This document discusses various methods for measuring and forecasting market demand, both current and future. It describes techniques like surveys of buyers and salespeople to estimate current demand. For future demand forecasting, it recommends analyzing past sales trends, conducting expert panels or surveys, and using quantitative approaches like regression analysis or expert opinions. The key is selecting the appropriate technique based on factors like available data, product type, and market characteristics. Accurately measuring demand is important for companies to effectively allocate resources and plan production levels.

1. MARKET DEMAND
ASSESSMENT- PRESENT
AND FUTURE DEMAND

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Discussion Questions
• How can companies more accurately
measure and forecast demand?
• What is the importance of Demand
forecasting?

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3-3
Opening Case
MIS Systems Provide Information on Buyer
Preferences and Behavior: Dupont’s Pillow
Study
Pillow Segments
• 23% - stackers
• 20% - plumpers
• 16% - rollers or folders
• 16% - cuddlers
• 10% - smashers

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Forecasting and Demand Measurement
Market
- Size
- Growth
- Profit potential
Understanding a market
potential involves more than just
research and analysis. Companies
must also determine market size,
growth, and profit potential.

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Market Types
Potential Market: Interest
Available Market: Interest,
income and access
Target Market: market which
company decides to pursue
Penetrated Market: buying the
companies product

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Ninety Types of Demand Measurement

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Sr.
No.
Demand state Characteristic Example
1. Negative demand Consumer does not like the product and even prepared to
pay a price to avoid it.
A strict vegetarian person will not take non
vegetarian food and may even skip the meal and
remain hungry.
2. No demand Consumers are not interested in the product or not aware
about the product.
A farmer may not be interested to adopt new farming
technique for one or the other reason or might not be
aware about the same.
3. Latent demand A strong need which cannot be satisfied by existing
products.
A single dose of drug which cure deadly disease like
AIDS or cancer.
4. Declining demand Reduction in demand of organizations product/service due
to less purchase.
All organizations may face such a situation for their
products or services.
5. Irregular demand Variation in demand is observed on a seasonal, monthly,
weekly, daily, or hourly basis.
Demand of ice cream.
6. Full demand Market demand is in accordance with organizations
capacity.
Many organizations experience such a demand state.
Cooperative dairy plants of Gujarat have full demand.
7. Overfull demand Demand for organizations product are more than which it
can handle.
Some religious places experience more devotees on
some particular day then on other days.
8. Unwholesome demand Demand of products undesirable from societies point of
view
Drugs e.g. marijuana
Various Demand States

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Demand Measurement
Market Demand: 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.
Company demand (expected market
share) is the company’s estimated share
of market demand at alternative levels of
company marketing efforts in a given
time period.
Company Demand

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Estimating Current Demand
Area market potential
Total market potential
Potential
Buyers
Average
purchase
quantity
Average
price
X X
Chain-ratio method
Demand
for new
light beer
Population
Average percentage of income spent on:
= X Food X Beverages X
Alcoholic
beverages
X
Expected % of
spending on
Light beer

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• This refers to maximum total aggregate sale of
all the organizations in an industry for a
specified time period, for a specified
geographical area and under organizations
specific marketing expenditure and
environmental conditions.
• Total market potential = (Total number of
potential consumers) x (Average quantity of
products/services purchased by a consumer) x
(The price paid by the consumer)
Total Market Potential

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• This method employs multiplying several proportions by a base number.
For example, a dairy marketing federation is interested to know the
market potential of probiotics ice creams among rural people between 20-
40 years.
• Potential for probiotic ice-cream among rural people between 20-40 years
= A x B x C x D x E x F
• A = Rural population between 20-40years.
• B = Per capita personal discretionary income of rural people between 20-
40 years.
• C = Average percentage of discretionary income spent on food.
• D = Average percentage of amount spent on food that is spent on frozen
foods.
• E = Average percentage amount spent frozen foods that is spent on ice
cream from total amount spent on frozen food.
• F = Expected percentage amount spent on ice creams that will be spent on
probiotic ice cream
Chain Ratio Method

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• This method involves finding out all the potential
consumers in each market area and knowing their
potential purchases. For example, if an organization
producing LCD projector for classrooms wants to
estimate its market potential in Anand city of
Gujarat, it will first of all determine the list of all
educational institutes in Anand city which have
adopted and which may adopt the teaching method
through overhead projector. Then it will estimate the
number of LCD projector each educational institute
will purchase based upon number of classrooms.
Area market potential: Market builds up method

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• This method is most suitable for consumer goods. For consumer goods
many consumers are there and it is difficult to list them all. In this method
certain weights are assigned to factors affecting sales of consumer goods.
It is mainly dependent upon population of the geographic area, average
personal income of people of that area, number of retail outlets in the
area etc.
• For example, a pharmaceutical company may assume that potential for
drugs in a particular geographical market will be a function of, say, (i)
population of the area, (ii) per capita income, and (iii) number of
physicians in the market. Using econometric methods the company can
develop a multi-factor index for estimating potential for drugs as shown
here:The drug-buying index (i.e., percent of national drug sales that might
be expected) for, say, Chennai = a x population of Chennai as a percentage
of national population + b x Per capita income of Chennai as a percentage
of national per capita income + c x number of physicians in Chennai as a
percentage of the number of physicians in India.
• Note: a, b, and c, are determined using past sales and other data.
Area market potential: Multiple factor index

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• Percentage of brand sales in particular
area in relation to the percentage of
country’s population in that area. It
indicates where significant groups of
brands customer live and helps direct
marketing efforts. Suppose a brand has 20
percent of sales in an area where the
country’s 40 percent of population live
than is brand development index will be
(20/40) x 100 = 50.
Area market potential: Brand Development Index

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Estimating Future Demand
Sales Force Opinions
Forecasting
Past Sales Analysis
Buyer’s Intentions
Expert Opinions

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• Under this method, buyers are asked
about their future purchase
intentions for a product. The answers
are suitably arranged on a scale
indicating options from complete
certainty to not at all and in between
them.
Survey of buyers

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• When it is difficult to estimate market demand
based upon buyers survey, the organizations
may resort to sales force estimation. In this
method, salespersons are asked to give future
sales estimate in their territory.
• Although simple, but the method is not widely
used as there are possibility of providing very
pessimistic or optimistic estimate by
salesperson without considering company
policies and larger economic trends.
Aggregate sales force opinion

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• Expert’s opinion may be obtained in number of ways.
They can be interviewed separately or called at one
place and opinion asked for in the form of a group
Classroom Discussion Task:, (focus group) or may be
sent as a questionnaire and then responses are revised
by moderator (Delphi method).
• In Delphi method anonymity of experts is maintained
wherein one or two rounds of sending questionnaires
may be undertaken until a final common figure is
obtained. Under these method dealers, large buyers,
marketing consultants and persons from trade
associations may be considered as experts.
Expert opinion

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Focus Group in Session

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• Any Questions?

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• Which methods you will use for
estimating current and future market
demand for your product and
service?
• What is the base/reason of selecting
the method and what is involved in
the method (procedure).
Assignment-8

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For Review
• How can companies more accurately
measure and forecast demand?
• What is the importance of Demand
forecasting?

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• Thanks for your attention.