METHODS OF DEMAND

FORECASTING
Survey Methods

1) Consumers’ interview method:

Consumers are interviewed directly and asked the quantity
they would like to buy. After collecting the data the total demand
for the product is calculated. It is done by adding up all
individual demands.
Complete enumeration method- when all the consumers are
interviewed
Sample survey method- when a selected group of consumers are
interviewed.
2) Collective opinion method/ sales force
opinion method:
Under this method salesmen estimate the
expected sales in their respective territories on
the basis of previous experience. The demand is
estimated after combining the individual
forecasts of the sales men.
3) Experts opinion method/ Delphi method:
Under this method the firm makes an effort to obtain the opinion of experts
who have long standing experience in the field of enquiry related to the
product under consideration.
A panel of experts is individually presented a series of questions pertaining to
the forecasting problem. Responses acquired from the experts are analyzed by
an independent party that will provide the feedback to the panel members.
Based on the responses of other individuals, each expert is then asked to make
a revised forecast.
4) Consumer Clinics:
• “Laboratory”-style experiments, where a
sample of consumers is given a budget and is
asked to simulate their spending/buying habits.
Then the prices are changed and the
consumers are asked to make fresh purchases
with the given money.
• In this way the consumers responses to price
changes are observed. On this basis demand is
estimated.
Advantages
1. It provides sector wise demand forecasts
2. It gives accurate predictions
3. It does not require any historical data
Disadvantages
4. It is costly and time consuming
5. It requires complex calculations
6. It requires every industry to furnish its plan of
production correctly and in advance
Statistical Methods
Trend Projection Method
• Assumes that past trend will continue in future.
• It makes use of time series(data over a period of
time)
• The trend in time series can be estimated by
using any one of the methods:
• Least square method, Free hand methd, Moving
average method and semi average method.
Regression and Correlation/ Econometric model
building;
• Combine economic theory and statistical
technique for estimation.
• The relationship between sales(dependent
variable) and other variables(independent
variables such as price of related goods,
income, advertisement etc) is ascertained.
• It established on the basis of past data to
analyse the future trend.
• Personal Income, non agricultural placements,
gross national income, prices of industrial
materials, wholesale commodity prices,
industrial production, bank deposits etc. are
most commonly used indicators.
• Simultaneous equation method:
which can explain the behaviour of all
variabes which the compny can control.
Also known as complete system approach of fo