DEMAND FORECASTING & MARKET SEGMENTATION

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

Steps  Identifying the general need  Selecting the period of forecast  Selecting the forecast model to be used  Collecting the required data  Evaluating the collected data  Preparing the forecast

Techniques  Survey of Buyers’ Intentions  Sales Force Opinion method  Expert Opinion method  Market Test method  Time Series Analysis  Statistic Demand Analysis

Survey of Buyers’ Intention  This is the most basic and the least sophisticated method  Customer plays an important role  The method is simple to understand and easy to implement  Not reliable for long run as buyers’ interest, willingness and intentions are irregular and short term in nature

Sales Force Opinion Method  This method is often used by industrial or business marketing companies  It involves sales people to estimate their future sales  The sales forecast is a combined sales forecast of all sales personnel

Expert Opinion (Delphi Method)  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.  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.

Market Test Method  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.  The test experiments are that they are very costly and much time consuming.  If in a test market prices are raised, consumer may switch to the competitor’s products.

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)Cycle 3)Season 4)Erratic events

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. 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.

Statistical Demand Analysis  The method employs a mathematical technique known as the regression analysis which relates a dependent variable to an independent variable in the form of linear equation

Conclusion  Accurate demand forecasting requires  Product knowledge  Knowledge about the customer  Knowledge about the environment

Market Segmentation  Market Segmentation is division of the market or population into subgroups with similar motivations in context of their characteristics, needs, preferences and buying capacity

Steps in Market Segmentation 1. Identify the target market 2. Identify the expectations of target market 3. Create subgroups 4. Review the needs of the target audience 5. Name your market segment 6. Marketing strategies 7. Review the behavior 8. Size of the target market

Basis for Market Segmentation  Geographic:  Nations, States, Cities or Regions  Demographic:  Age, Gender, Family Size, income  Psychological:  Social class, Life style or personality  Behavioral:  Occasions, benefits sought, user status, usage rate, loyalty