Demand forecasting entails forecasting and

estimating the quantity of a product or

service that consumers will purchase in
future.
Thus demand forecasting means estimating
or anticipating future demand on the basis of
past data.

A. Short Term Objectives:
To help in preparing suitable sales and production policies.
To help in ensuring a regular supply of raw materials.
To reduce the cost of purchase and avoid unnecessary
purchase.
To ensure best utilization of machines.
To make arrangements for skilled and unskilled workers so
that suitable labour force may be maintained.
To help in the determination of a suitable price policy.
To determine financial requirements.
To determine separate sales targets for all the sales
territories.
To eliminate the problem of under or over production.
Long term Objectives:
To plan long term production.
To plan plant capacity.
To estimate the requirements of workers for long period
and make arrangements.
To determine an appropriate dividend policy.
To help the proper capital budgeting.
To plan long term financial requirements.
To forecast the future problems of material supplies and
energy crisis.
Determine the purpose for which forecasts
are used.
Selection of goods
Selection of method
Interpreting the result


1. Macro level Micro level demand forecasting is
related to the business conditions prevailing in the
economy as a whole.
2. Industry Level it is prepared by different trade
association in order to estimate the demand for
particular industries products. Industry includes
number of firms. It is useful for inter- industry
comparison.
3. Firm level it is more important from
managerial view point as it helps the management
in decision making with regard to the firms demand
and production.
Prevailing business conditions
Conditions within the industry
Conditions within the firm
Market behaviour
Sociological conditions
Psychological conditions
Competitive conditions
(A) Survey methods,
(B) Statistical methods

Opinion Survey method
Expert Opinion
Delphi Method
Consumer Interview method
Complete Enumeration
Sample survey -
End-use method


1.Trent projection method
2. Regression and Correlatio
3. Extrapolation
4. Simultaneous equation method
5. Barometric techniques


Survey method
Test marketing
Life cycle segmentation analysis

1.Plausibility-It should be reasonable or
believable.
2. Simplicity- It should be simple and easy.
3. Economy it should be less costly.
4. Accuracy it should be as accurate as
possible.
5. Availability Relevant data should be
easily available.
6. Flexibility it should be flexible to adopt
required changes.
Average Revenue (AR); AR means the total
receipts from sales divided by the number of
unit sold.
AR= TR/Q
Total Revenue (TR): TR means the total
sales proceeds .it can be ascertained by
multiplying quantity sold by price.
TR =PxQ
Incremental Revenue (IR): IR measures
then differences between the new TR and
existing TR
IR=R2-R1 =R
It is the additional revenue which would be
earned by selling an additional unit of a
firms products. It shows the change in TR
when one more or one less unit is sold.
MR= R2-R1/Q2-Q1 = R/Q
Where, R1= TR before price change
R2= TR after price change
Q1 = old quantity before price change
Q2 = new quantity after price chan
Quantity demanded (Q) AR TR MR
1 9 9 9
2 8 16 7
3 7 21 5
4 6 24 3
5 5 25 1
6 4 24 -1
7 3 21 -3
8 2 16 -5
9 1 9 -7