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Demand Forecasting

Demand / Sales / Market Survey It has following steps :a) Define objectives of the survey b) Based on the objectives, define the scope of the study.

c) Workout universe & sample size. d) Study existing data i.e. desk research. e) Design questionnaire for survey. f) Pretest the questionnaire with the small select sample.

g) Modify the questionnaire, if required. h) Collect data i) j) Process the data Analyse the date & Recommendations,

k) Work out Report Conclusions. l)

Prepare time bound Action Plan ‡ By Mail ‡ Telephone Interviews ‡ By Personal Interviews

Note :i. ii. While carrying out the survey keep the Scope, Time & Cost in mind. Use secondary sources to the extent possible, since primary data collection is very costly & time consuming. Questionnaire mentioned as (a) Consumers (Questionnaire 6.00) Retailers (Questionnaire 6.01)

served markets. See Fig 6.  We must first know what are the various demand estimates.Process of Demand Forecasting  Demand analysis seeks µto search out¶ and µmeasure¶ the forces that determine sales. we have to keep in mind actual buyers. While doing this. potential markets. potential buyers.  Let us make a model.01 . penetrated markets etc. available markets. a three-dimensional model of demand.

01 has five different products levels ± three different space levels and three different time levels. these factors have to be kept in mind. a company¶s short-range forecast of the total demand for a particular product/ item provides a basis for ordering raw materials. Each level serves a specific purpose.There are various types of demand measurements. planning production. scheduling short-run controls or it might make a forecast of regional demand for its major products line to provide a basis for considering market expansion. . The matrix Shown in Fig. 6. While assessing demand. depending upon products/ systems/ item. Say.

6.Fig.01 .

(a) Existing Market It is easy to forecast demand for the existing market may be for the same product or a product with some innovations. It is also desirable for forecasting the sales of new products or an existing product for a new channel of distribution. Salesmen of the company are also a god source of information since they have the feel of the market. . distributors and retailers fall in this category. µAsk the customers what they are planning to buy. a direct market test is desirable. Wholesalers.¶ We can also ask the people who are likely to know what people will buy. The various methods are as follows :Test Market Method Where enough data is not available or guess cannot be made.

technology. Season (S) represents sales movement within the year. seasonal patterns.Projection of Past Patterns (Time Series Analysis) This is called µtrend and cycle¶ analysis. 6. Cycle (C) captures the wave-like movement of sales. capital. See Fig. Past behaviour is broken into many components like business movement. etc.02. Sales are affected by swings in general economic activity. It is found by fitting a straight line or curved line through past sales. . Trend (T) is the result of basic developments in population. These components are projected into the future based on past behaviour.

customs. etc. weekly. It is also related to weather. 6. holidays.It can be hourly. quarterly. monthly. Fig.02 Time Analysis .

ware and other disturbances. Therefore.000 policies in 1993. lockouts. : Sales in 1994 = 25200 x 0. Business recession is expected and there may be a fall of 10 per cent.05 = 25200 b.9 = 22680 . fire. an insurance company sole 24. It would like to predict sales in December 1994. riots. a. sales (S) can be defined as S æ T C S E For example. : Sales in 1992 = 24000 x 1.Trend shows 5 per cent growth every year.Erratic events (E) includes strikes.

c. The seasonal index is 1. Presume sales is the same each month : Per month sales = 22680 = 1890 d. : December 1994 Sales = 1895 x 1. : Sales in December 1994 = 2457 12 . No disturbance is expected.3 = 2457. December is an above-average month.00 e.3.

. . . x4) National income Advertisement expenditure Individual income Price Labour price index Multiple correlation . x2. Q Q x1 x2 x3 x4 xn = Sales f(x1.Statistical Demand Analysis Here we analyze demand factors or variables which affect sales and work out a multiple correlation.

1 x3-1.8 X 10-4 x12.985)T formula . the demand function of cars assessed some time ago in USA was as follows :Y x1 x2 x3 T New car registration/ 1000 households Income per household/ yearly Monthly income Ratio of car index to consumer price index Time Projected demand = 2.5 x22.3 (0. for cars.For example.

For example.(b) New Products Methods of forecasting demand for new products are quite different from those for established products. Forecasting methods need to be tailored to the particular product. start with the assumption that colour television demand picks up where black and white television demand left off. Possible approaches can be classified as follows :Evolutionary Approach Project the demand for the new product as an outgrowth and evolution of an existing old product. . For products that are new to the economy as well as to the company. an intensive study of the economic and competitive characteristics of the product affords the key to intelligent projections of demand.

. Growth-Curve Approach Estimate the rate of growth and the ultimate level of demand for the new product on the basis of the pattern of growth of established products. For example. For example. analyse growth curves of all established household appliances. and try to establish an empirical law of market development applicable to a new appliance.Substitute Approach Analyse the new product as a substitute for some existing product or service. the new Foto-setter substitutes photographic composition for the established typesetting equipment (linotype).

by direct sale or through one chain store ± and from this try to estimate the total demand for all channels and a fully developed market. for example. . This is also test market method. Sales-Experience Approach Offer the new product for sale in a sample market. then blow up the sample to full scale.Opinion-Polling Approach Estimate demand by direct inquiry of the ultimate purchasers on sampling basis. Sending an engineer with drawings and specifications for new industrial products to a sample company is an example.

These methods are not mutually exclusive. The evolutionary approach is useful only when the new product is so close to being merely an improvement of an existing product that its demand can be pretty much a projection of the potential development of the underlying product. A combination of several of them is often desirable when they can supplement and check each other. .Vicarious Approach Survey consumers¶ reactions to a new product indirectly through the eyes of specialized dealers who are supposedly informed about consumers¶ needs and alternative opportunities. The big problem is to estimate how the demand patterns of the new version will differ from those of the prototype.

00 Certain Chance .g..20 Some Possibility 0.80 High Possibility 1. Probability Approach The result of a recent survey for buying a product was as follows. Question : Do you intend to buy an automobile within next 6 months? 00 No Chance 0.The substitute approach has great promise when applicable. Most new products are substitutes.60 Good Possibility 0. though not always for just one thing (e.40 Fair Possibility 0. Sometimes the old product sets a rough upper limit to the potential. air express is a substitutes for land transport).

FOR Consumers Q.QUESTIONNAIRE FOR SURVEYS Sample Questionnaire are as follows for :(a) (b) Consumers Retailers To workout the impact of new campaign of ³Kit Kat´ of Nestle (Chocolate) entitled ³Fridge a Kit Kat.1 : What brands of Chocolates are you aware of ? TOM SPONTANEOUS . Play it Cool´.

2 : Which brands of Chocolates do you prefer? Q.3 : Which brand of Chocolate do you buy most often? Q.Q.4 : What size do you normally consume? .

then aid i. then ask Q.¶ do you remember? ? TOM SPONTANEOUS Q.5 : Which Chocolate µads.e.6 : Which KitKat ad do you remember? Q. 8 onwards) . camel/ desert/ fridge on the top of a camel.Q.7 : Have you seen the latest KitKat ad? YES NO (If No.

10 : What do you dislike about it? . what do you recall about the ad? Q.8 : If yes.9 : What do you like about the ad? Q.Q.

Q.11 : What do you think the ad is trying to tell you? Q.12 : What do you understand by : Have a Break Have a Kitkat Fridge a KitKat Play it Cool .

why? If Yes.13 : Do you stock Chocolates at Home? YES NO If No.Q. why? .

14 : Which Chocolate brands do you stock? Q.Q.15 : What pack size do you normally stock? Small Large Q.16 : In case of KitKat which sizes do you stock? 2 Finger Pack 4 Finger Pack .

6x2 Finger Pack 12x2 Finger Pack Q.17 : (a) Are you a regular consumer of Chocolates? YES NO (b) if Yes. how many do you consume? Once a Week More than once a Week Once a Fortnight Once a Month .

) PROFILE : NAME AGE ADDRESS . Sp.Q.18 : Who in the family consumes the Chocolates? Kids Parents Grand Parents Any Other (Pl.

FOR Retailers Q.1 : What are the different brands of Chocolates you stock? SUMMERS WINTERS Why? SUMMERS WINTERS .

SUMMERS 1.Q. Company¶s Reputation 3. Schemes provided by the company 4. Promotion activities by the company 5. Any other WINTERS . Customers¶ Demand 2.2 : Your decision to stock a particular chocolate is affected by : (Tick whichever applicable).

Q.4 : What are the pack sizes that sell the most in Summers? Small Large .3 : Which brand is deal for you to stock in summer? Why? Q.

5 : What are the different Trade Promotion Schemes being offered? BRANDS CDM KitKat Any Other SUMMERS .In case of KitKat 2 Finger Pack 4 Finger Pack 6x2 Finger Pack 12x2 Finger Pack Q.

6 : Are you aware of the new KitKat Ad.BRANDS CDM KitKat Any Other SUMMERS Q. then prompt the respondent about the camel ad) .? YES NO (If No.

7 : What do you recall? (If No.Q.8 : What do you understand by ³Fridge a KitKat/ Play it cool)? . then prompt the respondent about the camel ad) Q.

what pack size? 2 Finger Pack 4 Finger Pack 6x2 Finger Pack 12x2 Finger Pack .Q.9 : Have Consumers shown inclination to purchases KitKat recently? YES NO If Yes.

Why/Why Not? .10 : Do you think such an advertising has effected sales of KitKat? YES NO If Yes/ No.Q.

PROFILE : NAME OF RESPONDENT AGE NAME OF SHOP ADDRESS .

 Let us make a model. potential buyers. See Fig 6.03 . penetrated markets etc. potential markets. a three-dimensional model of demand. served markets.06 Market Strategy Framework  Demand analysis seeks µto search out¶ and µmeasure¶ the forces that determine sales.  We must first know what are the various demand estimates. available markets. While doing this. we have to keep in mind actual buyers.6.

03 Marketing Strategy Framework .Fig 6.

Develop Product Market strategic Options Channel/market access .

(b) Summary of findings : After introduction there would appear a statement of findings and recommendations in non-technical language. If the findings are extensive. they should be summarised. . The scope of the study along with various limitations should as well be stated in this part. The main text of the report should have the following parts : (a) Introduction : It should contain a clear statement of the objective of the research and an explanation of the methodology adopted in accomplishing the research.

. reports. etc. i. (d) Conclusion : Towards the end of the main text.. consulted.. Index should also be given specially in a published research report. appendices should be enlisted in respect of all technical data. Bibliography. it is the final summing up. researcher should again put down the results of his research clearly and precisely. list of books.e. In fact. journals.  A the end of the report.(c) Main report : The main body of the report should be presented in logical sequence and broken-down into readily identifiable section. should also be given in the end.

¶ there may be¶. and the like. .  Calculated µcconfidence limits¶ must be mentioned and the various constraints experienced in conducting research operations may as well be stated.  Charts and illustrations in the main report should be used only if they present the information more clearly and forcibly. Report should be written in a concise and objective style in simple language avoiding vague expressions such as µit seems.