Determining Market Demand for Feasibility
OMBA 2027A · Managing Cost and Profit (ACCTG 210)
Prof. Christian Eligius A. Jimenez
PRESENTED BY: LT1 & LT7
LT1: Apuya | Balba | Martinez | Palma | Robles | Rodriguez
LT7 : Amante | Cabangis |Garcela | Gutierrez | Lehao | Santos
Is it reasonable to estimate future sales by assuming a percentage of the existing café’s customers will switch? Why or why n ot?
The 400 cups prove demand, and not a switch rate.
No . The café’s 400 cups a day prove that coffee demand exists near the campus, so it is a fair reference point . It is not a safe basis for predicting Campus Brew’s sales, because a fixed switch rate assumes behavior, which the data does not support .
Why? Different product, price, and segment.
• The café sells ₱ 45 brewed coffee ; Campus Brew sells ₱ 60 –80 premium drinks . That is a different product at a different price for a possibly different segment . A higher price shrinks the paying market, and taste, preference, and budget vary, so café customers will not move at a predictable rate .
• Campus Brew may even draw a new segment, such as students who now buy premium coffee off campus, rather than take the café’s customers at all .
Why a fixed percentage of the café’s customers is the wrong base?
Two
gaps make the switch rate unreliable.
Why?
Competition is wider than the café
Students already carry bottled coffee (purchased elsewhere from convenience stores, vending machines, and off -campus sellers) . Part of the demand is already served, so the café is not the full market . Treating it as the only competitor is the classic trap of ignoring competition .
Why?
The observation is too thin
Three days cannot capture weekly patterns, timeof -day swings, or the school calendar, where exams and events lift demand while breaks lower it. Convenience, speed, location, and habit also drive the choice, and none of these were measured .
Conclusion : Use the 400 cups as proof of demand and a starting reference, not as the sole basis for the forecast . Gather more data before buying equipment .
What additional demand validation techniques should Campus Brew conduct before finalizing its feasibility study?
Validation techniques that check what customers actually do.
Pilot test or pop -up booth
Run a booth for a few days with price sensitivity and taste testing . Record real purchases at ₱ 60 –80 and not stated interest . This shows what students do, and not what they say .
1
Foot -traffic analysis
Count students passing the cart and identify peak hours, then separate passers -by from likely buyers . Paired with the pilot, it gives a real conversion rate .
Competitor check
Measure how much demand is already served by the café, bottled coffee, convenience stores, vending machines, and off -campus shops, including their prices and volumes .
2
3
What additional demand validation techniques should Campus Brew conduct before finalizing its feasibility study?
Segmented student survey
Size, interest, spending, frequency, and willingness to pay across a representative sample . Stated intent runs higher than real buying, and a sample of only 20 misleads .
Comparable -business benchmarking
5
Capacity and seasonality checks
Check the estimate against similar campus carts, adjusted for student numbers, price, location, and competition . 6
Set the ceiling on what the cart can serve and adjust demand across the school calendar .
Why combine them? No single method is enough . The pilot and foot traffic confirm real buying, the survey and check add context, and together they cross -check for a defensible estimate .
How should management estimate market share more realistically while accounting for uncertainty?
Bottom -up, Top -down, then Cross -check.
Bottom -up
Build demand from foot traffic
Cups/day = foot traffic × target % × conversion
% × cups per buyer
Illustration
5,000 × 20% × 8% × 1
How should management estimate market share more realistically while accounting for uncertainty?
Cross -check, then decide.
The pilot test helps prove it .
Check
It turns assumed rates into real ones : measure actual buyers against foot traffic, then apply that conversion to normal traffic . Adjust downward for novelty and free samples . Where the three figures converge is the defensible estimate .
Supporting cross - checks:
Purchase frequency → cups
To the management : Do not fix one market -share figure yet . Build bottom -up, bound top -down, confirm by pilot testing . Plan on the most -likely case, test survival on the conservative case, and finalize estimates after the field data is in . Comparable business
Thank you Salamat po Shukran
Gracias Merci Arigato
