Marketing aspects of Feasibility Study

The Marketing Aspects
Jeziel K. Camarillo

Marketing Aspects
• To determine the extent to which the goods/ services be
generated by the project are needed or demanded and to
design the appropriate marketing strategies and plans that will
help ensure that the project’s outputs will reach and be
accepted by the target users.

Objectives of Marketing Study
 To analyze the past and present demand and supply situations,
expected future behaviours and the resulting demand –supply gaps as
they relate to the outputs of the projects whether they carry market
prices or not (e.g. Public goods).
 To undertake the analysis, planning and formulation of workable
marketing programs, product mix strategy, marketing mix and marketing
organization that can effectively inform, motivate and service the
markets.

Parts of Marketing Study:
1. Market Analysis
Demand
Supply
Demand Supply Consolidation
 2. Marketing Planning
Forecasting Techniques

Definition of a Market and General Market
Definition
Market
 an arena for potential exchanges that may involve money.
Where demand and supply conditions for goods or services are taken into account (with or without
market selling price, e.g. Economic services such as primary health care, education, extension services.
Etc.
It is essential for project to have a clear definition of the types and the nature of the products/ services
to be generated by the projects, their specific uses, potential users, geographic influence area and other
characteristics.
These type of general information will provide the basis for identifying the different areas of
investigation necessary to the analysis of the product’s demand and supply and for setting the limits
within which calculations have to be made.

Demand Analysis
- involves the estimation of market demand for the output(s) of the proposed
project.
- it involves
a. identification and analysis of demand determinants;
b. estimation of past and present demand
c. projection of future demand

Demand Determinants
 Population
 Income
 Prices
 Substitution Possibilities
 Changes in users' taste
 rate of investments
 government policies and budget
 *The relative importance of the above factors as demand determinants depends on whether
one is analyzing consumer or producer demand for non marketed goods, such as social
services

Consumer Demand
 or final demand reflects the demand for a product for final consumption purposes (e.g.
basic food commodities, housing, clothing, health care, basic educational services)
 important consumer demand determinants are population, per capita income, consumer
preference in the case of marketed goods and services.
 population characteristics or may have to be specified as to age, gender, geographic
distribution, social background, income class for more meaningful consumer demand
analysis.
 the relationship between some determinants such as income and prices and the demand
for a consumer good can often be described mathematically (e.g. demand and income can
be reflected in terms of income elasticity of demand)

Marketing aspects of Feasibility Study

Producer Demand
 or intermediate demand is the demand for a product which is used as an input to the
production of other goods and services: also called derived demand (e.g. demand for
lumber, furniture, fuels for industrial purposes, demand for research, training, skills for
various productive applications.
 producers demand for the project's output depends on the nature of their production
processes, scale of operations, rate of investment and ultimately on the level of
demand for thier own product.

Demand for Social Services
 is a special case of consumer demand where services have no market price, where needs are virtually
unlimited, and where limiting factors is governments ability to pay, rather than consumer's income.
 the demand for social services can be undertaken through an assessment of the adequacy of various
type of social services provided by the public sector.
 For instance the Health Sector the estimation of the level of need for public health services may be
based on an analysis of health and nutrition indicators, e.g. disease patterns (morbidity rates), or
proportion of people suffering from different types of diseases; disease mortality rates, or number of
deaths due to these diseases; nutritional deficiencies which can be measured from the occurrence of
diseases related through malnutrition, or through various antrometric measures like height and
weight -for-age, or birth weight

Estimating Past and Present
Demand
- once the determinants of demand have been identified, the past and present
behavior of these determinants are examined to measure the prospective
demand for the project's output.
- the choice of quantitative and qualitative data to be analyzed should be
highly selective and directly relevant to this purpose.

Sources of Data
 data on demand can be obtained either first hand or from existing documentation or both. Proper judgment
must be exercises in deciding which methods to use.
 Existing Documentation(secondary statistics)- includes: statistics generated by government agencies, trade
associations and firms; general surveys such as economic census, research institute studies; social services
surveys (e.g. data on consumption of imported commodities may be obtained from the Department of
Economic Research, Central Bank of the Philippines; National Census and Statistics Office; Bureau of
Customs and private firms that compile data on imports.
 *There is a tendency for some project planners to over-indulge in secondary data even when firsthand
information is access able and cheap to generate.
 *There is likewise an unfortunate tendency for planners to be selective in the secondary data used to avoid
presenting data that will tarnish the image of the product of being laid out.

Sources of Data cont.,
 Interviews and special surveys are usually used to supplement the data collected from
existing secondary sources.
 For many projects however, it makes a lot of sense to rely on firsthand rather than
structured surveysThese should, however, be conducted with proper expertise.
 In addition, costs of conducting the interviews/survey should be weighted against the
quality and the extent of data needed.

Historical Data Coverage
 The period from which data on the quantitative and qualitative aspects of demand are
collected and synthesized depends on the following:
(1) Homogeneity of Statistics- statistics availed of should be comparable over
the period, i.e.the same definitions are used, same geographical coverage holds,etc.
*In general the longer the period considered, the better the demand analysis and
estimate. In some cases, however, the data available are limited to a few years, leaving
no choice in the length of period to be used

Historical Data Coverage cont.,
 (2) Factors which may have significantly changed the trend of demand for the project
output. It is important to take account of recent events and changes in government policies
that may have affected the market.
 For instance, historical data on log exports are no longer relevant in the face of recent
policies limiting log exports. The project planner will thus have to rely on his own judgment
when fixing a limit to his own inquiries into the past.
 In general, statistics on basic products (steel, rice) can be used over a longer period while
those on less essential goods and services, particularly those which are subject to dynamic
changes in technology and involve wide product ranges (electronic devices) are significant
for shorter period of 5 to 10 years.

Techniques for Demand Estimation
 (1) Standards Coefficients- for example the market demand for a certain food product
in a specific location maybe derived from actual per capita consumption estimates.
Similarly, the demand for classrooms may be calculated on the basis of an accepted
national planning standard such as classroom-pupil ratio.
 (2) Chain Ratio Method- An example of the application of this method is when the
demand for cow’s meat is estimated to be equal to: Population X Personal
discretionary income per capita X Average percentage of food expenses spent on meat
X average percentage of food expenses spent on cow’s meat.

Techniques for Demand Estimation cont.,
(3) Market- Build-up Method- this is an aggregation of the potential beneficiaries in each
market. Since this method is a more direct approach to demand estimation, it is
generally preferable.
• A good illustration is the project study on the feasibility of a poultry dressing plant for
backyard raisers in particular province to be owned and operated by the government.
• *If the outlets of dressed chicken will be mainly the public markets, the potential
demand estimated is shown below.

Name of Public Market No. of Poultry Meat Stalls Average No. of Dressed Chicken
Sold Daily
MunicipalityA 15 450-500
Municipality B 16 400-600
MunicipalityC 4 100-150
Municipality D 7 250-300
Municipality E 8 350-400
Municipality F 10 300-400
Total 60 1,850-2,350

Projecting Demand
-these are the various methods for estimating future demand, among which are the following:
-(1)Are based on the potential clients’ say they will do, a)survey of the people’s intentions and b)
needs assessments;
-
-(2) Base on clients’ expected to do, a)expert’s opinions) b)time series analysis(trend
projection);c)statistical demand analysis, d)use of planning standards (coefficients,
international, or interregional data comparisons) and e)market (pilot project) testing.
*The choice of forecasting technique would depend on various factors including the quality
and quantity of data available.

Techniques in Projecting Demand
(1)Survey of people’s intentions and Needs Assessment- the determination of whether and
to what extent the target population feels a need for the outputs of a proposed
project.
 In general it entails the collection of information through field investigations where
specific questions relating the outputs of the project under consideration to the actual
and perceived needs of the target population are asked through direct contact with a
sample of the population.
 The results of needs assessment can also be used to verify what the intended
beneficiaries want in contrast to the project designer’s assumptions.

Techniques in Projecting Demand cont.,
(1)Survey of people’s intentions and Needs Assessment-
 A useful way of finding out how the target market will react to the project output is by asking the
potential beneficiaries themselves. (Random Sampling)
 Example: DoYou intend to use X product/ service
Yes ________ No ______ Don’t Know___
 Total Market =Yes:Yes and No
 (a)Don’t know=Yes/No (b) Don’t know = No
 Refinements of this method can be made by incorporating the concept of probability.
 A crude way is to include “Maybe” and give it 50% probability against 100% forYes and 0 % percent
for N0

(1)Survey of people’s intentions
and Needs Assessment-
 A more elaborate way is to us e a
probability scale such as the example below:
 most applicable in the following
circumstances: when number of beneficiaries
Is relatively small; the cost of reaching them
Is small; they follow their original intentions;
They are willing to disclose their intentions;
And when new good/service will be introduced
and thus no past data exist.
Probability
(ExpectedValue)
Description
1.00 Certain/ Absolutely
.90 Almost Certain
.80 Very Probably
.70 Probably
.60 Good Possibility
.50 Average Chance
.40 Fair Possibility
.30 Some Possibility
.20 Very Slight Possibility
.10 Absolutely No chance

 (2) Expert’s Opinion- a substitute for a survey of people’s intentions or needs assessment, it
is a systematic determination of the views and opinions of those who “know” these
beneficiaries.
 These “experts” are themselves potential beneficiaries and can speak for the rest of the
beneficiaries and are therefore familiar with the latter thinks( e.g. feed producers or
distributors may be asked about the preferences of the chicken growers) and those who
have undertaken some studies on the subject.
 Methods in extracting demand forecast from experts are through: group discussion
method; pooled individual estimate method; Delphi approach.

 (2)Trend Analysis - - use to determine pattern or movements of an economic variable over
time that may indicate the direction in which it will proceed over time. historical demand
data is collected for a number of years.The rate of growth of demand data is collected
during the past years is extrapolated and is for projecting the future demand over a period
of time.
 A relatively long series of historical data is required to ensure that short term economic
fluctuations or changes in the social environment do not unduly affect the median line to be
extrapolated .
 Trend projections assumes that factors affecting past demand will continue to prevail in the
future
 Fro preliminary estimation purposes or for small scale projects, this method is usually
sufficient.

 (d) Statistical Demand Analysis- quantifying the functional relationship between the
level of demand and various demand determinants.
 (e)Use of Planning Standards- the use of comparisons of market data from other
regions or other countries in cases where local data for the project’s output are limited.
 * Cautions should be exercised in the selections of regions/ countries with which the
data are indeed comparable . Some factors to account for are possible differences in
the demand determinants, levels of development, definitions used and statistical
coverage.

 (f). MarketTesting- a more direct approach, when the potential beneficiaries are not clear about their
preferences or are not quite consistent in what they say or do or where experts cannot make good
guesses.
 For instance if the planner is interested in the probable demand for a new rice hybrid which is proposed for
national marketing he may try to conduct pilot marketing of that product in the selected areas.
 Limitations of MarketTesting: a) where the basic fixed capital requirements (e.g. building, equipment) are
substantial, there may be no middle ground between doing it fully or not doing it at all; b) where the
approach is applicable, the problem include selecting market segments that will reasonably represent the
market as a whole estimating the future on the basis of past market conditions and the existence of
exogenous factors that could affect the outcome on the test(e.g. water)

Supply Analysis
An evaluation of existing supply conditions towards bridging the gap between the
level of supply and the level of demand for the proposed project’s output.

Steps in Supply Analysis
 (1) Identifying Supply Resources- the examination of supply resources with respect to
volume of each output, capacity distribution, service area and other relevant
characteristics.
 *For social services, various supply can be analyzed by specifying the agencies
rendering such social services and evaluating the levels of services provided and the
respected service areas.

 (2) Estimating Past and Present Supply- employing of historical estimates of supply
and some knowledge of its historical trends/ fluctuations that may be due to the
influence of economic and social policies and technological changes on the supply
determinants (e.g. the effect of imports constraints, shortages of raw materials,
innovation in productions process, changes in social environment.)
 *For Social services, the use of social service indicators may be particularly helpful in
the analysis of past and present supply situations , for instance health service
indicators (e.g. no. of people per heath worker, midwife, doctor, clinic/ health center
hospital)

 (3)Projecting Supply
 The approach and considerations are essentially similar to those relating to demand.
 The methodology and factors used in forecasting should be cited.
 Two sets of supply projections are made (with or without the project). In both sets, rated
capacities and production efficiencies assumed for the different producers should be made.
 Expected market should be cited in the case of projections of the project.
 For social services, the targeted level and volume of specific types of social services to be
provided by each agency and their respected areas should also be cited.

Demand and Supply
Consolidation
- Determines whether and to what extent there is a market for the
project’s output of good and services.

Steps in Demand- Supply Consolidation
 (1) Past and Present Supply- Demand Gap- to provide indications of total current
shortage, if any, and to specify the areas affected by said shortage.
 * Specific reasons (e.g.Technical, financial, administrative) behind current bottlenecks
should likewise be identified to arrive at proper solutions to the problems.

 (2) Future Demand – Supply Gap,Without the project
 Yields information on the expected shortages/surpluses in supply according to the
type of demand, sources of production, seasonal variations, geographic fluctuations,
etc.
 The analysis, therefore, serves as a basis for the identification of alternative sizes,
locations, production processes and other specifications of the proposed projects.

 (3) Future Demand – Supply Gap,
With the project
 The addition to supply provided
by the project, reduces, if not
altogether closes, the projected
gap between future demand and
supply.
Before the
Project
X1 X2
Project Implementation
X3
Project in Implementation
Time
Supply Without
the Project
Demand/Supply
with the Project
Demand Supply Curve Relationship With
and Without the Project

Other Major Market Considerations
 Instances where demand and supply gap may not be necessary to justify a project (Market
goods/services):
 Exportation of a good or services despite the adequacy supply in the world market in view of a comparative
advantage enjoyed by the country resulting in the price competitiveness of the product.
 Setting up hydroelectric power plant despite adequacy of power supply in the project influence area in view
of lower power generation costs relative to, say, power generation using oilfired plants.
 For social services, supply and demand have a different meaning, particularly where the purpose of the project is to
help eradicate a social problem(e.g. poor health, low levels of education), the demand-supply gap in this case
becomes “relevant”.

 Competitiveness of a Product
 For producing market goods/services, its competitive position can be analyzed in terms of the price of the project output with
that of competing products in the market should be made to determine the extent of price competitiveness.
 This involves the knowledge of past price behaviour and expected future price movement of a certain products.
 The comparison of the quality specifications of the project’s output to determine the extent of quality competitiveness.
 * For social projects , the associated costs that the user bears in utilizing the project services should be compared with the costs
of other alternative available (e.g. the interest cost differential between credit from project subloans and from traditional money
lenders can be lost if users have to spend time and money travelling between project offices and villages to collect signatures
and complete the paper work of loan processing.)

 Government Policies
 Specific policies directly affecting the industry or sector to which the project belongs should be
analyzed.
 In the case of marketed goods, these would include existing trade agreements, tariff rates,
quantitative import or export restrictions, and financial and tax incentives, all of which might affect the
overall marketability of project’s output.

 Marketing Program
 Is a basic consideration in the market study, and is often a critical determinant of the success of the project.
 Strong marketing program of a project which promises to yield market shares can be rated feasible even in the
absence of a shortage of supply or a relative advantage in production, at least in a market standpoint.
 Marketing Planning
 A market study serves as the bases of marketing plan
 typically deals with four areas: market segmentation and targeting, product mix strategy, marketing mix, and
marketing organization.
 These aspects should be viewed in the context of specific projects, since the relevance of these aspects vary
according to project.

Market Segmentation and
Targeting
 Market segmentation is a marketing
strategy that involves dividing a
broad target market into subsets
of consumers who have common
needs and priorities, and then
designing and implementing
strategies to target them.

Market Segmentation
 SegmentationVariables
 Geography
 Demographic
 Psychographics

MarketTargeting
 Target Market Strategies
 Undifferentiated Marketing- broad
largest Market
 Differentiated Marketing- separate
product/segment for each market
segment
 Concentrated Marketing- Select one
or Few submarkets and design
appropriate Marketing Plans

Marketing Organization
[Full Name]
Project Manager
[Full Name]
Member Role
[Full Name]
Member Role
[Full Name]
Member Role
[Full Name]
Member Role
[Full Name]
Administrative
Assistant

Marketing aspects of Feasibility Study

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Editor's Notes