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Project Appraisal

Demand Analysis

Mona Iyer
Asst. Professor, School of Planning
CEPT University
Project Development Cycle
Preliminary Assessment Preliminary Analysis/Planning

Market /User demand

Detailed feasibility
Project Appraisal
Analysis/ Economic/SCBA
Project Appraisal/
Project Evaluation Environmental/Ecological


Mobilization Selection of Feasible


Management Implementation

Review and Monitoring

Project Development Process
Project Identification

Demand and Technical Feasibility Evaluation

Financial Viability Analysis

Evaluation of Project Structuring


Resolution of Project Implementation Issues

Bid Documentation

Bidding Process
Demand Assessment
(Market Analysis)
• Two important aspects of Demand
– Aggregate Demand
– Market Share
• How do we assess aggregate demand
– Pattern of consumption/growth of service (product)
– Variations in demand with variations in income

• How do we decide the market share

– Composition of market (users)
– Nature of competition/competing facilities
Demand Assessment

Step 1 Situation Analysis and Specification of Objectives

Stakeholder meetings/workshops

Discussions with Client

Discussions with Competitors

Yes No formal Proceed

Reliable handle? Study with
(also when time Technical
No constraints) Appraisal

Specification of Objectives Detailed Study of Market

What is the current demand Who are the users

Demand distribution –temporal and geographic

Willingness to pay Prospects of immediate use

Importance of Demand Assessment in a PPP
(WorldBank Toolkit)

• Demand forecasts are the most fundamental data in the analysis

from the planning stage onward.But these concerns have generally
been addressed through more "macro" oriented modeling.
• Gives an opportunity to the private operators to complain, soon
after taking over a business, about over or underestimations of
demand based on the initial information provided by governments.
• It tends to result in an excuse for the private operators to try to
renegotiate the contract to improve its terms.
• It is quite common for both regulators and concessionaires or
bidders to devote much more money to the construction cost
studies than to the demand analysis.
Demand Assessment

Step 2 Collection and Evaluation of Secondary Information

Who collected (objectives clear?), how and when and from where

Period and sample - representative

Step 3 Collection and Evaluation of Primary Data-

Market Survey- Census or Sample

Define Target Population/Users

Sampling scheme and sample size

Develop questionnaire

Survey and Analysis- Generating pivots

Demand Assessment

Step 4 Characterization of market

Effective demand in past and present

Demand breakdown-users (age, sex, income, geography etc…

Preferred method of distribution and promotion

Current market supply and competition

Government policies influencing demand

Demand Assessment

Step 5 Demand Forecasting

Qualitative Methods – jury of executive opinion, delphi

Quantitative time series projections-linear, exponential, moving


Causal Method- Econometric, leading indicator…etc..

Check uncertainties- extreme values, assumptions,

sensitivity, adjustment
Demand Assessment

Step 6 Market planning

Current marketing situation demand, competition– and effect of

macro environment
SWOT analysis


Marketing strategy/expansion strategy

Action programme to operationalize strategy