Demand Forecasting

Presented by:
Zoha Rashid
Vaibhav Badukale
Gaurav Shah

Vini Pargain
Vipul Maheshawari
Jayendran B

What is Demand Forecasting?

Demand forecasting is the activity of estimating
the quantity of a product or service that
consumers will purchase

Need of Demand Forecasting

Measure and forecast the size, growth and profit
potential of each market opportunity
It helps marketers quantify, compare, and
interpret marketing performance
Demand forecasting may be used in making
pricing decisions, in assessing future capacity
requirements, or in making decisions on
whether to enter a new market

Marketing Research
Marketing research is the
systematic design,
collection, analysis, and
reporting of data and
findings relevant to a
specific marketing situation
facing the company

Measures of Market Demand

Types of Market
Potential market
Consumers have some stated interest in a product or service.

Available market
Set of consumers who have the interest, income and access to the
product or services.

Qualified available market

Set of consumers who have the interest, income, access and
qualifications for a particular product or service.

Served or target market

Part of the qualified market that the company decides to pursue.

Penetrated market
Set of consumers that have already bought a particular product or
service.

Market Demand
DEFINITION:- 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 program.
The combined demand of everyone willing and able to
buy a good in a market. Market demand is one half of
the market. The other is market supply. It is graphically
represented by a negatively-sloped market demand
curve, which can be derived by combining, or adding,
the individual demands of every buyer in the market.

Market Demand
Market demand captures the buying side of a
market exchange. Guided by the law of demand,
buyers are willing and able to purchase a larger
quantity at a lower price. This relation is
illustrated by a downward-sloping market
demand curve.

Market Demand
Market demand primarily focuses on the one-toone relation between the demand price and the
quantity demanded. The quantity demanded at
higher prices is less than the quantity demanded
at lower prices.

Market Demand Curve

A representative market
demand curve is
illustrated in this exhibit.
Note that the curve, or
line, has a negative
slope. At a relatively
high price of Rs40, the
quantity demanded is
20. At a relatively lower
price of Rs10, the

Other Factors Affecting Demand

As market demand focuses on the relation
between demand price and quantity demanded,
it is also affected by the five ceteris paribus
demand determinants:
(1) buyers' incomes
(2) buyers' preferences
(3) the prices of substitute goods
(4) buyers' expectations
(5) the number of buyers in the market

Market Potential
The maximum sales reasonably attainable under
a given set of conditions within a specific period
of time.
Example Texas Instrument Handheld
Calculator, The SR10.

Uses of Market Potential

Potential estimates can help allocate resources
over a product line.
Potential estimates can help to determine the
stage of the product life cycle.
Potential estimates can help set product
objectives.
Potential estimates can help Sales Managers.

 Potential estimates can help to develop

Marketing Strategies.
Potential estimates can help make location
decisions.
Finally, Estimates can be an input for Forecasts.

Sources for Potential estimates

Government Sources
Trade Associations
Private Companies
Financial Analysts

Methods of Estimating Market Potential

Analysis based Estimates.
Area Potential.

Market Forecasting
The amount of sales expected to be achieved
under a set of conditions within a specific period
of time

 Forecasts answer What If Questions.

Forecasts help set budgets.
Forecast provides a basis for a monitoring
system.
Forecast aid in production planning.

Company Demand
Company demand is demand for a specific companys
goods compared to other company offerings. The
demand is determined by sales numbers of a
particular brand put against total market sales.
Example : The number of shirts sold within a
particular season is 50,000 units (combining all
brands and sellers), and if a specific companys shirts
amount to 4,000 units, the company demand for the
firm is (4000x100/50000) 8 percent.

Company Sales Forecast

Sales Forecasting is the process of estimating
what your businesss sales are going to be in the
future. Sales forecasting is an integral part of
business management. Without a solid idea of
what your future sales are going to be, you cant
manage your inventory or your cash flow or plan
for growth. The purpose of sales forecasting is to
provide information that you can use to make
intelligent business decisions.

Company Sales Potential

The highest market share that a product can
reasonably be expected to achieve within a
given time frame. The sales potential for a new
product is typically assessed by
a business interested in producing it
before production commences to determine
whether production efforts are likely to be
worthwhile.

Estimating Current Demand

There are 2 types of estimates of current
demand:
Total market potential
Territory potential

Total Market Potential

It is the maximum amount of sales that might be
available to all the firms in an industry during a
given period.
Q=n*p*q
Q: total market potential
n: no. of buyers of specific product
q: quantity purchased by an average buyer
p: price of an average unit

Territory Potential
Since it is impossible for a company to have the
demand forecast of the product globally
Therefore, territorial potential method can be
introduced.In this method, the company selects
a territory where it can sell its products well.

Forecasting Future Demand

SURVEY OF BUYERS INTENTIONS

COMPOSITE OF SALES FORCE OPINIONS
EXPERT OPINION
PAST-SALES ANALYSIS
MARKET-TEST METHOD
LEADING INDICATORS

Survey of Buyers Intensions(Opinion

Surveys)
The most direct method of estimating demand in
the short-run is to ask customers what they are
planning to buy for the forthcoming time period
usually a year
short and medium-term sales

Composite of Sales Force Opinions

Forecasts on information provided by the sales
force.
Delphi Method.
Bias
They may understate demand so that the company
will set a low sales quota.

Expert Opinion
Forecasting specialists are in a better position
than the company to prepare economic forecasts
because they have more data available and more
forecasting expertise.
Bias example
In 1946,Daryl F. Zanuck, head of 20th CenturyFox, made this pronouncement: TV wont be able
to hold on to any market it captures after the first
six months. People will soon get tired of staring at
a plywood box every night.

Past-Sales Analysis
Time-series analysis
Breaking down past sales into its trend, cycle,
season and erratic components, then recombining
these components to produce a sales forecast.

Limitations:
Historical data is not always good indication of
what might happen in future.

Market-Test Method
Buyers do not plan their purchases carefully or
where experts are not available or reliable, the
company may want to conduct a direct test
market.
Limitations:
Expensive
Time consuming
Competitive Awareness

Leading Indicators
Think of how the amber traffic light indicates the
coming of the red light. In the world of finance,
leading indicators work the same way.
Example
Stock Market
GDP