Market and Demand Analysis

Demand Analysis Of Product

The success of any project depends on the
demand for the output produced by it.
Catering an unfulfilled need should the
ultimate objective of commercial
projects, if they should succeed .the
Identifying the need , or the potential
demand for the product is the main issue
involved.
Market and Demand Analysis is concerned
with two broad issues:-

 Whatis the likely aggregate demand for the

product / services?

 What share of the market will the proposed

project enjoy?
Steps involved in demand and
market analysis
1) Situational analysis and specification of
objectives
2) Collection of secondary information
3) Conduct of market survey
4) Characterisation of the market
5) Demand forecasting
6) Uncertainties in demand forecasting
7) Market planning
Key Steps in Market and Demand Analysis and their Inter-
relationships

Collection Demand
of Forecasti
Secondary ng
Informatio
n

Situational
Analysis Characterisati
and on of the
Specificati Market
on of
Objectives

Conduct of Market
Market Planning
Survey

5
1) Situational analysis and specification
of objectives
In order to get a “feel” of the relationship between
the product and its market, the project analyst may
informally talk to customers, competitors,
middlemen, and others in the industry. Wherever
possible, he may look at the experience of the
company to learn about the preferences and
purchasing power of customers, actions and
strategies of competitors, and practices of the
middlemen .
If situational analysis generates enough and reliable
data to measure the market and projected demand,
a formal study need not be carried out.

For eg:- a small but technologically competent

firm has developed an improved air cooler
based on new principle that offers various
advantages.
2) Collection of secondary information
Secondary information is information that has
been gathered in some other context and is
already available.

Secondary information provides the base and

the starting point for the market and demand
analysis. It indicates what is known and often
provides leads and cues for gathering primary
information required for further analysis.
General sources of secondary
information
Census of India:- provides information on
population, demographic characteristics etc.
Economic survey:- provides information on
industrial production ,wholesale prices, exports,
national income, agricultural production etc.
Plan reports:- provides a wealth of information
on plan proposals, physical and financial
targets(five-year plans)
Stock exchange directory:- provides ten-year
picture of performance & financial statements
for all listed co’s.
3)Conduct of market survey
• Secondary information, though useful, often
does not provide a comprehensive basis for
market and demand analysis. It needs to be
supplemented with primary information
gathered through a market survey.
• The market survey may be a census survey or a
sample survey; typically it is the latter
Information Sought in a Market Survey
 Demand and rate of growth of demand
 Demand in different segments of the market
 Motives for buying
 Purchasing plans and intentions
 Satisfaction with existing products
 Unsatisfied needs
 Attitudes toward various products
 Distributive trade practices and preferences
 Socio-economic characteristics of buyers
 Steps in a Sample Survey

1. Define the target population.

2. Select the sampling scheme and sample size.
3. Develop the questionnaire.
4. Recruit and train the field investigators.
5. Obtain information as per the questionnaire
from the sample of respondents.
6. Scrutinise the information gathered.
7. Analyse and interpret the information
 4) Characterisation of the Market
Based on the information gathered from secondary
sources and through the market survey, the market
for the product/service may be described as:-
 Effective demand in the past and present
 Breakdown of demand
 Price
 Methods of distribution & sales promotion
 Consumers
 Supply & competition
 Government policy
1)Effective demand in the past & present

It’s defined as :-
Production +imports-exports-changes in
stock level
2) Breakdown of demand:- total demand may
be broken down into demand for different
segments of market.

 Natureof product
 Consumer groups
3) Price :- Manufacturer’s price quoted as cost,
insurance & freight ;average wholesale price;
average retail price.
4) Methods of distribution & sales promotion:-

5) Consumers :-
age,income,profession,residence,preferences
habits, attitude.
6) Supply and competition :-

7 ) Government policy
 5) Demand forecasting
I Qualitative Methods : These methods rely
essentially on the judgment of experts to translate
qualitative information into quantitative
estimates.
The important qualitative methods are :
• Jury of executive method
• Delphi method
II Time Series Projection Methods : These
methods generate forecasts on the basis of an
analysis of the historical time series . The
important time series projection methods are :
• Trend projection –method
• Moving average method
 Jury of Executive Opinion Method
This method involves soliciting the opinion of a group of
managers on expected future sales and combining them
into a sales estimate
 Pros
• It is an expeditious method
• It permits a wide range of factors to be
considered
• It appeals to managers
 Cons
• Its reliability is questionable
 Delphi Method
This method is used for eliciting the opinions of a
group of experts with the help of a mail survey.
The steps involved in this method are :
1. A group of experts is sent a questionnaire by
mail and asked to express their views.
2. The responses received from the experts are
summarised without disclosing the identity of the
experts, and sent back to the experts, along with a
questionnaire meant to probe further the reasons
for extreme views expressed in the first round.
3. The process may be continued for one or more
rounds till a reasonable agreement emerges in the
view of the experts.
 Pros
 It is intelligible to users
 It seems to be more accurate and less expensive
than the traditional face-to-face group meetings
Cons
 There are some question marks: What is the
value of the expert opinion? What is the
contribution of additional rounds and feedback to
accuracy?
 Trend Projection Method
The trend projection method involves (a)determining the
trend of consumption by analyzing past consumption
statistics and
(b) projecting future consumption by extrapolating the trend.
Linear relationship : Yc = a + bx
Yc = Trend Value X = Unit of Time
a = Constant Value b = Slope of the Trend
N = Number of Years
∑y = Na + b ∑X ∑XY = a ∑X + b ∑X2

Moving Average Method
 As per the moving average method of sales
forecasting, the forecast for the next period is
equal to the average of the sales for several
preceding periods.
In symbols,

where Ft+1 = forecast for the next period

St = sales for the current period
n = period over which averaging is done
6) Uncertainties in Demand Forecasting

Demand forecasts are subject to error & uncertainty

which arise from three principal sources.

 Data about past and present market.

 Methods of forecasting.
 Environmental change.
1. Data about past & present markets :-
b) Lack of standardisation
c) Few observation
d) Influence of abnormal factors

2. Methods of forecasting
a) Unrealistic assumptions
b) Excessive data requirement
3. Environmental changes
a) Technological changes
b) Shift in government policy
c) monsoon
7) Market Planning
A marketing plan usually has the following
components:

 Current marketing situation

 Opportunity and issue analysis
 Objectives
 Marketing strategy