Deck 6: Market Potential and Sales Forecasting

Question 1

The assumptions underlying the sales forecast are critical to its success.

Answer 1

True

Question 2

Essentially, sales forecast and sales potential are synonymous concepts.

Answer 2

False

Question 3

In order to estimate BOTH the saturation level and the time pattern of market development, it is useful to compare the firm's product to its competitors with regard to elative advantage(s), compatibility and risk.

Answer 3

True

Question 4

Logic and common sense is much more important than statistical knowledge / expertise in the creation of market and sales potential estimates.

Question 5

The chain ratio method of estimating potential often results in the "discovery" of untapped segments and / or untapped purchasing power.

Question 6

Just-in-time production and distribution systems have reduced the need for accuracy in forecasting.

Question 7

The data obtained from consumer purchase surveys provides the most accurate sales forecast the firm can develop for new products.

Question 8

Moving averages essentially smooth out random variables to make underlying patterns more apparent.

Question 9

Since sales data is always linear in nature, regression analysis provides a simple and highly accurate forecasting tool.

Question 10

Regression models have proved to be the most accurate forecasting technique for new products.

Question 11

The maximum sales reasonably attainable under a given set of conditions with a specified period of time is BEST described as

A) Potential
B) Forecast
C) Quota
D) Expectation
E) Regression

Question 12

A key distinction between potentials and forecasts in a sales context is that

A) Potentials depend on a set of conditions
B) Forecasts represent expectations
C) Forecasts are concerned with what customers do
D) Potentials fall far below forecasts
E) Forecasts are time dependent

Question 13

Potential estimates are LESS likely to be useful for

A) Making entry / exit decisions
B) Making resource level decisions
C) Setting objectives and evaluating performance
D) Providing inputs to forecasts
E) For accurately predicting sales

Question 14

Identify the situation where a new product, when compared to its major- and typically older- competitors is likely to have greater potential with increased chances of being achieved faster.

A) It has a lower relative advantage
B) It has greater risk involved
C) It has higher costs
D) It is has lower incompatibility
E) It has lesser benefits

Question 15

To be reasonably comparable, both the newer product and its older analogue should be all of the following EXCEPT

A) Targeted to a similar market
B) Using similar technology
C) Similar in perceived value
D) Similar in terms of the major benefits provided
E) Similar in price

Question 16

Which of the following statement pertaining to estimating market potential using chain ratio analysis is NOT true?

A) It forces a manager to think about who the potential customers for the product are
B) It seldom results in thinking about untapped segments
C) It usually reveals a significant amount of untapped purchasing power in the market
D) It helps uncover untapped purchasing power waiting for a new product formulation
E) It helps identify untapped purchasing power that can be captured by a new competitor

Question 17

The method of estimating market potential by identifying potential customers by SIC code and then extrapolating how much they buy from an activity measure, helps increase sales volume in a category or for a brand in all of the following ways EXCEPT

A) By pursuing new segments
B) By developing new products
C) By increasing the purchase rate
D) By getting more customers in existing segments
E) By increasing prices

Question 18

What can be thought of as the process of assessing the possible outcomes under reasonably likely combinations of the four basic determinants of outcome?

A) Potential
B) Forecasting
C) Grading
D) Budgeting
E) Leveraging

Question 19

The benefit of a better forecast usually is greater when

A) The price of the product is low in absolute terms
B) Product demand is relatively volatile
C) The cost of an error in forecasting is low
D) The cost of an error in forecasting is zero
E) The price of the product is low in relative terms

Question 20

Which forecasting technique requires usage of past data?

A) Sales force composite
B) Executive opinion
C) Market testing
D) Market survey
E) Naive extrapolation

Question 21

Which of the following forecasting techniques is solely judgment-based?

A) Correlation
B) Econometric
C) Regression
D) Delphi
E) Market testing

Question 22

Which forecasting method requires HIGHER financial resources?

A) Naive extrapolation
B) Moving average
C) Market survey
D) Exponential smoothing
E) Extrapolation

Question 23

Identify the forecasting technique that requires HIGHER levels of quantitative skills.

A) Econometric
B) Moving average
C) Exponential smoothing
D) Sales force
E) Delphi

Question 24

Consumers are MORE heavily involved in which of the following forecasting techniques?

A) Market testing
B) Sales force composite method
C) Jury of expert opinion approach
D) Delphi method
E) Naive extrapolation

Question 25

This is a specific form of primary market research in which potential customers are asked to give some indication of their likelihood of purchasing a product.

A) Market testing
B) Rollout
C) Market survey
D) Naive extrapolation
E) Exponential smoothing

Question 26

Random variation occurring in extrapolation methods may be "smoothed out," to make the patterns more apparent, by using

A) Chi-square
B) Regression analysis
C) Data points
D) Moving averages
E) Base values

Question 27

This is a useful statistic produced by regression analysis and is a measure of fit that is the percentage variance in the dependent variable explained by the independent variable.

A) X²
B) Mean
C) Standard deviation
D) SE²
E) R²

Question 28

All of the following forecasting methods are model-based and often termed causal because the techniques utilize one or more variables other than time to predict sales, EXCEPT

A) Regression
B) Delphi method
C) Leading indicators
D) Econometric model
E) Multiple-equation regression

Question 29

Changes in the macroeconomic variables, that occur before changes in the economy, are often used by economists for forecasting and are known as

A) R variables
B) Leading indicators
C) Lagging variables
D) Prime variables
E) Dependent variables

Question 30

Which of the following methods is MORE heavily used for short / medium-term forecasting?

A) Judgmental approach
B) Straight-line projection
C) Simulation
D) Classical decomposition
E) Box-Jenkins

Question 31

The most frequently used quantitative method for forecasting is a(n)

A) Econometric model
B) Delphi model
C) Moving average
D) Executive jury panel
E) Sales force panel

Question 32

Which of the following quantitative approaches is used MORE frequently, particularly for long-run forecasts?

A) Regression
B) Straight-line projection
C) Simulation
D) Classical decomposition
E) Box-Jenkins

Question 33

Research indicates that the most commonly used new product forecasting technique is

A) Customer / market research
B) Diffusion model
C) Precursor curve
D) Box-Jenkins technique
E) Neural network

Question 34

Identify the INCORRECT statement pertaining to regression model.

A) In its first stage, the variables assumed to affect dependent variables are specified
B) In its second stage, a model is specified indicating the form of the relation between the independent variables and sales
C) The nature of the relationship between the independent variables and sales is rarely linear
D) The model is estimated by means of regression analysis, using commonly available computer programs
E) The model can be used to forecast sales

Question 35

In using a regression forecast model, while some of the variables may be under the firm's control. several others need to be forecasted. Here modelers often use _____ as they are themselves easy to forecast.

A) External predictor variables
B) Surged predictor variables
C) Leading predictor variables
D) Forward predictor variables
E) Lagged predictor variables

Question 36

Identify the final step in the data analysis stage of the regression model-building process.

A) Examine the correlations among the independent variables
B) Run the regression
C) Determine the significant predictors of the dependent variable
D) Develop the forecast and confidence interval
E) Check the signs of the significant independent variables

Question 37

The strength of the effect of an independent variable on sales in regression models is measured by

A) Chi-square
B) The t statistic
C) R²
D) X²
E) X

Question 38

This is important in forecasting models, because fewer independent variables must be predicted to develop the ultimate forecast for a "smaller" model.

A) Estimation
B) Smoothing
C) Parsimony
D) Volume
E) Preference

Question 39

The omission of one or more key variables from a regression model will produce a(n) _____ error.

A) Identification
B) Specification
C) Production
D) Timing
E) Smoothing

Question 40

A _____ forecast is typically the best guess minus two standard errors of estimate.

A) Optimistic
B) Best-guess
C) Pessimistic
D) Point
E) Sanguine

Question 41

In the Cobb-Douglas function, coefficients are interpreted as

A) Slopes
B) Elasticities
C) Independent variables
D) R² values
E) Chi-square values

Question 42

For share forecasting, the _____ model is widely used.

A) Ceteris paribus
B) Elasticity
C) Delphi
D) Logit
E) Linear

Question 43

This model forecasts first purchases of products and results in a diffusion process. It assumes two kinds of customers: innovators and imitators.

A) Logit
B) Delphi
C) Bass
D) Innovation
E) Imitator

Question 44

When using quantitative methods, a manager should also take all of the following supplementary steps EXCEPT:

A) Conduct a sensitivity analysis
B) Analyze large residuals
C) Lay utmost stress on precision
D) Accept that "turning points" will often be missed
E) Be tolerant of errors

Question 45

Which of the following statement about forecasting is NOT true?

A) It does not provide perfect results
B) It may be improved by using more than one approach
C) It typically requires negotiation / compromise
D) It forces managers to critically analyze data, assumptions and results
E) It guarantees success

Question 46

What is the major problem faced in forecasting? BRIEFLY discuss its impact.

Question 47

What is potential? What role(s) does the estimation of market potential play?

Question 48

What factors must be considered in forecasting new or growing product potential?

Question 49

What role(s) function(s) are played by forecasts?

Question 50

What factors must be dealt with in forecasting? What impact do these have upon the accuracy of forecasts?