Demand for ecasting

IMPORTANCE
q

Help in deciding number of Determine the sales territories

Click to edit Master subtitle style

sales people required

q

Determining production level Determining pricing strategy Deciding channel of

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IMPORTANCE
q

Deciding to enter in new market or not

To prepare standard against which to measure performance

Decide the promotion mix Asses the effect of proposed

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Market demand for a product is the total volume that would be bought by a defined customer group in a defined geographical area in a defined time period, in a defined marketing environment under a defined marketing programme Philip kotler.

Market Demand = Total Demand of all firms in a particular time period Company potential= maximum number of unit sold by the
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company in a particular time

APPROACHES TO MEASURE SALES POTENTIAL Break-Down approach General economic forecast for a specific time period
v

Market potential is estimated on the basis of this economic forecast.

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Companys sales potentials is

Build-up approach
v

Estimate how much product a potential buyer in specific geographic area (ST) will purchase in a given period.

Multiply the unit or amount into total number of potential buyers present in that area.

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MP= nqp

Q= market Potential n= number of buyers in the specific product q= quantity purchase by the an average buyer p= price of an average unit
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Demand for ecasting

Short run Demand forecast
1. 2.

Avoid over production Determine appropriate price policy Short term financial requirement Setting sales target

3.

4.

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Long run demand forecast

5 years
v

New unit planning or expansion of existing unit Long term financial requirements Planning for man power requirement under the long term demand

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Factors affecting demand (sales) forecast

Purchase power of customer Demography Price Replacement demand Credit condition Condition with in the industry Socio economic condition
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Methods of demand forecasting

Survey of buyer intention/opinion survey method

Merits suitable for industrial products Help in new product development Demerits Expensive
8/11/12 Time taking

Sales force composite method or collective opinion method

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

Merits
First hand Accurate data & simple method

Demerits
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Executive Judgment / Jury of Executive Opinion Method Executives of different department take part Involves combining and averaging sales data If accurate update data is present then this approach can work

Merits Forecast can be made quickly and economically Demerits Subjective and hence forecast lack of 8/11/12 scientific validity

Delphi Method
v

Group of experts repeatedly respond the question from uncertain area

Till the consensus appear in a single line

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Each expert is given opportunity

Time series analysis

Components
1.

Cycle comprises sales movement Trend past sales record Erratic events includes the major disaster that is unpredictable (need to be removed)

2.

3.

4.

Seasons pattern of sales movement during the year y= f(TCES)

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Market Test Method

Total response of potential customer to the marketing mix Testing of actual sales made not target sales

Merit Useful when surveyor buyer method is costly Help for new product forecasting Help in testing of elasticity of 8/11/12

Correlation method

Method based on historical data When there is close relation between sales volume & economic condition

Marketer should develop mathematical formula that

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describe the relationship

Demand forecasting for new products

1.

Evolutionary approach Substitute approach Market testing approach The potential consumer approach

2.

3.

4.

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Procedure of demand forecasting

Step 1. Determine the objectives and the purpose for which forecasts to be used Step 2. Determine the relative importance of the factors, which affect sales of each product Step 3. select the appropriate forecasting methods Step 4. collecting and analysis the data 8/11/12