ANALYSING

MARKET
OPPORTUNITIES

ROBIN GULATI
CONTENTS
• Some common terms
• Market demand
• Ways to break down the market
• Need for forecasting
• What is forecasting?
• Why forecasting?
• Who needs forecast?
Some Common Terms
• Market Potential: A quantitative estimate
of the total possible sales by the all firms
selling the same product in a given market.
• Company Potential: Refers to a part of
the market potential; what an individual
firm can achieve at the maximum in a given
market, again under ideal conditions and on
the assumption that an ideal marketing
effort has been made.
• Market Demand and Company
Demand: Refers to those portions of
‘market potential’ and ‘company potential’
that are achievable under existing
conditions.
• Market Forecasting: It is transparent and
rigorous approach to estimate the current
and future market trends by using existing
data and facts.
• Company Forecast: It is the sales
forecast of the company.
• Refers to that portion of the company
demand, which the company expects to
capture with the chosen marketing effort.
Market Demand

6x5x3=90
• Companies can prepare as many as 90
different types of demand estimates.
• Demand can be measured for six different
product levels, five different space levels,
and three different time levels.
• A company might forecast short-run
demand for a particular product for the
purpose of :
• Ordering raw materials,
• Planning production, and
• Borrowing cash
• It might forecast regional demand for its
major product line to decide whether to set
up regional distribution.
• Forecasts also depends on the type of
market.
• The size of a market depends on the number
of buyers who might exist for a particular
market offer.
Ways to break down the market:

1. Potential Market: The set of

consumers who profess a sufficient level
of interest in a market offer.
• However, potential consumers must have
enough income and must have access to the
product offer.
2. Available Market: The set of
consumers who have interest, income,
and access to a particular offer.
• For some market offers, the company or
government may restrict sales to certain
groups.
3. Target market: The part of the
qualified available market the company
decides to pursue.
• The company will end up selling to a
certain number of buyers in its target
market.
4. Penetrated Market: The set of
consumers who are buying the company's
product.
• Market demand for a product is the total
volume that would be bought by a defined
customer group in a defined geographical
area in a defined time period in a defined
marketing environment under a defined
marketing program.
• Company Demand is the company's
estimated share of market demand at
alternative levels of company marketing
effort in a given time period.
• The company's share of market demand
depends on how its products, services,
prices, communications, and so on are
perceived relative to the competitors'.
• Total market potential is the maximum
amount of sales that might be available to
all the firms in an industry during a given
period, under a given level of industry
marketing effort and environmental
conditions.
• A common way to estimate total market
potential is as follows:
(Potential number of buyers) x (the average
quantity purchased by a buyer) x (the
price)
• Area Market Potential: Companies face the
problem of selecting the best territories and
allocating their marketing budget optimally
among these territories. Therefore, they
need to estimate the market potential of
different cities, states, and nations.
• Two major methods of assessing area
market potential are:
1. The market-build up method: Used
primarily by business marketers
2. The multiple-factor index method:
Used primarily by consumer marketers.
The Market-build Up Method

• Identifying all the potential buyers in each

market and estimating their potential
purchases.
• This method produces accurate results if we
have a list of all potential buyers and a good
estimate of what each will buy.
• This information is not always easy to
gather.
The Multiple-factor Index Method

• Most commonly used in consumer markets.

• A drug manufacturer, for example, might
assume that the market potential for drugs is
directly related to population size.
• If the Mumbai has 2.28% of the Indian
population, the company might assume that
Mumbai will be a market for 2.23% of total
drugs sold.
• Single factor, however, is rarely a complete
indicator of sales opportunity.
• Regional drug sales are also influenced by
per capita income and the number of
physicians per 10,000 people.
FORECASTING
What is a forecast?
• The best judgment of the future.
• Framework for interpreting present events.
• Identifies factors with which a corporation
must cope.
• Provides a sorting rule amongst corporate
choices.
• Examines current strategic assumptions.
• Aids in strategic decision-making.
• Measure of uncertainty.
Need for forecasting
• Affects:
• R&D expenditure
• Production planning
• Promotional investment
• Portfolio optimization
• Sales targets
• Business development and licensing
• Art of sales forecasting is to balance market
factors with the internal dynamics of the
company and to do it with simplicity,
consistency and transparency.
Why forecasting?
• Rapidly changing environment; rapidly
evolving technology, changing market
structure, and critical political
developments.
• Uncertainty about the future: It is always
good to have estimate about the magnitude
of this uncertainty.
• Development of alternative actions.
• Better forecasting, better decision making.
Who needs forecast?
• Managers for Brands & business unit
management require sales forecast for:
• Demand and supply planning and order
fulfillment
• Partnering decisions
• Finance management
• At levels of local/country, regional &
global
 Sales
revenue,
Unit
ROI, volume Health care
Margins, policy,
Options Pricing
valuation policy

FORECASTIN
Marketing, G Licensing,
Promotional Partnering,
and Consumer Opportunity
Programmes costs

Sales force Global,

size, Regional,
structure & Country
allocation Business units
Forecasting Techniques
• Involves:
1. Patient based forecasting
• Estimates patient share/market share by
using:
• Incident and prevalent population
• Diagnosed population
• Prescription data
• In-patient based forecasting the
combination of patients and prescription
Patient based forecasting

• Patient demographics and epidemiology of

a disease help drug-makers to chose the
right market for the drug.
• Shows the actual picture of the market.
• Gives a knowledge of the potential market.
• Any event affecting the epidemiology will
increase or decrease the total patient pool,
thus the market size.
• Epidemiology is the result of segmentation,
thus a change in patient pool will affect the
segments in future making the patient based
forecast necessary.
2. Data based forecasting
• Estimates product/market share by
statistical trending of historical data.
Patient based algorithm

• The theoretical maximum number of

patients with a given disease state are
defined and then this data is contracted, or
filtered, to arrive at the number of patients
who currently are receiving therapy.
Steps involved are:

A measure of disease prevalence or incidence.

An estimate of the no of patients who are

symptomatic for the disease

An estimate of the no of patients who are

diagnosed correctly with the disease.

An estimate of the no of patients who undergo

drug therapy.
Example: Forecast steps for DDP IV agents

Historical units data by Population

drugs/class Prevalence rate
Prevalence of
T2D
Daily dose Diagnosis rate
Key
of therapy Diagnosed
forecasting
compliance patients
parameters
rate
Treatment rate
Drug treated
Time statistical series patient pool
modeling to predict
future yearly sales
converted to patient
No. of patients on
numbers
each existing
drug/class
 Uncontrolled patient on each
existing therapies
Add on DPP IV for
uncontrolled patient

Add-on therapy Add-on therapy

Add-on therapy
for uncontrolled for uncontrolled Add-on therapy
for uncontrolled
patients on patients on for Big+
patients on Bigu
biguanides only sulfonyl ureas Glitazones (%)
+ SU (%)
(%) only (%)
Add-on therapy Add-on therapy for
for uncontrolled uncontrolled patients on
patients on triple therapy
SU+glitazones Bigu+SU+Glitazones
(%) only (%)

Patients on DPP IV class at

peak • Daily dose
• Days of therapy
DPP IV class: Value & • Compliance rate
volume forecast • Pricing
Forecasting the Product

• Calculation of potential patients who are

treated with the product being forecast.
• This is referred to as patient share, product
share, or market share depending upon the
definition of the share calculation.
Forecasting Patient Share
(Methods)
I. User-entry Share Methodology
• Simplest method
• Forecaster enters the projected share for all
products in the competitive grid.
• May be based on monthly, quarterly, or
annual basis, or entered on any time basis
aligned with the model design.
• Demerit: Non-transparent method.
II. Peak Share and Time to Peak Share
Methodology
• The user enters in 2 parameters:
a. The peak share of the product being
forecast
b. The amount of time required to attain
this forecast peak share.
• More complex than simple user-share
method.
• Demerit: Non-transparent method.
III.Attribute Methodology

• Most sophisticated
• Forecast is based on the product’s attributes,
market’s perception of those attributes and
the importance of various attributes in the
mind of the physician.
• Types:
a) Attribute scores and weights
b) Conjoint studies
c) Preference shares
d) Discrete choice models
e) Utility function models
• Attributed used in prescription very
therapy-area specific.
• Include some measure of safety and
efficacy.
• Ranking should be according to the relation
between attributes.
• The attributes must be combined together to
reflect their importance in the prescribing
decisions.
 Method Merits Demerits
User-entry Flexible and quick Logic used to derive
shares can be unclear
Simple model Defensibility relies
construction upon user
documentation
Combines peak share
and uptake dynamics
in a single forecast
input.
Peak share and Separates peak Logic used to derive
can be unclear
time to peak
Simple model Defensibility lies in
construction user documentation
 Method Merits Demerits

Attributes Constructs share as a Outcome relies upon

function of product the integrity of the
and scores attributes input data; bias can
affect results
Separates attributes used Data collection can be
in the prescribing costly and time
decisions consuming
Allows for perceptual
mapping of products

Forecast are defensible

based upon product
attributes
 Other methods for forecasting
sales/demand

1. Jury method / Executive opinion method

a) Top jury method
b) Percolated jury method
2. Survey of expert’s opinions
3. The Delphi method
4. Sales force composite method
5. Market share method
6. Substitution/replacement method
7. Market tests/Test marketing
8. Analytical and statistical method
a) Simple projection method
b) Extrapolation method
c) Moving averages method
d) Exponential smoothening
e) Time series analysis
f) Complex econometric models
9. Market survey method
THANK YOU!