Unit 6

MEASURING/ANALYZING AND
FORECASTING MARKET DEMAND
What is Market Demand?

 Market demand refers to how much

consumers(number of consumers) want
your product for a given period of time.
 An effective demand has three
characteristics namely, 
 desire,
 willingness, and
 ability of an individual to pay for a product.
 market demand indicates total sales of the
product to the specific groups of buyers in a
specific period and in defined geographical
areas in a given marketing environment.
Relationship between market demand
and price of a product
  As market demand for a product increases,
the price of that product will also increase.

 And, when the demand of that product

decreases, price will also decrease.
Measures of Market
Demand-types/breakdown of market

1.The Potential Market

2.The Available Market
3.The Target Market
4.The Penetrated Market
Measures of Market
Demand-types/breakdown of market

1.The Potential Market

 set of consumers with a sufficient level of
interest in a market offer (products). but they
will buy only if they hv sufficient income &
access to the product.
2.The Available Market
 set of consumers who have interest,
income, and access to a particular offer
 Qualified available market- who have
interest, income, access &
qualifications/legally allowed to buy the pdt
3.The Target Market
 
part of the qualified available market the
company decides to pursue/capture/serve
with their product.
4. The penetrated market is the set of
consumers in the target mkt who are buying
the company’s product/purchased the
product.
Importance of market demand
 Every business organization must analyze and forecast
their market demand because :
1. It helps in decisions that marketing management has
to make.
2. Helps in formulation of appropriate marketing
strategies.
3. Helps in evaluating the feasibility (success rate) of
entering new markets.
4. Helps in allocating the marketing resources effectively
and efficiently- helps in reducing the wastage of
resources
Market demand forecasting
 Forecasting generally means making an estimation in
the present for a future occurring event. 

 Market demand forecasting is a technique for

estimation/prediction of probable demand for a product
or services in the future.
 Demand forecasting is an assumption of demand in future. 
 It is based on the analysis of past demand for that
product or service in the present market condition. 
 In marketing, sales forecasting is the starting point of
demand forecasting.
Significance of Demand Forecasting:

 Fulfilling objectives of the business.

 Preparing the budget- Good forecast helps in appropriate
production planning, capacity planning, facility layout
planning, and inventory management, etc.
 Decision making- reduces risk related to business activities
and helps it to take efficient decisions and do correct planning
in competitive market conditions. Such as decisions relating to
sales, production etc,
 It also provides a way for the formulation of suitable pricing
and advertisement strategies.
 Evaluating the performance of the organization,its products in
comparison to the competitors/other products in the market.
SALES FORECASTING

 Sales Forecast is assessing/predicting the

future sales of products produced by the
company. 
 It is the backbone of marketing.
 Only with proper sales forecasting, the firm
can do the marketing planning and
marketing strategy formulation
 Sales forecasting serves as the starting point for all
activities of the firm and gives direction to all
activities.
 It helps the firm to decide
 which products are to be continued,
 which products to discontinue,
 which products are to be added and
 which products need modification.
 Proper forecasting helps the company in its
decision-making process and avoids the unnecessary
wastage of resources.
DEMAND/ SALES FORECASTING
METHODS
 QUALITATIVE/NON-STATISTICAL METHODS
 EXECUTIVE OPINION
 EXPERT OPINION/DELPHI METHOD
 SALES FORCE OPINION
 TEST MARKETING/EXPERIMENT MARKETING
 CONSUMER’S SURVEY METHOD

 QUANTITATIVE/STATISTICAL METHODS
 TREND PROJECTION
 BAROMETRIC FORECASTING
 ECONOMETRIC FORECASTING
 QUALITATIVE/NON-STATISTICAL
METHODS
 EXECUTIVE OPINION
 EXPERT OPINION/DELPHI METHOD
 SALES FORCE OPINION
 TEST MARKETING/EXPERIMENT MARKETING
 CONSUMER’S SURVEY METHOD
1. Executive Opinion

 The executives of the company come togeher

and discuss their opinions

Each executive submits an estimate of the

company's sales, which are then averaged to
form the overall sales forecast.
2. Delphi Method/expert opinion method

 Under this method, outside experts are

appointed.
 They are supplied with all kinds of company
information, statistical data and asked for
opinion.
 The management requests the experts to
express their considered opinions and views
about the expected future sales of the
company.
 Every individual expert takes an individual
decision from their place and send their decision
to the co-ordinator.
 Then, the co-ordinator summarizes the opinion of
all experts and prepare a report by considering all
the opinions.
 The report prepared by co-ordinator is again sent
to all the executives to review and compare their
opinion. are requested to send their fresh opinion
again.
 If any executive after comparing opinions,
feels to change their opinion with proper
research, they can change and again send a
fresh report to the co-ordinator.
 This process continues until the desired result
of forecasting is achieved, i.e., opinions of all
experts individually match or nearby matches
with each other’s opinion. So, the forecasting
will be more accurate.
3. Sales Force Opinion

 In this method of sales forecasting the opinion of the

salespersons are considered as a base for making the
forecasting as they experience the direct relation with
the customers of their territory.
 Thus, it is much easier for them to understand the
customer’s choice and taste of products. This will help in
forecasting the future trends of the market.
 However, the success of such kind of forecasting
depends upon the individual salesperson’s competence
(knowledge and experience).
4. Test Marketing/ Experiment Marketing

 it is like a hit and trial technique of sales forecasting.

 Helps in forecasting new-product sales or established
product sales in a new distribution channel or territory.
 In this method a particular geographical area is
selected for introducing the product and
understanding the market response. Then, based on
the study of results sales forecasting is made.
 It helps the management to interpret the possible
drawbacks and rectify them before the bulk
production of goods.
 5. Consumer Survey/Buyer’s Opinion

 In this method an appropriate questionnaire

is required for this method to collect or
gather the relevant data from the consumers

 This helps in understanding the consumer’s

buying plans.
 QUANTITATIVE/STATISTICAL METHODS
 TREND PROJECTION
 BAROMETRIC FORECASTING
 ECONOMETRIC FORECASTING
 TREND PROJECTION METHOD
 Trend projection uses the past sales data to
project your future sales. It is the simplest and
most straightforward demand forecasting
method
 In this method a data set of past sales are taken at
specified time, generally at equal intervals to
depict the historical pattern under normal
conditions. On the basis of derived historical
pattern, the future sales of a company are project.
 BAROMETRIC FORECASTING METHOD
 Economic Indicators Method
 In this method forecasting follows the method
adopted by meteorologists in weather forecasting
and a few economic indicators become the basis
for forecasting the sales of a company.
 An economic indicator indicates change in the
magnitude of an economic variable.
 It gives the signal about the direction of change in
an economic variable.
 Economic variables examples include birth
rate.
 If birth rate increases, we can assume that
demand for baby products will increase
 Leading indicators attempt to predict future events.
For example, an increase in customer complaints due to
shipping delays or backorders could lead to a decrease
in sales.
 Lagging indicators analyze the impact of past events.
For example, a spike in sales the month prior could
indicate a growing trend that needs to be watched
closely for inventory purposes.
 Coincidental indicators measure events happening
right now. For example, real-time inventory turnover
demonstrates current sales activity.
Econometric Method

 Mixture of economic theories+ statistical tools and

estimates.

 The econometric demand forecasting method accounts for

relationships between economic factors and the
product/service.
 For example, when the COVID-19 pandemic became
widespread in 2020, there was an increased demand for
online shopping as customers locked down and avoided the
in-store experience.
End of Unit 6