1. Conceptual Structure of Demand Model
Firm Demand = Total Industry Demand * Market Share
Define Market Share = Firm Demand / Total Industry Demand
Market Share = Firm Demand / (Avg. Demand * Number of Firms)
Market Share = Relative Demand / Number of Firms
Firm Demand = Total Industry Demand * (Relative Demand / N)
Macro-economic Influences
Seasonal Patterns
Stage of Life Cycle
Exogenous
Demand
TID
RD/N
Industry Activity
Pricing, Promotion,
Quality
Endogenous
Demand FD
Competitive Profile
Relative Pricing, Promotion,
Quality, and Loyalty
Relative
Demand

2. Total Industry Demand TID Exogenous Demand Endogenous Demand
Macro-Economic
Influences
- Seasonality
- Stage of Life Cycle
Estimate Trend and
Seasonality using
Time Series Analysis
Industry Behavior
- Pricing (Avg Price)
- Promotion (Avg. Advertising)
- Product Quality (Avg. R&D)
Estimate weights of these factors using Regression Analysis

3. Relative Demand (Measure of Market Share)RD
Quality
Promotion
Pricing
Loyalty
Relative Price (PREL)
Relative R&D
RD1 (t-1)
Relative Advertising
RD is firm specific and a measure of market share, the predictor variables should also be relative to industry averages.
For example, relative price of the firm is PREL = Firm’s Price / Industry Avg. Price

4. A DSS for Estimating Demand