Forecasting & Demand Measurement

Demand MeasurementMarket Company

Demand Market Demand Company Demand Function

Potential Market Potential Company Sales Potential

Forecast Market Forecast Company Sales Forecast

Market Demand (definition)

• 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.

Marketing Potential (definition)

• Marketing Potential is the limit approached by Market demand as industry marketing effort (Expenditures) goes to infinity, for a given environment.

Market Forecast (definition)

• Only one of the many possible levels of industry marketing effort (expenditure) will actually occur. The Market Demand corresponding to the expected effort is called the Market Forecast.

Company Demand (definition)

• Company Demand is the Company’s estimated share of market demand at alternative levels of Company’s marketing effort in a given time period.

Company Sales Potential (definition)

• Company Sales Potential is the sales limit approached by the company demand as the company marketing effort increases relative to that of Competitors.

Company Sales Forecast (definition)

• Company Sales Forecast is the expected level of company sales based on a chosen marketing plan and an assumed marketing environment.

Market Build Up Method (area market potential)

• Standard Industrial Classification Major Industry Groups Furniture = 25 Each industry Sub Groups HH = 251 And Product Category Wood F=2521

Standard Industrial Classification

Annual Sales (Million)

No. of Establishments

Potential Sales per Sales (Million)

M.P.

2511 $1 6 10 60

$5 2 10 100

2521 $1 3 5 15

$5 1 5 25

Market Potential = 200

• Multiple Factor Index MethodSingle Index => (say)population %=>Market

PotentialBuying Power Index (B.P.I.)B.P.I. % Weight

Disposable Personal Income

2.00 0.50

Retail Sales 1.96 0.30

U.S. Population 2.28 0.20

2.04

• Brand Development Index (B.D.I.)

Lower BDI =>Higher Market OpportunityHigher BDI=>Higher Market Opportunity to Share

B.D.I.(a/b) * 100

Territory(City)

% Brand Sales(a)

%Category Sales (b)

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 3.00

• Industry Sales and Market Shares

1.Industry Trade Association(Elcoma,IEMA,FMA)2.Markets research Audit Report (ORG,Nielsen)3.Own methods/ models

Estimating Future Demand

• What people say … (buyer’s opinion,sale,expert)

• What people do … (Test Market Response)

• What people have done… (Time Series… Statistics)

• What people saySurvey of Buyer’s IntentionsDo you intend to buy …..within next…..year.no chance certain0.00 100.00{Purchase Probability Scale}Composite of Sales Force OpinionsExpert opinion : Trade,Consultants,associations

• What people do

Test Market (New Product)

• What people have done

Post sale analysisTime seriesExponential SmoothingStatistical Demand Analysis {Casual Factors}Econometric Analysis {Damo. Guj.}