FORECASTING &

DEMAND
MEASUREMENT
TOTAL MARKET POTENTIAL
AREA MARKET POTENTIAL
MARKET DEMAND

• M. D 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…
MARKET POTENTIAL

• M. P is the limit approached by market

demand as industry marketing effort
(expenditure) goes to infinity for a given
environment…
MARKET FORECAST

• Only one of the many possible levels of

industry marketing effort (expenditure)
will actually occur. The market demand
corresponding to the market effort is
called Market Forecast…
ESTIMATING CURRENT DEMAND

• STANDARD INDUSTRIAL CLASSIFICATION

– Major Industry Groups

– Each into Sub Groups

– Product Category
 1 2 3

S.I.C Annual Sales No. Of Establishments Potential Sales M.P

(Mln) per Sale ( )
1x2x3

2511 $1 6 ` 10 60

$5 2 10 100

2521 $1 3 5 15

$5 1 5 25

MARKET POTENTIAL = 200

MULTIPLE FACTOR INDEX METHOD

• Single Index
eg. Population % (2.28%) Market
Potential

• Buying Power Index (B. P. I) % Weight

– Disposable Personal Income 2.00 0.50
– Retail Sales 1.96 0.30
– U. S. Population 2.28 0.20
BRAND DEVELOPMENT INDEX
B. D. I Territory (City) % Brand Sales % Category Sales

(a/b) * 100      

114 1 3.09 2.71

65 2 6.74 10.41

91 3 3.49 3.85

120 4 0.97 0.81

140 5 1.13 0.81

104 6 3.12 3
Lower B D I Higher Market Opportunity
Higher B D I Higher Market Opportunity to Increase Share
INDUSTRY SALES & MARKET SHARE

• INDUSTRY TRADE ASSOCIATION

– Elcoma, IEMA, FMA

• MARKET RESEARCH AUDIT REPORT

– ORG, Nielsen

• OWN METHODS / MODELS

ESTIMATING FUTURE DEMAND

1) What People Say…..

Buyer’s opinion, Sale, Expert

2) What People Do…..

Test Market Response

3) What People Have Done…..

Time services, Statistics

WHAT PEOPLE SAY
Survey of Buyer’s Intentions
o Do you intend to buy within the next…..month/ yr.
No Chance Certain 0.00
100.00
(Purchase Probability Scale)
Composite of Sales Force Opinions
Expert Opinion:
Trade Consultants, Associations.
WHAT PEOPLE DO

• TEST MARKET (NEW PRODUCT)

WHAT PEOPLE HAVE DONE

• Post Sales Analysis

• Time Series
• Exponential Smoothing
• Statistical Demand Analysis (Casual
Factors)
• Econometric Analysis