DEMAND

FORECASTING

Demand Forecasting means predicting or estimating

the future demand for a product.
It is undertaken for the purpose of planning and
making long-term decisions.

Definition of Demand
forecasting
According to American Marketing
Association, Demand forecasting is an
estimate of sales in rupees or physical
units for a specified future period under a
proposed marketing plan.
It is the tool to scientifically predict the
likely demand of a product in the future.

Business Decision Making Use of Demand Forecasting

Forward Planning and Scheduling

Acquiring Inputs
Making provision for finance
Formulating pricing strategy
Planning advertisement

Steps in Demand Forecasting

Specifying

the Objective
Determining the time Perspective and
type of good
Selecting a proper method of forecasting
Collection of data
Interpretation of results

Forecasting Horizons.
Short Term (0 to 3 months): for inventory
management and scheduling.
Medium Term (3 months to 2 years): for
production planning, purchasing, and
distribution.
Long Term (2 years and more): for
capacity planning, facility location, and
strategic planning.

METHODS OF DEMAND
FORECASTING

SURVEY METHODS
SURVEY METHOS
CONSUMER
SURVEY METHODS

OPINION METHODS

COMPLETE
SAMPLE
TEST MARKETIN
END USE
EXPERTS OPINION
ENUMERATION
SURVEY METHOD
METHOD
METHOD
METHOD
METHOD
DELPHI METHOD

STATISTICAL
METHODS

TRENDPROJECTION

REGRESSION
METHODS

BAROMETRIC
METHOD

Delphi Method

Delphi method: it consists of an effort to

arrive at a consensus in an uncertain area by
questioning a group of experts repeatedly
until the results appear to converge along a
single line of the issues causing
disagreement are clearly defined.
Developed by Rand Corporation of the U.S.A
in 1940s by Olaf Helmer, Dalkey and Gordon.
Useful in technological forecasting (noneconomic variables).

Consumers opinion Survey

In consumers opinion survey buyers are
asked about their future buying intentions
of products
This survey can be conducted in two
ways.
Census method, involves contacting each
and every buyer; but this is very time
taking and costly is often not desirable
And Sample method, involves survey of
only representative sample of buyers .

Experts opinion Method:

It is essentially based on the opinion of
experts, either internal or external to the
firm.
Group Discussion: Decisions may be
taken with the help of brainstorming
session
Delphi technique: it is an other way of
getting the opinion of experts without their
face to face interaction.

Delphi method
Advantages
1.
Facilitates the maintenance of anonymity of the respondents
identity throughout the course.
2.
Saves time and other resources in approaching a large number
of experts for their views.
Limitations/presumptions:
3.
Panelists must be rich in their expertise, possess wide
knowledge and experience of the subject .
4.
Presupposes that its conductors are objective in their job,
possess ample abilities to conceptualize the problems for
discussion, generate considerable thinking, stimulate dialogue
among panelists and make inferential analysis of the
multitudinal views of the participants.

Market Simulation
Firms may create an artificial market in
which the consumers are instructed to
shop with money.
This kind of laboratory experiment can
be useful in ascertaining consumers
reactions to changes in price, packaging,
and even location of the product in the
shop.

Test Marketing:
In this method the product is actually sold
in certain segments of the market,
regarded as the test market.
It is considered less risky than launching
the product across a wide region

Trend Projection

It is a powerful statistical tool that is

frequently used to predict future values of
a variable on the basis of time series data.

TREND ANALYSIS
METHOD
THIS

METHOD IS USED
WHEN A DETAILED
ESTIMATE HAS TO BE MADE
TIME PLAYS AN IMPORTANT
ROLE IN THIS METHOD

TIME SERIES PREDICTS

This method uses historical and cross
sectional data for estimating demand
Finding a Trend value for a specific year

FINDING SEASONAL FLUCTUATIONS IN

THE VARIABLE
PREDICTING TURNING POINTS IN
FUTURE MOVEMENTS OF THE
VARIABLE