4. Demand Forecasting

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IMPORTANCE

qHelp in deciding number of

sales people required

qDetermine the sales territories

qDetermining production level

qDetermining pricing strategy

qDeciding channel of


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q

Deciding to enter in new marketor not

q To prepare standard against

which to measure performance

q Decide the promotion mix

q Asses the effect of proposed


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Market demand for a product is the total volume thatwould be bought by a defined customer group in adefined geographical area in a defined time period,

in a defined marketing environment under a definedmarketing programme Philip kotler.

Market Demand= Total Demand of

all firms in a particular time

period

Company potential= maximum

number of unit sold by the

company in a particular time


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APPROACHES TO MEASURE SALES

POTENTIAL

v General economic forecast for a

specific time period

v Market potential is estimated on

the basis of this economicforecast.

v Companys sales potentials is

Break-Down approach


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Build-up approach

v

Estimate how much product apotential buyer in specific

geographic area (ST) will

purchase in a given period.

v Multiply the unit or amount into

total number of potential buyers

present in that area.


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MP= nqp

Q= market Potentialn= number of buyers in thespecific product

q= quantity purchase by the anaverage buyer

p= price of an average unit


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1. Avoid over production2. Determine appropriate price

policy

3. Short term financialrequirement

4. Setting sales target

Short run Demandforecast


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5 years

v New unit planning or

expansion of existing unitv Long term financial

requirements

v Planning for man powerrequirement under the longterm demand


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Factors affecting demand(sales) forecast

Purchase power of customer

Demography

PriceReplacement demand

Credit condition

Condition with in the industry

Socio economic condition


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suitable for industrial products

Help in new product development

Demerits

Expensive

Time takin

Survey of buyer intention/opinionsurvey method


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Sales force composite method orcollective opinion method

Merits

First hand Accurate data& simple method

Demerits

All Salesman estimate the expected salesin their respective territory.All are combined to get overall demand


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Executive Judgment / Jury of ExecutiveOpinion Method

Executives of different departmenttake partInvolves combining and averagingsales dataIf accurate update data is presentthen this approach can work

MeritsForecast can be made quickly andeconomicallyDemerits

Subjective and hence forecast lack ofscientific validit


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Delphi Method

v Group of experts repeatedly

respond the question fromuncertain area

v

Till the consensus appear in asingle line

v

Each expert is given opportunity


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Time series analysis

Components

1. Cycle comprises sales movement

2. Trend past sales record

3. Erratic events includes the major disaster

that is unpredictable (need to be removed)

4. Seasons pattern of sales movement during

the year

y= f(TCES)


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Market Test Method

Total response of potentialcustomer to the marketing mix

Testing of actual sales made not

target sales

Merit

Useful when surveyor buyermethod is costly

Help for new product forecasting

Help in testing of elasticity of


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Correlation method

Method based on historical data

When there is close relation

between sales volume &

economic condition

Marketer should develop

mathematical formula that

describe the relationship


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Demand forecasting fornew products

1. Evolutionary approach

2. Substitute approach

3. Market testing approach

4. The potential consumer

approach


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Procedure of demandforecasting

Step 1. Determine the objectivesand the purpose for whichforecasts to be used

Step 2. Determine the relativeimportance of the factors, whichaffect sales of each product

Step 3. select the appropriateforecasting methods

Step 4. collecting and analysis the

data

4. Demand Forecasting

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