Market demand analysis

The first analyzes we know about demand are those related to fluctuations in the price and quantity of products or services in a given market, leading to changes in demand depending on the type of market competition, which leads us to consider the potential market, the level of consumption and the distribution of family spending. It is here where the opinion of the Marketing analyst becomes important, who should ask the following questions: How many people can buy our product? If the researcher were to try to obtain a market potential for skateboards, it is essential to investigate the number of births in the given period.

Just as the money supply is made up of the total amount of money that exists in an economy, which is closely related to liquidity, as an instrument of consumer purchase. The so-called Total Monetary Demand arises, "the function that expresses the amount of wealth that people and companies keep in the form of money" and that at the moment of consuming it becomes units of units of a good or service that consumers want acquire at a certain time.

Buyers are influenced by a series of environmental, cultural, social, personal and psychological aspects, which together with marketing stimuli, lead buyers to a response that can be cognitive (Knowledge, memory) affective (attitude, preference, intention) or mental behavior (test, purchase, fidelity).

The quantity of items that consumers would be willing to buy depends on a set of variables, such as the price, the utility assigned to them, the quantities they already possess, the price, their income and their expectations.

In this domain, the term market appears, which is defined as the set of real and potential buyers who share a need or a desire and who may be willing to satisfy a specific need. The size of the market depends on the number of buyers that could exist for a particular market offer. Thus, potential buyers of a product have three characteristics: interest, income and access.

Within the market concept that we will study, it is necessary to analyze some previous aspects before explaining the particular demand models, which I will develop later.

Total market: It is the set of all actual and potential buyers of a product.

Market size: It is the number of buyers that could exist for a particular market offer.

Potential market: It is the set of clients that shows a sufficient degree of interest in a certain market offer, but that we have not acquired.

Available market: It is the set of consumers who have interest, income and access to a specific market offer.

Qualified available market: It is the set of consumers that have interest, income, access and qualities that match the market offer.

Market served or target market: it is the part of the qualified available market that the company decides to serve. Remember that the company must select the different needs that the customer wants.

Market penetrated: It is the set of consumers who have already bought the product

Under these concepts we could derive the following analysis:

Calculate the number of consumers who have a potential interest in owning a skateboard?

We propose the following variables:

Are you interested in acquiring a skateboard? If one out of 10 people answers yes, it is possible that 10% of all customers will constitute the potential market for skateboards The potential market is the group of customers who show a sufficient degree of interest in a a certain market offer. The consumer's interest is not enough to define a market. Potential customers must have sufficient income to be able to purchase the product. They must be in sufficient conditions to answer the following question. Have sufficient resources to purchase a skateboard? the price, the less people will be able to respond positively. Market size is a function of both interest and income. Access barriers further reduce the size of the market.If the bicycles are not distributed in a certain area, the logo markets do not have potential customers in it. The available market is the set of consumers who have interest, income and access to a market offer The company or government restricts sales to certain groups? The market in which it enters (penetrated market) is the set of consumers who have already bought the product. The sale of skateboards to minors under 18 years of age could be prohibited. The remaining adults constitute the qualified available market, that is, the set of consumers who have interest, income and access and that are consistent with the particular market offer Does the company have the alternative of trying to reach the qualified market or focus on certain segments? The market it serves (target market),It is the part of the qualified available market that the company decides to capture. The company could focus its marketing and distribution efforts in a specific region in the north of the country. In this case, the company and that region becomes the market that is served. The company and its competitors end up selling a certain number of skateboards in the market that is served. The market in which it ventures or the penetrated market is the group of consumers who have already bought skateboards.The market in which it ventures or penetrated market is the set of consumers who have already bought skateboards.The market in which it ventures or penetrated market is the set of consumers who have already bought skateboards.

How can we obtain the market demand or qualified available market for a new product?

Suppose we are required to determine the market demand for that product. We know that we have this product as a company and a potential market, which is submitted to a survey and which is complemented with information obtained from the country's Institute of Statistics and Censuses with a sample of 200 people.

We know that those 200 consumers who represent the sample have a frequency of purchase distributed as follows:

Frequency	Consumers
one	35
two	29
3	twenty-one
4	18
5	30
6	28
7	twenty-one
8	18
Total	200

Costa Rica is known to have 4,775,000 inhabitants (as of December 2012).

The percentage of men represents 49.50% The population between 18 and 25 years represents 27% Residents of the selected region represent 42% The population of the low-high stratum represents 20% The population of the medium-low stratum represents 18 % The economically active population represents 1,500,000 inhabitants The single population represents 52% We know that 60% of those surveyed show a willingness to consume this product

We also know that the sale price of the product to the final consumer is Ȼ 25,000.

And the profit margin that the intermediary obtains is 26%

We need to obtain the Total Monetary Demand for skateboards, the qualified available market and the number of products that consumers obtain for consumers.

Then we proceed to determine as a first step the number of consumers in the qualified available market, according to the parameters established in the population mentioned above.

We know that the country's population is 4,775,000 inhabitants, but from this population we obtained a sample of 200 consumers, who have different purchase frequencies, leading us to first obtain the number of skateboards that they consume on a monthly average.

First step: We make the previous table to obtain the weighted average of how many monthly skateboards each one consumes on average:

4,775,000 inhabitants * 49.50% * 27% * 42 * 18% * 31.4% * 52% * 30% = 2,363.29 qualified available market consumers who are willing to buy the product. (Note that the economically active population does not to be expressed as a percentage, it must be calculated (1,500,000 / 4,775,000) = 31.4% or percentage of the economically active population.

Second step: we have to determine the average number of monthly skateboards that consumers in the qualified available market would be willing to consume.

We have:

Frequency	Consumers	Product	Weighted average
one	35	35
two	29	58
3	twenty-one	63
4	18	72
5	30	100
6	28	140
7	twenty-one	125
8	18	130
Total	200	723/200	3.61 units / month

We know then that from the above table it follows that on average each consumer has an average monthly consumption of 3.61 skateboards per month.

Step 3: We have to calculate the number of total skateboards that consumers would be willing to buy during a year, so we get it like this:

2,363.29 * 3.61 * 12 = 102,377.72 skateboards that would be willing to consume for a year. FOURTH STEP: we calculate the total monetary demand that the total number of skateboards from the previous step will demand, less the distribution margin that the intermediary has. Since the intermediary has a distribution margin, we also have to subtract it because this variable must be net as well as the population that is a specific segment.

Knowing that the margin the intermediary earns is 26% and the sale price to the final consumer is Ȼ 25,000, we have the following algebraic operation:

Mathematically it is like this:

25,000 / 1.26 = Ȼ 19,841.27

The algebraic proof is as follows:

19.841.27+ (Ȼ19.841.27X0.26) = Ȼ2500019.841.27 (1 + 0.26) = Ȼ25.00019.841.27X1.26 = Ȼ25.00019.841.27 = Ȼ25.000 / 1.2619.841.27 = Ȼ19.841.27

Finally to obtain the total monetary demand it would be:

102,377.72 (# of products) X Ȼ 19,841.27 = Ȼ 2,031,303,984.50

The previous analysis has focused on concepts of market potential, penetrated market, potential market and the development of total monetary demand. Next, we will analyze the demand referring to the measurement and behavior, to the explanation of the factors that determine it and its forecasts.

It is important to review that demand is “an extension of the needs and desires of the market and is conditioned by the available resources of the buyer.” Therefore, demand can refer not only to the entire market, to certain segments of individuals. or to a particular person, also to a class of product, a brand, a territory, a period of time with a certain duration and finally to the demand for the final consumer, which occurs when that primary market is penetrated by a product or service or the derived demand that is what is produced for production processes.

Starting from the previous explanation, the demand carries out 3 important actions: a) Measure the demand, that is, quantify its future scope. physical, monetary units or in terms of market share. b) Explain the demand. This explains the variables that determine demand and how they influence behavior, which may be controllable or not controllable by the company, an aspect analyzed in the context of the consumer. The interrelation of these variables in demand will allow us to carry out an analysis on the sensitivity of consumer behavior. c) The forecast of demand.We must know current behavior and have clear databases of past sales in order to determine these forecasts.

The analysis of demand is of two types: quantitative or qualitative, in the quantitative aspect it is carried out not only to determine the current demand but also the potential, in the qualitative analysis it is an analysis that we will not develop in this chapter because it is an analysis related to the consumer purchasing decision process.

Types of demand forecast analysis

1) First of all we have subjective analysis or non-quantitative techniques of sales forecasting and it uses not very formal predictions and based on estimates. There are three methods on subjective approach or non-quantitative techniques, among them we can mention:

The Sellers Estimate, which is the opinion of the sellers, which is not the best method, since it supposes in some cases biases of opinion. Executive opinion jury, is an easy and fast method, but they have the disadvantage that they can be not very executive and not technical and precise opinions in some cases. Delphi method. It consists of the opinion of several experts on the subject on a market matter, of which they have had sufficient experience to express opinions, which although they differ from each other are taken into account.

2) Second is the Market Research approach, which uses three methods:

a) Purchase intention, which is determined by a survey or a panel technique to obtain primary information from potential consumers. It is about finding out purchase intention, characteristics and attributes and the factors that affect the purchase. This method is based on purchase intentions, which do not necessarily coincide with actual behavior. B) The next method is the Product Concept Test. It is used to evaluate the perceptions and preferences of the product attributes, purchase intention, price, place of purchase, product presentation and generally leads to several alternatives to define a product.. For example if we want to create a new car, should this be for personal use ?, for family use

Or for commercial use? ¿We define this choice with one of the models, to then predict the test and the purchase repetitions, but not the degree of innovation. C) The third method is the market test, which translates as a small-scale test of the product to be marketed, to determine a more exact demand. It is effective because it gives us an idea of the future behavior of the product in the market and its possible scope and limitations in the short term, which must be adapted before the definitive launch on the market.

3) The third term is the so-called Time Series Approach. This approach depends on the analysis of data on past sales and uses time as an explanatory variable of demand. There are several recommended methods

a) They are used when you want to make quarterly or semi-annual or monthly sales forecasts, where the components of the time series data must be isolated, first the seasonal pattern is removed, then the cyclical and then the erratic.

Historical sales of the company Grupo Metropolitano SA

Table # 1

TRIMESTER	YEAR 2000	YEAR 2001	YEAR 2002	THREE-YEAR QUARTERLY AVERAGE	SEASONAL I N DI CE
one	200	225	250	225	1.47
two	88	70	94	84	0.54
3	149	135	145	143	0.93
4	180	115	185	160	1.04

Sales are quoted in units.

Total sales for the three years were C 1,836.00 / 12 quarters = C153 The seasonality index for the first quarter is 225/153 = 1.47 The seasonality index for the second quarter is 84/153 = 0.54 Seasonality for the third quarter is 143/153 = 0.93 Seasonality index for the fourth quarter is 160/153 = 1.04

“In statistics, it is said that the demand or sales of a certain product shows seasonality when the adjacent time series goes through a predictable cyclical variation, depending on the time of year. Seasonality is one of the statistical patterns we use to improve the accuracy of demand forecasts ᶾ ”

Next consider the actual sales data set in the table above. To eliminate temporal fluctuations in the data to make it similar to normal sales figures, we must multiply historical sales figures by a seasonal index.

Seasonally adjusted data is shown in the following table: Table # 2

TRIMESTER	YEAR 2000	YEAR 2001	YEAR 2002
one	136.05	153.06	170.06
two	162.96	129.62	174.07
3	160.21	145.16	155.91
4	173.07	110.57	177.88

As can be seen in Table # 1, sales increased from the second to the third quarter of 2000 by 61 units (149-88) per quarter. As we can see in the previous table (seasonally) the pattern is not the same because there was no significant increase in sales.

Therefore, what we must do is calculate those seasonally adjusted sales for the second quarter (162.96) * 0.93 (seasonal index for the third quarter of 2000, and it gives us 151.55 and because our figures for the third quarter of 2000 were 149, we increased by one%.

b) Moving averages method. This statistical approach is based on the average of the sales of several months so that the upper and lower values come together more and there is not so much gap. So as the sales data for each new period is added to the average, the data for the oldest period is removed from the total, for each period the new average is calculated, which would be the new moving average.

According to the following table (table # 3), we can see that the forecast of moving averages for three quarters for sales for the year 2000 is as follows:

Sales forecast using the moving averages method for the year 2000 of the company Grupo Metropolitano SA

Table # 3

		EXPECTED SALES	EXPECTED SALES
MONTH	REAL SALES IN COLONES	3-MONTH MOBILE AVERAGE	MOBILE AVERAGE OF 6 MONTHS
January	2004
February	2760
March	2380
April	4032	2,381.3
May	3600	3,057.3
June	3080	3,337.3	2,976.0
July	2600	3,570.6	3,075.3
August	2400	3,093.3	3,015.3
September	3400	2,693.3	3,185.3
October	3800	2,800.0	3,146.6
November	3000	3,200.0	3,046.6
December	2400	3,400.0	2,933.3

c) Exponential smoothing method. It is used for short-term sales forecasts, which overcomes some drawbacks that normally appear in the previous methods, although it has the disadvantage that it does not overcome the trend methods.

4) The fourth term is the Quantitative Approach to Causal or Association Methods

One of the methods used is that of CORRELATION which consists, unlike the others, that try to directly predict, based on historical data, the factors that affect sales and determine their relationship. Instead, the REGRESSION method tries to predict how a variable, in our case sales, is affected by another variable, for example advertising expenses. Both correlation and regression analysis start with an even value graph, or scatter plot. In this case in the graphs, the variable (X) would be the independent variable (located horizontally) and the vertical axis is (y) or the variable to predict sales in this case.

Table # 4

Correlation relationships

Analysis of sales forecast by the regression method

To make this forecast, we must proceed as follows:

We must apply the formula of the linear equation y = a + bx, where the simple regression describes the relationship between a single variable, a dependent and an independent, in our case time is the independent variable and sales as a dependent variable. In cases where sales are related to several independent variables such as advertising expenses, prices or interest rates, we should apply some methods not analyzed in this section, such as the Statitcal Analysis System (SAS) or the Statical Package for The method. Social Sciences (SPSSx).

Continuing with our example we are guided with table # 4, we have:

The table shows us the variable X, which represents the number of years in the series that must be years numbered consecutively in even years, which in our example are 6 years that add up to 21 and whose average or would be 21/6 = 3.5 and the total sum of y would give us 853 and whose average would be 853/6 = 142.16. Having clear that the sum of xy corresponds to 3355 and the sum of X² is 91, we proceed to clear the respective formula

b = n Ʃ xy-Ʃx Ʃy / n (Ʃx²) - (Ʃx) ² = (20130-17913) / (546-441) = 2217/105 = 21.11

Therefore b = 21.11

a = Y average- bx average = 142.16- 21.11 (3.5) = 68.12

Therefore a = 68.12

Applying the formula of the linear equation, taking the values of a and b, we clear the equation of Y = a + bx, taking into account for this case that x is the value that we want to find out (7 since it is the year that we must find out), we substitute as follows:

Y = a + bx Y = 68.12+ (21.11X7) = Y = 68.12 + 147.77 y = 215.89

Therefore sales for year 7 will be 215.89

Determination of Grupo Metropolitano sales for year 7 by the simple regression method

Table # 5

XYXYX ²