That means, what are the features of your products? How it is better
than the available existing products? What is the alternative?
And because ah people will just not buy if it is a better alternative because you think
it is a better alternative. People will buy only when you are able to convince them and
we will discuss in another session that a new product for better appeal and for better
acceptability, what features it should have ah for you we what we say is higher rate of
diffusion or acceptance, we will discuss that .
But when you engage, you will understand that if you have this ah mosquito absorber rather
than ah repellent; what are the company actions that are necessary? What features will make
it for ah attractive you will in the process? But, you are only focusing in the earlier
exercise which we discussed ; just to estimate some number from your own area, from your
locality. Ah But, in the process you will understand that you have to understand competitors
and you have to understand your own features and benefits ah coming out of your products.
And what kind of preparation, what rate of supply, what kind of inventory you need to
build up? And all those are coming under company actions . I am now only showing you the headings
or the classes of ah inputs that are necessary to create finally, a scenario based forecast
. So, ah but, the details under each competitive
analysis, ah company analysis and general environment and consumer behavior ah related
analysis; these are the 3 dimensions which need to be integrated to create a good forecast.
And details of each of these some we have discussed and some more we will be discussing
over the ah coming a day’s . These are some typical forecasting methods
. So, if you actually the read any textbook ah on ah sales or if you just ah search ah
on Google you will find ah excellent Google, Wikipedia all of these will give excellent
ah very lucid, easy to understand and you can also find lot of ah ah simple and attractive
lectures on YouTube on say Naive extrapolation, Sales force composite, expert opinion, Delphi
method, Electronic ah Market. All of these you will find . This is a summary
ah I am not spending too much time on. But the main point is that that upper portion
is what is important for you at this moment. There are many ah detailed methods which are
given below. Some of those I will show you ah, but ah to
explain . But otherwise, this is just a chart some of you who want to get into the nitty-gritties
of this part of it. Then, you can actually ah this will help you to search the for the
related information and if you and perhaps, you know forecasting by itself sales forecasting
is a full length ah topic. It will take ah at least ah 10 – 15 hours
to get into the nitty-gritties. But this is kind of you can, it can you can use it as
a guidance chart for ah tabulating what you need to know right ok.
But some I am going to discuss. So, one is this Customer – Based Method. Customer – Based
Method means you have to do some Market Testing . So, situations in which potential customers
are asked to respond to a product or product concept.
We discussed that there this focus group . So, you can you can either ask people individually
or you can ask ah ah people in a group that likely ah buyers in a group . So, like the
mosquito ah ah killer or mosquito absorber that we were discussing instead of a mosquito
repellent . Now, you can ask 100 persons look, if I come
up with this product or not do not say come up I say ah here is ah you know, I have a
new product and this is going to do this in the instead of mosquito repelling it is going
to ah lure the customers into the system and the mosquitoes are going to die .
So, that is a much better method than repelling because as soon as your system is switched
off, the mosquitoes come back and with this logic you talk to 100 persons and ah suppose
ah 20 of them say that ah yeah, I will be quite interested to buy such a product . So,
that gives you an idea that ok 20 percent people are ah perhaps I can ah think.
So, if I in my area, they are likely there will be there there is a population of ah
say 600000. 600000 of people live in that popular ah area and ah suppose, they live
in 10000 households; I am just taking some arbitrary numbers ah.
So, this 100000 households might need their for each household, if they need say 2 mosquito
repellents or absorbers because they have 2 rooms where people sleep . Then, you know,
you you have a potential of 200000 . Now, you can ah again ask 100 people and you
will find that maybe 40 people they already have some kind of a system . So, you initially
you might ignore that ah because there you will have to compete ah to the place which
is tougher. But people who do not have and will be buying;
they will be a better ah more attractive customers because easier ah to tackle . So, they are
actually you make ah ok therefore, maybe ah 40 percent ah. So, 40000 ah is the requirement.
Then, you saw that ah 20 percent people when you talk to them said yes, I will be interested
. So, that means, 20 percent of that 40000 is
your initial number. This is a rough way ah actually; ah actually there is a good model
ah for this which is called ATAR. That means, your if total number is 100000
right. First out of that you will say how many people are aware of your system that
itself will immediately bring it to maybe you can reach out in the initial phase to
ah maybe 50 percent of the population . So, which means aware number will become 50000
ok and then, maybe you have demonstrated your product and etcetera. So, maybe 20 percent
people have ah of that 50000 would have actually tested the product, have ah seen some trial
of the product that how good your product is in attracting mosquitoes and killing them
. So, 20 percent of 50000 . So, that is about
say 10000 ah that becomes your ah next number. And then, you have to look at ah that how
many of them you can reach through shops and ah or ah direct marketing or whatever approach,
I am not going to ah get into at this stage the discussion of what marketing method is
best suited for what kind of product at what stage .
This we have discussed in one of our earlier courses marketing 1 and marketing 2 . There
actually we have gone into far more details about the methods of ah these ah creating
your channels to market . Ah Briefly we will discuss that ah ah in the
maybe next week , but ah more detail you can access to that that particular course, our
course marketing 2 ah. There you will get a much better idea. But here, suppose, ah
as we said that ah you as I have said 50 percent ah 50000 people are aware of the 100000 of
your product ; out of them 20 percent; so, 10000 people you have been able to show some
trial or they have actually seen some a demonstration .
And then, you see this this 10000, I have 3 dealers who have carried agreed to ah carry
my product and ah. So, and plus I will do some ah direct selling, door to door selling
and you say ok, maybe I will be able to ah initially definitely reach 25 percent. So
that means, if your number then, next number comes to 2500.
So, if you are going to ah make some estimate of how many numbers you are going to produce
initially . So, you can use this as a rough cut number and you can say ok, if I if since
my product is good and; obviously, if you do not have faith in your product; then nobody
else will have . So, if you have faith in product; then, you
say ok at least maybe 20 percent people ah from this group will persuade some other people
to buy this product because my product is so much better . So, you see that 20 percent
of that 2500 to, another 500 you can add. So, your initial forecast then becomes 3000.
So, ah listen to my logic as I said and this model is often called ATAR. That means, first
is A stand for Awareness; second, T ah stands for ah Trial; third, A ah stands for Availability
and last one is Repeat buyer or Referral buying .
So, ah this each stage the number comes down by a discounting factor which is the percentage
of people . So, first is the total population is x multiplied by a which is a fraction of
x ; that means, say as we said say 50 percent people are aware of the 100000 . So, that
is 0.5 . Then, next is ah T that means people who have
taken a Trial. So, we say that is a 20 percent . So, that is 0.2. Then, we said ok, out of
that people you can actually 25 percent will be you can reach through various channels.
So, that is 0.25 and then multiplied by maybe ah 0.2, the people who will do referral buying
that is a that is to be added. So, first ATA by multiplying you can get some
kind of an initial estimate out of the total ah 100000 that is the available market. This
is also yeah your ah process for calculating the tam 1 and tam 2 that we discussed earlier.
So, tam 1 is total addressed market and tam 2 is the total available market . So, avail
total available market here is 100000 and total addressed market is this number that
you will calculate by multiplying A T and A.
And ah Market Survey ah that actually ah is the more detailed process of this Market Testing
that is a form of going out asking people, focus groups and all those that ah are the
processed by which you will arrive at the likelihood of ah purchasing a product by intend
ah targeted buyers. That kind of gives you an overall idea and
now, I am going to discuss ah in the next session some ah simple statistical techniques
of ah creating ah the ah most used method which is called the Time Series Forecasting
Method. So, that we will take up ah in the next session.