Accurately Conducting Market Forecasts

Market forecasting is an attempt to predict opportunities for revenue generation through understanding future trends. The paper by Pilinkienų (2008) discusses a number of forecasting mistakes organizations make. Understanding how to forecast properly is part of market analysis and is a strong method for determining present actions that will have outcomes that are more fruitful in the future. Strategic decisions of organizations often rely on information contained within the present and the likely outcome of actions five or ten years down the road.

Forecasting is usually seen as a process of understanding trends that influence the status of economic objects. Such outcomes continually adjust as new information becomes available. It is about knowing future economic opportunities through analysis based upon objective laws of reality. Some can see it as a prediction of events based in theory and practical laws of nature. There are number of concepts related to forecasting:

-forecasting is assessed not from a static function but from a position within a process;

-economic index is usually considered to be the object of forecasting;

-it is a concurrent part of every economic subject’s activity;

-forecasting tools are used to make predictions.

Forecasting the market demand is a process that seeks to analyze the present status of market demand and to predict changes in the market for a specified period of time. Such predictions help organizations adjust their strategies and offerings in a way that help them overcome environmental factors and draw the most potential for revenue. Every product and service has a lead-time and understanding trends will help ensure resources are not wasted in the developmental process.

Bails and Peppers(1993)  offers a forecasting model that includes action steps:

-Formulation of the forecasting claim.

-Identification of external and internal factors.

-Collection and analysis of information.

-Selection of forecasting methods.

-Verification of the forecasting method.

-Conducting the forecasting.

The authors indicate that looking at market indexes and government information make the process of forecasting easier. The use of available market data is used as an overall guide to specific product/service forecasts. The more information governments and other institutions offer the easier it is to find strategic pathway to developing sustainable operations. 

There is bottom-up forecasting and top-down forecasting. In bottom-up forecasting the individual sales revenue of each of a firm’s products are used to determine the revenue projections of the firm. In a top-down forecasting, the highest-level sales projections are used for main products and the analysis moves downward into smaller product areas. It provides two slightly different projections. 

The authors found that a majority of firms use surveys in their forecasting method. They also leave far too little information on influence of external market factors (i.e. global trends).  There are times when a single forecasting model can create improper market assumptions. These firms may fail to consider alternative sources of information or counter perspectives.  Once completed, the firms may not assess the appropriateness and accuracy of their chosen methods thereby perpetuating the problem. 

In agreement with the author, the forecasting method is limited by the analytical abilities of the researcher as well as the models they chose. Where there is no perfect model available, the use of multiple models will develop increasingly accurate assessments. Firms should consider alternative scenarios in order to help themselves prepare for market changes or previous inaccurate assessments.  Using a wider macro-assessment of global trends within their analysis will help ensure that the global market is accurately reflected. All local trends exist within a wider global trend.

Bails, D. & Peppers, L. (1993). Business Fluctuations. London: Prentice Hall International.

Pilinkienu, V. (2008).Market demand forecasting models their elements in the context of competitive market. Engineering Economics, 60 (5).

Improve Customer Satisfaction through Process Development

Organizations seek to raise their customer service preferences but may ignore more fundamental adjustments in the manufacturing processes which raises and creates higher levels of product development. It is often these systematic changes which can transform quality products into superb products that improve upon quality, design, functionality, utility and eventually long-term customer satisfaction.  

Customers have needs and demands that make their way into their perceptions of the business and the product. A positive perception of quality is important for meeting these customer expectations Stojkovic & Djordjevic (2010). Where Americans may have difficulty competing on price due to international competition, they can still enhance quality and service to retain value.It is difficult to compete on price as a sole factor when labor costs and currency make product manufacturing much cheaper in China and Asia. Even with such difficult to match price points Americans can still provide a higher-level product with updating features and strong service performance. Yet before this can occur operations should be aligned along key competitive strategies.

To use service enhancements for additive value it is important to understand what types of service customers are seeking. These include time, timelines, completeness, courtesy, consistency, accessibility, and convenience, accuracy and responsiveness (Nazzal, 2006). Such surface enhancements do not necessarily address the satisfaction that is inherent within the product itself.

Once an organization has defined their customer’s needs they should begin to align their operations to meet those standards at a more fundamental level. This alignment creates systematic adjustments to ensure higher caliber of products. According to Radovic, et. al. (2009) there is nine steps to improving processes to create greater customer service:

1.)    Develop mission and vision statements.
2.)    Indentifying service inputs for process identification.
3.)    Define the company’s goals and objectives.
4.)    Determine service quality determinants.
5.)    Identify processes currently being used.
6.)    Understand the critical processes and select those that fulfill goals.
7.)    Define the process performance indicators.
8.)    Review and re-engineer processes.
9.)    Manage processes for continuous improvement.

Alignment of operations to customer preferences is often a detailed and painstaking process of continuous improvement. Through the development of strong operational adjustments the end products specifications are more closely aligned to customer needs. Often we view service as only customer service but this does not take into consider the service adjustments that can be applied systematically and create compounded benefits in product design, quality, and output. Understand what your customers want and align your operations accordingly.   

Nazzal M. (2006). The Palestinian Health Care System ata critical and crucial point (The Two-Edged Sword. How does it foster life and death simultaneously. Retrieved May 22^nd, 2013 from http://www.ahewar.org/eng/show.art.asp?aid=104 

Radovic, M., Tomasevic, I., Stojanovic, D., Simeunovic,B.. (2009). An excellence role model:Designing a new business system one process at a time. Industrial engineer. 41, (8) 

StojkovicD., Djordjevic D. (2010) Important aspects of customer relationship management conceptin banking quality. Journal TTEM-technics, technologies, education, management. 5 (4).. 

Services versus Goods – Which brings your company more money?

A fundamental shift from good-demand logic to service-demand logic is occurring within the service management field. Service-demand logic looks at the economic value of the services associated with the product versus the actual cost of the product itself. Changing this scope of understanding helps decision-makers to view the value of the product as one of many types of possible revenue generating sources. These others sources may include servicing, insurance, technical support, upgrades, etc…

One of the reasons why a company would desire to move from a good-demand mentality to a service-demand mentality is because the latter affords many more opportunities to gain wealth. A secondary reason is because in today’s world of low price Asian manufacturers it is hard for American companies to compete on product price alone. Selling a total package raises the overall value of the product to the consumer.

It is important to understand the differences between products and services to understand how the mental shift impacts business operations. According to Vargo and Lusch (2004) there are four fundamental differences:

1.)    Intangibility: Services are intangible and products are tangible.

2.)    Heterogeneity: Goods are standardized while services are not.

3.)    Inseparability: The services are inseparable from the customer while goods are produced separate from the customer.

4.)    Perishability: Services are perishable while most good are not.

Through these four concepts it is possible to understand that services are connected deeply to the needs of the customer. They create a relationship and expectation on the customer through which long-term relationships and additional purchases can be sought. Thinking of a product with services raises the overall market value of the entire package allowing for higher levels of customer satisfaction and sales.

Service-demand logic is based on the culmination of many different marketing , organizational, and service theories. Lusch and Vargo (2006) reviewed 50 top marketing scholars from around the world and found much support and some criticism of service-demand logic. Eventually the field was integrated by Gummesson (2008) with marketing and customer relationship management to create multi-party networks through mass marketing.

Even though this is an emerging concept it stands to logic and reason that the service economy requires a new way of thinking about products. The product is sold into a relationship with the customer. It is this relationship that can either foster over many years or be a simple one-time sale. Through the proper management and development of appropriate service offerings organizations can create higher revenue streams that further their sustainability interests.

Gummesson, E. (2008), Total Relationship Marketing, revised 3rd ed., Butterworth-Heinemann, Oxford.

Vargo, S. and Lusch, R. (2004b), The four service marketing myths: remnants of a goods-based, manufacturing model. Journal of Service Research, 6 (4).

Vargo, S.. and Lusch, R. (2006), Service-dominant logic: what it is, what it is not, what it might be, in Lusch, R.F. and Vargo, S.L. (Eds), The Service-dominant Logic of Marketing: Dialog, Debate, and Directions, M.E. Sharpe, Armonk, NY, pp. 43-56.