Demand Forecasting

1 Prof. Deepa Rohit, LLIM

 Key terms
 Market – a set of existing and potential buyers of a product/
service
 Potential Market – set of consumers who have interest in the
marketer’s offer.
 Target market – also called as served market. It refers to the
market segment which a firm chooses to serve.
 Penetrated market / Market penetration – is the set of
consumers who are currently buying company’s product
 Market penetration ratio – to the total number of such
consumers to the total number of consumer in the target
market. This ratio indicates the opportunity for growth

2 Prof. Deepa Rohit, LLIM

 Market Demand
 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.
 Its not fixed but a function of all above factors

3 Prof. Deepa Rohit, LLIM

 Market demand as a function of industry
marketing expenditure
Market Demand in specific period

Market Sales
Potential Q2

Market
Forecast Q f

Market
Planned
Minimum
Expenditure
Q1
Industry Marketing Expenditure

4 Prof. Deepa Rohit, LLIM

 Market Potential
 Market potential – is the limit approached by market demand
as industry marketing expenditures approach infinity for a
given marketing environment
 Market forecast – the market demand corresponding to the
level of industry marketing expenditure

5 Prof. Deepa Rohit, LLIM

 Basic Kinds of Market Measurement

Market Potential

Industry Sales
Sales Company Sales

Current Time Period

6 Prof. Deepa Rohit, LLIM

 Company Demand and Sales
Forecast

7 Prof. Deepa Rohit, LLIM

 1. Company demand – a company’s estimated share of the market
demand at alternative levels of company’s marketing efforts in a
given time period
2. Next step is to choose the level of marketing efforts to produce an
expected levels of sales.
3. Company Sales Forecast – is the expected level of company sales
based on chosen marketing plan and an assumed marketing
environment. It’s the estimates of future sales of the company’s
products.
4. Sales Quota – is the sales goal set for a product line, company
division or sales representative. It is a managerial device for defining
and stimulating sales efforts. Generally sales quota are higher than
estimated sales.
5. A Sales Budget – is a conservative estimate of the expected sales
volume and is used for current purchasing, production and cash flow
decisions. It is based on the sales forecast and may be considered
lesser than sales forecast.

8 Prof. Deepa Rohit, LLIM

  Company Sales potential – the sales limit approached by
company demand, as marketing efforts increases relative to
its competitors. This is absolute limit of company demand is
of the market potential.

9 Prof. Deepa Rohit, LLIM

 Estimating Current Market Demand
Can done using any of these tools –
•Estimating total market potential
•Territory / area market potential
•Total industry sales and market shares

10 Prof. Deepa Rohit, LLIM

 1. Market Potential Estimation
 Market potential refers to the size of the current market
available to the firms and thus represents maximum sales, all
firms can achieve in a given geographical area, at a given time
and under given marketing conditions and efforts.
 Number of potential buyers X volume of product bought by
them X price
Y=nXuXp

11 Prof. Deepa Rohit, LLIM

 2. Area Market Potential
 As marketing budgets are allocated across various regions/
territories. Business marketers use Market-buildup method
and consumers marketers use multiple-factor index method
 Market- Buildup Method
 Identify all the potential buyers in each market and
estimate their potential purchases
 Multiple – Factor Index Method
 Can used existing market indexes or develop their own
 Using various factors and giving appropriate weights

12 Prof. Deepa Rohit, LLIM

 3. Industry Sales and Market Shares
 The method is based on estimating industry sales and
market shares of competition and the firm.
 Often data is available from Centre for Monitoring
Indian Economy (CMIE ) or Confederation of Indian
Industry (CII ) or other

13 Prof. Deepa Rohit, LLIM

 Tools for estimating future market
demand
Reference : Dr. Rajan Saxena

14 Prof. Deepa Rohit, LLIM

 Tools for Estimation
 Qualitative Tools  Quantitative Techniques
 Survey of buying  Short-term forecasting
intentions  Extrapolation techniques
 Composite of sales – exponential
smoothing, time series
force opinion
etc
 Delphi Technique
 Long-term forecasting
 Time series
 Correlation
 Econometric models

15 Prof. Deepa Rohit, LLIM