Market Modeling
The process of generating forecasts often stems from the development of a market model. Many practitioners ask what is meant by ‘market modeling’. Market modeling is a useful method for embodying our knowledge of markets into a statistical or even a non-statistical framework. This framework gives the user predictions of how a market may react given changes to factors like product price.
Market models can have many benefits to organisations:
Test your ideas on the model without affecting customers.
Measure the effect of important market factors on demand (e.g. economic activity, seasonality, advertising, product prices, and consumer socio-demographics).
Predict future demand
Market modeling can be undertaken using a variety of techniques and the LCF has specialist skills in the following areas:
1. Fast Moving Consumer Goods Modeling (e.g. supermarket shelf products):
A number of successfully completed projects in this area allow clients to better understand the interior mechanisms of their markets. Using state of the art modeling approaches, the LCF has been instrumental in providing brand managers with detailed knowledge on the price sensitivities of its consumers. Price sensitivities, data willing, can be provided for both own and competitor products that also control for the effects of events outside of an organisations control, such as demand seasonality.
2. Innovative Technology Demand Modeling:
To be able to estimate the likely demand of new or recently launched products is a useful planning tool. The diffusion of an innovation like broadband, from market entry to final market saturation, allows market planners and policy makers to assess the potential of a product. Research undertaken for the Icon programme at the LCF describes how technological innovations, like general household technologies and internet shopping, can evolve through to saturation. We show, via Icon, that the estimation of segmental consumer diffusion curves from survey data is possible that can be used for market planning purposes.
3. Consumer Choice Modeling:
Underlying all markets are consumer choices. Using appropriate statistical methodologies we at the LCF have the necessary skills to be able to measure the effect that market factors have on this choice. Our most recent work involves the analysis of the choices that consumers make when choosing to purchase products online. Previously, we have analysed the effects of consumer socio-demographics and product price on the choice of whether to have internet services residentially. See the Icon pages for working papers and publications.
4. Market Research:
Most predictive models rely on solid underlying market knowledge that can only be derived from market research. We at the LCF draw support from Lancaster University Management School that has a long history of lecturing and researching using well founded market research principles. We learn from its methodology that many excellent and well founded products have failed in the past principally due of a lack of basic and often elementary research.
5. Survey Design and Data Collection Services:
All of the modeling activities at the LCF require data. Where this is not available to purchase (e.g. point of sale data from AC Nielsen) it needs to be collected. The LCF has considerable experience in the construction and delivery of surveys that can be placed onto websites or presented in print format that help us measure consumer activities and opinions. An important aspect of the research we undertake is to see how consumer behaviour evolves over time and this involves periodic resurveying work. We presently have a database of approximately 800 households, of known characteristic, that can be used to understand changes in consumer ICT markets. Over the coming years we plan to extend this number to approximately 10,000 households that will be used for a variety of academic and non-academic purposes. Please contact us should you wish to support out efforts in this area or, indeed, if you would like knowledge support in setting up your own consumer panel.
For additional information see the SIG on the left or visit the ICT-Research website.
