Quiz Questions:

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Q19-1

1. What is "market potential"?
2. Define a "sales forecast".

1. What does the term "trend extension" mean and what is the primary weakness of this forecasting method?

2. Briefly explain the "factor method" of forecasting.

Define each of the following terms:

1. "Time series"
2. "Leading series"
3. "Indices"

How is spreadsheet analysis helpful to a marketing manager?

Why is it important to include in a marketing plan a time frame, specific costs for each decision area, and expected estimates of sales and profit?

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Answers:

A19-1

1. "Market potential" is what a whole market segment might buy.

(p. 517 of text)

2. A "sales forecast" is an estimate of how much an industry or firm hopes to sell to a market segment.

(p. 517 of text)

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A19-2

1. A "trend extension" extends past experience into the future. The weakness of this forecasting method is that it assumes past conditions will continue unchanged into the future. In fact, the future isn’t always like the past.

   (pp. 518 and 519 of text)

2. The "factor method" of forecasting tries to forecast sales by finding a relationship between the company’s sales and some other factor (or factors). The basic formula is as follows: something (past sales, industry sales, etc.) times some factor equals sales forecast. A "factor" is a variable that shows the relationship of some other variable to the item being forecast.

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A19-3

1. "Time series" is a historical record of the fluctuations in economic variables.

(p. 521 of text)

2. "Leading series" is a time series that changes in the same direction but ahead of the series to be forecasted.

(p. 521 of text)

3. "Indices" are statistical combinations of several time series.

(p. 521 of text)

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A19-4

With spreadsheet analysis, costs, sales, and other information related to a problem are organized into a data table – a spreadsheet – to show how changing the value of one or more of the numbers affects the other numbers. Spreadsheet analysis also allows the marketing manager to evaluate what-if type questions. For example, a marketing manager might be interested in this question: "What if I charge a higher price and the number of units sold stays the same? What will happen to profit?"

(pp. 523 and 524 of text and see Exhibit 19-7, p. 524)

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A19-5

This information should be included in a marketing plan so that the plan can be compared with actual performance in the future. In other words, the plan not only makes it clear to everyone what is to be accomplished and how, but also provides a basis for the control process after the plan is implemented.

(p. 526 of text)

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