Marketing Management 3(2+1)

Lesson 24 : Demand Measurement And Forecasting

Sales/Demand Forecasting Methods

A great variety of methods are available for forecasting market demand and sales of a company.

1. Consumer expectations:
   Consumers are interviewed with questionnaires regarding their buying habits their motivating factors and intentions for purchase. The data is analysed and this feedback is used to estimate the expected consumption or purchase of the product. It gives very detailed information about the product and helps in assisting and for forecasting new products. This holds good with consumer products but number of customers have to be small apart from great expenditure in terms of money, time and labour.


2. Jury Method / Executive Opinion Method:
   The jury method is one of the commonly employed methods. The opinions of a small group of high-level managers are pooled and together they estimate demand. The group uses their managerial experience, and in some cases, combines the results of statistical models. Judgement is the base in this method where both the 'top jury method' and the 'percolated jury method' is followed. The difference is that in the former, the participants are limited to the top executives and in the latter, a large number of marketing sales executives participate. In both, the participants exercise their judgment and give their opinions. The final forecast is arrived at by averaging these opinions.


3. The Delphi Method
   The Delphi method developed in 50s, is mainly used when long-term issues have to be assessed as expert opinions are the only source of information available. In this method, a panel of experts in the field is interrogated by a sequence of questionnaires. People involved in the feedback give their own forecast about the subject and the feedbacks are gathered into a summary. If someone’s answer differs a lot from the median, then the person gives an explanation why she or he made such an estimate. The explanation is added into the summary and the summary is given to all the participants of the forecast. They study the summary and make a new forecast.


4. Sales Force Composite Method:
   As per the sales force composite method, the sales forecasting is done by the sales force. Since the salesperson is the one closest to the marketplace, he has the capacity to know what the customer wants. Each salesman develops the forecast for his respective terri­tory; the territory-wise forecasts are consolidated at branch/area/region level; and the aggre­gate of all these forecasts is taken as the corporate forecast


5. User Expectation Method/End Use Method/Survey of Buyers' Intentions
   This method is adopted for industrial marketing. If a company can obtain an adequate and reliable information sample of what customers will buy, even though the actual orders are not in hand, it will have a good basis upon which to develop a sales forecast


6. Market Share Method
   The firm first works out the industry forecast, applies the market share factor and deduces the company forecast.


7. Market Test / Test Marketing:
   When buyers do not plan their purchases carefully or experts are not available or
   reliable, a direct market test is desirable. A direct-market test is especially desirable
   in forecasting new-product sales or established product sales in a new distribution
   channel or territory.


8. Analytical and Statistical Methods:
   Besides judgment methods, a wide variety of analytical and statistical methods are available for forecasting a firm's sales. The firm can choose the most appropriate one depending on its forecasting needs


9. Market Survey Method
   Normally, when a company wants to introduce a new product or an improved product or a company that is entering a new business it resorts to a market survey to assess the likely demand. Usually the firm conducts a survey among a sample of consum­ers and gauges their attitudes, likely purchases and purchase habits and sometimes, among the channel member, wholesalers and/or retailers-to elicit information on their attitudes, likely purchases, etc