Market Appraisal

Objective of Market Appraisal

The objective of market appraisal is
to examine the reasonableness of
market assessment and
projections relied upon by
promoters, by viewing the
available survey reports, and
through some independent market
survey, if required.

Scope of Market Appraisal

(1)
(2)
(3)
(4)
(5)

Appraisal of Demand Estimates

Supply Projections
Forecasting of Price Trend
Marketing Arrangements
Marketing Personnel

Assessment of Market
Demand

Effective Market Demand of a Product =

Existing level of consumption Market imperfection
Stock changes Changes in consumers preference,
etc.
Estimate of Demand is Based on (1) Estimated Existing Consumption
(2) Demand Elasticity and Expected Changes
(4) Extent of Competition and Market Share
(5) Estimated Imports and Exports
(6) Estimated Stock Changes

Segment Analysis
To identify the behaviour pattern of different
segments and design appropriate strategy for
each segment.
Basis of Segmentation
(1) Nature of Product - Grouping product wise or
brand wise for each product
(2) Geographical Divisions - Grouping region-wise,
state-wise or area-wise.
(3) Some Special Feature - Grouping based on
religion, class, income level, education level or
some other feature expected to influence the
choice of product.

Demand Estimation
(1) Total demand of the product.
(2) Segment-wise break up of the demand.
(3) Income elasticity of the demand.
(4) Demographic Changes
(5) Consumers related information like
motives, attitudes, habits, socio-economic
profile of buyers, their preference, etc.
(6) Trade practices, including distribution
channels, advertising media, special
facilities and arrangements required, etc.

Collection of Market InformationSurvey

(1) Census Survey: In case the product has a small market
and limited number of users/buyers and more accurate
and reliable information is required for decision making.
All present and potential users/buyers are expected to be
covered.
(2) Sample Survey: In case the product has a large market
and a diversified group of users.
Based on sample of appropriate size covering all varieties of
user groups is selected and survey done. With less effort
and cost more useful information may be collected.

Methodology of Market
Survey
(1) Recognition and Definition of Target Population
(2) Selection of Sample
(3) Design Survey
(4) Instrument Development - Questionnaires and
Schedules
(5) Recruitment and Training of Investigators
(6) Field Investigation and Survey
(7) Scrutiny and Editing of Information Collected
(8) Data Analysis
(9) Survey Report

Secondary Sources of Market

Information
(1)
(2)
(3)
(4)
(5)
(6)
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(8)
(9)

Census of India
National Sample Survey Reports
Plan Reports
Central Statistical Organisation Reports
Directorates of Economics and Statistics Reports
Research Reports - Research Institutes
Administrative Reports
Reports from Regulatory and Other Bodies
Reports from International Institutions

Precautions in Use of Secondary

Sources
(1) Credibility of the source to be checked
(3) Reliability, Accuracy and Relevance of
information to be ascertained and
tested prior to its use.
(2) Projections to be verified by
comparing with projections of Planning
Commission, DGTD, NSS, CMIE, etc.

Demand Forecasts
Based on (1) Trend Projection Method
(2) Consumption Level Method
(3) End Use Method
(4) Leading Indicators Method
(5) Econometric Models
These estimates are verified with statistical
tests and finally future demand is
estimated.

Uncertainty Factors in Demand

Forecasting
(1) Inadequacy in Data
(2) Inappropriate Method of Forecasting
(3) Environmental Changes
(i) Technological changes - production technology, new
researches, new products, better alternatives, use of
substitutes, etc.
(ii) Changes in political philosophy - industrial policy, licensing
policy, import and export policy, taxation policy, price and
distribution control, etc.
(iii) Changes in physical environment - weather, topography,
rainfall, climatic conditions, tides, earthquakes, etc.
(iv) Changes in social and cultural environment, - education,
health, habits, customs, group dynamics, etc.
(v) International environment - political and ideological shifts in
the policy of international institutions, country blocks, etc.

Meeting Uncertainty in Demand

Forecasting
(I) Critical evaluation of the assumptions made.
(ii) Monitoring Environmental changes
continuously.
(iii) Updating Information base from time to
time.
(iv) Sensitivity analysis to determine impact of
different factors.
(v) Maintaining long term perspective.
(vi) Quantification of non-quantitative
variables.

Supply Projections
Based on 1. Existing Sources
2. New Projects
3. Imports
4. Substitutes

Forecasting Price Trend

Variables expected to influence price
include
1. Changes in demand
2. Changes in supply
3. Changes wage rates
4. Tax Rates
5. Interest Rates
6. Price Level Changes
7. Imports and Exports
8. Substitutes and their Price

Marketing Policy
1.
2.
3.
4.
5.

Channels of Distribution
Transportation Arrangement
Warehousing and Storage
Packaging
Sales Promotion and Advertising

Assessment of Strengths and Limitations

Exploration of alternatives
Identification of Appropriate Mix

Marketing Personnel
1. Profile of Key Marketing Personnel
2. Background and Experience
3. Resourcefulness and Commitment
Support systems
1. Compensation Package
2. Incentive system
3. Training and Development
4. Market Research Support

Justification for Market

Appraisal
Shall Come from (1) Consideration of all variables expected to influence
market demand, supply, price trends, marketing
policy, etc.
(2) Adoption of appropriate methodology for the
assessment of market demand, supply, price, etc.
(3) Maintaining objectivity all through the assessment.
(4) Using well founded assumptions at different stages.
(5) Assessments being comparable with competitors,
other agencies and other projects.
(6) Variance, if any adequately explained.
(7) Error in estimation being not significant.

Thanks