This presentation will give you an idea of what is demand forecasting and what are the different techniques which help businesses to forecast potential demand for their products.

1. Meaning
Importance
Methods
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Title: Demand Forecasting Techniques:
Subject: Managerial Economics

2. Why demand forecasting?
• Planning and scheduling production
• Acquiring inputs
• Making provision for finances
• Formulating pricing strategy
• Planning advertisement
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3. Steps
• Specifying the objective
• Determining the time perspective
• Making choice of method
• Collection of data
• Estimation and interpretation of results
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4. CLASSIFICATION OF DEMAND FORECASTING
QUALTITATIVE TECHNIQUES
1)EXPERT OPINION
• Delphi method.
2)SURVEY
3)MARKET EXPERIMENT
• Test marketing
• Controlled experiments.
QUANTITATIVE TECHNIQUES
1)Time Series Analysis.
2)Barometric Analysis.
• leading indicators
• Coincident indicators
• lagging indicators.
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5. Expert Opinion
• The expert opinion method, also known as “EXPERT CONSENSUS METHOD”, is
being widely used for demand forecasting.
• This method utilizes the findings of market research and the opinions of
management executives, consultants, and trade association officials, trade
journal editors and sector analysts. When done by
• An expert, qualitative techniques provide reasonably good forecasts for a
short term because of the expert’s familiarity with the issues and the
problems involved.
DELPH I METHOD:- The Delphi method is primarily used to forecast the demand
for “NEW PRODUCTS”.
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6. SURVEY
A firm can determine the demand for its products through a
market survey. It may launch a new products, if the survey
indicates that there is a demand for that particular product in the market.
For example, Coke in India expanded its product range beyond
carbonated drinks, after the company conducted a nationwide
survey. The survey revealed that about 80% of the youth
preferred to drink tea or coffee rather than carbonated drinks at
regular intervals. The remaining 20% preferred to have milk
products while only 2% preferred to drink carbonated drinks like
coffee.
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7. Market Experiment
Market Experiment can help to overcome the survey problems as
they generate data before introducing a product or
implementing a policy.
Market Experiments are two types:-
1) Test marketing:-
2) Controlled experiments:-
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8. Test marketing
In this case, a test area is selected, which should be a
representative of the whole market in which the new product is
to be launched. A test area may include several cities and towns,
or a particular region of a country or even a sample
of consumers. More than one test area can be selected if the firm wants to
assess the effects on demand due to various alternative marketing mix.
Advertising or packaging can be done in various market.
Then the demand for the product can be compared at different
levels of price and advertising expenditure.
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9. Controlled experiments
Controlled experiments are conducted to the test demand for a
new product launched or to test the demands for various
brands of a product.
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10. Time Series Analysis
The time series analysis is one of the most common
quantitative method used to predict the future demand for a
product. Here the past sales and demand are taken into
considerations.
TIME SERIES ANALYSIS IS DIVIDED INTO FOUR CATEGORIES:
1)TREND
2)SEASONAL VARIATIONS.
3)CYCLICAL VARIATIONS.
4)RANDOM FLUCTUATIONS.
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11. BAROMETRIC ANALYSIS
DEFINITION:-
“The prediction of turning points In one economic time series
through the use of Observations on another time series called
the Barometer of the Indicator”.
It can be divided into three groups
• 1)Leading indicators.
• 2)Coincident indicators.
• 3)Lagging indicators.
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