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DEMAND

FORECASTINGGROUP MEMBERS:Gargi Ghosh

Sneha Kesarkar

Lakshmi Subramanian

Divya AgarwalSnibdha Tambe


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DEMAND

FORECASTING

It means estimating demand for a

product in future.Its an attempt to see the future byevaluating the past.Very essential aspect for an organizationfor forward planning.Works as a reference point for allbusiness decisions.

Based on the law of probability.


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STEPS IN DEMANDFORECASTING

Determination of objectives.

Nature of the product and market.

Identification of demand determinants.

Selection of method of demand

forecasting.


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ADVANTAGES OF DEMANDFORECASTING

Develop new product

Schedule production, avoid over and underproduction.

Create a good distribution system.

Helps in decision making.

Helps in forecasting Short term demand, MediumTerm demand, Long term demand.

KEY TERMS IN FORECASTING

Market

Potential Market


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QUALITATIVE TOOLS

Methods used are:

(a) Survey of buying intention

(b) Composite of sales force opinion

(c) Delphi technique


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SURVEY OF BUYINGINTENTION


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Surveys buyers to assess their intention to buy

the product.

Useful in estimating the market demand forconsumer durables or even a new product.

E.g. change in price & its effect on consumerdemand studied through this method.

Purchase intention of the buyer can bemeasured on a seven-point scale from a

definitely buy to a definitely not buy i.e.purchase probability

Suitable in industrial marketing.


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Advantage:

-First-hand unbiased information.

Disadvantage:

-costly, unwillingness of consumers toanswer, uncertainty, time consuming.


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COMPOSITE OF SALES

FORCEOPINION


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Company asks individual sales personnel toestimate sales of the given product, in his/herterritory.

This estimates are then collected/pooled & anational level forecast of sales is obtained.


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Advantage:

-simple & does not involve the useof statistical techniques.

-the forecast are based on first-handknowledge of salesmen & others directly

connected with sales.-useful in predicting sales of new

products.

Disadvantage:

-can only be used for short-term


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DELPHI TECHNIQUE


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DELPHI METHOD is a structuredcommunication technique, originallydeveloped as a systematic, interactiveforecasting method which relies on a panel

of experts. This technique has been namedafter Mr. Delphi, who is the inventor of thistechnique.


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This technique involves constituting a panel of expertsand asking them to estimate the market demand for a given

product. They are also asked to mention their assumption, aboutthe future market environment. Individual experts do not knowwho else is on the panel. Since each expert works from his or heroffice, the chances of him or her getting influenced by others,does not arise. Once the marketer gets the estimates, he or sheisolates extreme opinions and estimates and reverts back to the

concerned expert, giving them the assumptions, which othershave made. However, the marketer does not reveal the estimateof other experts. The objective of sending back extreme opinionsis to get a consensus. This method is used for studying different scenarios and

is particularly useful in estimating demand for a new product ortechnology. A variant of the Delphi technique is the expert opinionpoll in which a firm may interview experts in its industry. Theseexperts could be dealers, large buyers, marketing consultants,and trade associations. These polls too, have the same limitations,as that of the consumer survey. Nevertheless, these polls are


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QUANTITATIVE TOOLS

It refers to forecasts for a period of three yearsor more.

The methods used are

(a) Time Series Analysis

(b) Correlation


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TIME SERIES ANALYSIS


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Most firms have their own industry and sales

data from previous years.

Decomposing this time series and thenestimating sales for the next time period iscalled time series analysis.

The Marketer should have the time series forthe past ten years.


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Two approaches to decomposing time seriesare:

Additive Approach Multiplicative Approach


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Multiplicative Approach

The sales over a time period is a function oftrend, cyclicality, seasonality, and erraticfactors.

Commonly it is expressed as

O=T*C*S*I

Where O refers to observed sales

T refers to trend component

C refers to cyclical component

S refers to seasonality component

I refers to irregular or erratic factor

Additive Approach

In the additive a roach sales is seen as the


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CORRELATION METHOD


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Correlation is the measurement of therelationship between two variables.

The purpose of doing correlations is toallow us to make a prediction about onevariable based on what we know aboutanother variable.

Correlation is a statistical measurementof the relationship between twovariables. Possible correlations rangefrom +1 to 1.

It is commonly believed that the sale of aproduct is a function of several variableslike :

Price,


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This relationship is reflected by thefollowing equation :

Y = f(X1, X2, X3,,Xn)

where, Y = Sales in volumes orMonetary Terms

X1,X2,X3,,Xn = IndependentDemand Variables

This method is increasingly being used.Especially for sales forecasting.

However, a marketer needs to be waryof problems like :

Too few observations,

Too much correlation among


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THANK YOU

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