An example might be helpful in demonstrating this procedure.
The new product manager for a regional bank located in Memphis, Tennessee, found that a recent study of the Memphis metro area indicated that 45 percent of the sample expressed interest in purchasing an asset management account during the next year. The product manager found from recently published census data that there are currently 10,500 households that would qualify as targeted customers for the new product.
Therefore, the best estimate as to the market potential for asset management accounts in the Memphis metro area for the next year, assuming one account per household, would be 4750 (10,500 x .45). If the new product sells for $10 per month, or $120 per year, the market potential estimate can be expressed in a dollar amount as $570,000. By placing confidence limits around this estimate (assuming 95 percent confidence), the market potential ranges from $500,000 (the worse case) to $640,000 (the best case). This figure represents the total estimated number of asset management accounts that could be sold to households in the Memphis metro area by all competing banks for the next year.
The product manager must now decide whether the potential is sufficient to warrant further development of the product. In so doing, the manager must consider what his/her bank’s share of the market would be. This can be done by using other products as indicative of share amounts. For example, this bank has traditionally controlled 30 percent of the Memphis market. Applying this figure to the potential estimate gives a figure of 1425 new asset management accounts worth $171,000. This figure now becomes the bank’s sales forecast for the new asset management account. It is the expected level of bank sales based on a stable market potential for the next year. The sales forecast, when made in this way, assumes a marketing effort consistent with the marketing effort expended on other bank products. Costs of developing and marketing this new product can now be examined and break-even levels estimated. A more fully developed example of this procedure is offered in the next chapter.
Other Vital Information
Several other types of information can be collected at this point which will make subsequent decisions concerning the development and marketing of the new product more effective and efficient. Developing a user profile is a good idea at this point. The user profile describes who the intended users are. These descriptions can be either demographic and/or psychographic and can be extremely useful in developing promotional programs to introduce the new product. Figure 4-6 shows a number of different demographic and psychographic dimensions used in developing user profiles.
Advertisement