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1. Demand forecasting
Course: BBA
Subject: Business Economics
Unit: 2.2

2. • Meaning
• Importance
• Methods

3. Why demand
forecasting?
• Planning and scheduling production
• Acquiring inputs
• Making provision for finances
• Formulating pricing strategy
• Planning advertisement

4. Steps
• Specifying the objective
• Determining the time perspective
• Making choice of method
• Collection of data
• Estimation and interpretation of
results

5. Techniques

6. 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.
a) leading indicators
b)Coincident
indicators
c) Taste indicators.

7. 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”.

8. 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.
The company is now trying to bring tea and coffee brands to India
by installing vending machines. It is also planning to introduce a
coconut flavored drink in Kerala and a black currant in Tamilnadu
named portello.

9. 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:-

10. 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.
• They are selected some consumers.

11. 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.

12. METHODS OF TIME SERIES
ANALYSIS
•
1)TREND:- Past data is used to predict the future
sales of firm trend is a long term increase or
decrease in the variable.
2)SEASONAL VARIATIONS:- It is taken into
account the Variations in demand during
different seasons.
Eg:- The sale of cotton dresses increases in summer.
The sale of Woolen clothes increases in winter.
3)CYCLICAL VARIATIONS:- This variations in
demand due to the fluctuations in the
business cycle – Boom, recession and
depression.
4) RANDOM FLUCTUATIONS:- It may happen due
to Natural calamities like flood, earthquake,
etc. Which cannot be predicted accurately.

13. Conclusion
• Accurate demand forecasting
requires
– Product knowledge
– Knowledge about the customer
– Knowledge about the environment