Forecasting Market Share

By Geurts, Michael D.; Whitlark, David | The Journal of Business Forecasting Methods & Systems, Winter 1993 | Go to article overview

Forecasting Market Share


Geurts, Michael D., Whitlark, David, The Journal of Business Forecasting Methods & Systems


A widely used measure of a company's marketing performance is the market share of the company's products. Market share ratio measure that allows the sales of a product for one company to be compared to total of the industry. Some companies make strenuous efforts to increase market share at the expense of competitors, because gain in the market share is generally considered one of the important measures of business success. Often a forecaster is asked to forecast market share rather than, or in addition to, actual sales.

Market share forecasts have become important planning and evaluation tools. Consequently, many forecasting models have been developed or modified to forecast market share. This paper looks at several models used to forecast market share.

MODELS OF FORECASTING MARKET SHARE

There are basically four types of market share forecasting models:

1. Time series models

2. Multiple linear regression models

3. Logit models

4. Conjoint analysis models

TIME SERIES MODELS

Time series models use past data to project into the future. They are one of the most frequently used models of forecasting. Nearly all business forecasting texts discuss time series so the mechanics are not covered in this paper. To predict market share, the procedure is to use market share values for the past periods to develop seasonal patterns as well as trends in the data. The market share trends are projected into the future. Trends of market shares are adjusted based on the seasonality of the period being forecasted. Generally time series market share forecasts have been accurate up to one year into the future for products that have two or more years of sales history, and when relative prices and advertising expenditures have been nearly constant. Given that the relative prices and advertising are constant, it is likely that time series models will be the best models of forecasting market share.

For products being sold in markets with unstable competitive environments where prices and advertising levels are, changing, time series models may not be appropriate. In such cases the models discussed below may produce the most accurate forecast of market share.

MULTIPLE LINEAR REGRESSION MODELS

When applied to market share, multiple linear regression models are often called response models because they explore the relationship between market share and changes in the marketing mix variables. Marketing mix variables are often divided into four categories:

1. PRODUCT

a. packaging

b. product improvements

c. product innovations

2. PROMOTION

a. advertising

b. sales calls

c. salesperson compensation

d. sales promotions (games, premiums)

3. DISTRIBUTION CHANNELS

a. channel promotion

b. channel development

c. training

4. PRICING

a. price changes

b. coupons

Response models estimate the extent to which market share responds to changes in these variables. Regression coefficients predict the effect of changes in price, advertising, or their marketing mix on a firm's market share. The model is particularly helpful in separating (partitioning) the effects of the marketing mix variables on market share. For example, suppose that a firm combines a series of price increases with increases in advertising expenditures. In this situation, the simple correlations between market share and price, or between market share and advertising could be quite small. Consequently, a model that attempted to predict market share based on price or advertising alone would yield poor forecasts. Multiple regression, however, can separate the two effects so that managers can understand how market share changes with price changes (holding advertising expenditures constant) and advertising changes (holding price constant). Response models that use multiple linear regression help managers to understand the effects of market mix variables on market share in addition to making a forecast of market share. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Forecasting Market Share
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.