Market Modeling Market Research
What can Market Modeling Research Do for My Business?
- What would happen to our company's market share, if X competitor were to exit the business?
- What would total sales of our category do if the price of gas doubled to $6 per gallon?
- What would happen to the market if the market share leader were to half their prices?
- What if my company doubles it's capacity to make our products and as our production prices declined sharply, we sold our product at a 30% discount?
- What would happen if the price of our currency were to increase by 50%? How would the key manufacturer's market share's be affected?
What is Market Modeling Market Research?
Market modeling research is really the Shangri-la of market intelligence because it seems to comprehend and incorporate the effects of everything that has been included in the model. The problem is that the assumptions built into the model are only as good as the people putting together the model. Additionally there are times when competitors take actions that don't seem to make any sense (and are therefore are not included in the model). For example the sales of US cars and their profit margins stagnated in the late 1990's, but the reaction was to give enormous rebates for customers purchasing US cares, especially higher margin trucks and SUV's. This tactic seems to have come home to roost as current estimates state that new car purchases could be the worst they've been in 15 years in 2008! Additionally, and most certainly not modeled, is the fact that the price of a gallon of gasoline has broached $3 a gallon and seems to be headed higher for the foreseeable future - gas guzzling SUV's, with their enormous profit margins are selling poorly while new breeds of "green" friendly cars are selling faster than they can be made in some cases. This demonstrates the limitations of market modeling market research.
How Does Market Modeling Market Research Work?
Although termed market research, market modeling is as much about forecasting as it is about market research. It attempts to tie together many disparate aspects of market research findings (such as pricing market research, and advertising market research) along with economic factors, broad industry trends (often fed to us by the syndicated market analysts and trade consortiums) and to mix it all together to make sense of some of the more likely scenarios that may arise in the future.
I believe that narrowly scoped Market Modeling projects can limit business risk, but there is a great tendency for [scope creep] and once that starts it's very hard to stop. If you end up with a "boil the ocean' market modeling project beware - it probably can't handle the simplest of changes, much less multiple large changes to the market. Caveat Emptor
