DEMAND FORECASTING GROUP MEMBERS:

Gargi

Ghosh Kesarkar Subramanian Tambe

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Sneha Divya

Lakshmi Snibdha

Agarwal

DEMAND FORECASTING
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It means estimating demand for a product in future. Its an attempt to see the future by evaluating the past. Very essential aspect for an organization for forward planning. Works as a reference point for all business decisions. Based on the law of probability. 3/18/12

STEPS IN DEMAND FORECASTING

Determination of objectives. of the product and market. of demand determinants.

Nature

Identification Selection

of method of demand forecasting.

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ADVANTAGES OF DEMAND FORECASTING

Develop

new product

Schedule Create Helps Helps

production, avoid over and under production. a good distribution system. in decision making.

in forecasting Short term demand, Medium Term demand, Long term demand.

KEY TERMS IN FORECASTING

Market Potential

Market 3/18/12

QUALITATIVE TOOLS
Methods used are:
(a) (b) (c)

Survey of buying intention Composite of sales force opinion Delphi technique

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SURVEY OF BUYING INTENTION

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 Surveys Useful E.g.

buyers to assess their intention to buy the product. in estimating the market demand for consumer durables or even a new product. change in price & its effect on consumer demand studied through this method. intention of the buyer can be measured on a seven-point scale from a definitely buy to a definitely not buy i.e. purchase probability in industrial marketing.
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Purchase

Suitable

Advantage:
-First-hand unbiased information.

Disadvantage:
-costly, unwillingness of consumers to answer, uncertainty, time consuming.

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COMPOSITE OF SALES FORCE OPINION

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 Company

asks individual sales personnel to estimate sales of the given product, in his/her territory. estimates are then collected/pooled & a national level forecast of sales is obtained.

This

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Advantage:

of statistical techniques.

-simple & does not involve the use

-the forecast are based on first-hand knowledge of salesmen & others directly connected with sales. -useful in predicting sales of new products.

Disadvantage:
3/18/12 -can only be used for short-term

DELPHI TECHNIQUE

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DELPHI METHOD is a structured Click to edit Master subtitle style communication technique, originally developed as a systematic, interactive forecasting method which relies on a panel of experts. This technique has been named after Mr. Delphi, who is the inventor of this technique.

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This technique involves constituting a panel of experts and asking them to estimate the market demand for a given product. They are also asked to mention their assumption, about the future market environment. Individual experts do not know who else is on the panel. Since each expert works from his or her office, the chances of him or her getting influenced by others, does not arise. Once the marketer gets the estimates, he or she isolates extreme opinions and estimates and reverts back to the concerned expert, giving them the assumptions, which others have made. However, the marketer does not reveal the estimate of other experts. The objective of sending back extreme opinions is to get a consensus. This method is used for studying different scenarios and is particularly useful in estimating demand for a new product or technology. A variant of the Delphi technique is the expert opinion poll in which a firm may interview experts in its industry. These experts could be dealers, large buyers, marketing consultants, and trade associations. These polls too, have the same limitations, 3/18/12 as that of the consumer survey. Nevertheless, these polls are

QUANTITATIVE TOOLS
It refers to forecasts for a period of three years or 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. this time series and then estimating sales for the next time period is called time series analysis. Marketer should have the time series for the past ten years.

Decomposing

The

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 Two

are:

approaches to decomposing time series Additive Approach Multiplicative Approach

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Multiplicative Approach
sales over a time period is a function of trend, cyclicality, seasonality, and erratic factors. it is expressed as O=T*C*S*I

The

Commonly

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
the additive approach, sales is seen as the
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In

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CORRELATION METHOD

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 Correlation The

is the measurement of the relationship between two variables. purpose of doing correlations is to allow us to make a prediction about one variable based on what we know about another variable. is a statistical measurement of the relationship between two variables. Possible correlations range from +1 to 1. is commonly believed that the sale of a product is a function of several variables like :
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Correlation

It

Price,

 This

relationship is reflected by the following equation : Y = f(X1, X2, X3,,Xn)

where, Y = Sales in volumes or Monetary Terms X1,X2,X3,,Xn = Independent Demand Variables

This

method is increasingly being used. Especially for sales forecasting. a marketer needs to be wary of problems like : few observations, much correlation among
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However, Too Too

THANK YOU

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