Market and Demand Analysis.pptx for Management students
1. Market &
Demand, Technical
& Financial
Analysis
By Dr. Kavita Rani
Assistant Professor
Mcom, MBA, Ph.D.
NET JRF in Commerce and NET in Management
2. MARKET & DEMAND ANALYSIS
Introduction
Market analysis is done to explore the requirement for demand of the
product/service that is a constituent of the project. Market analysis
initiates with the estimation regarding the market and the product.
Interactions are carried out informally with the customers, competitors
and the retailers to have a general view of the market scenario.
The main objectives of market analysis are forecasting market
development, analysis of the competitiveness of the goods, predicting
the actions of competitors, prediction of consumer preferences and
analysis of commercial risks, etc.
3. In majority of the cases, project analysis initiates with the estimation
of the market size of the product which the company intends to
manufacture and afterwards getting an estimation of the resources
required to hold the desired share among the market. There are two
issues that are faced by the market and the demand analysis:
1) The prospective demand for the product or the service.
2) The market share which the proposed project intends to capture
4. Steps in Market and Demand Analysis
The market and the demand analysis should be done in a
systematic way as illustrated below:
Situational Analysis and Specification of Objectives
Collection of Data
Market Survey
Characterization of the Market
Demand Forecasting
Market Planning
5. Situational Analysis and Specification of Objectives
With a view to study the relationship among the market and the
product, project manager is required to informally carry out
the discussions with the competitors, middlemen, customers
and others who holds a relevant position in the industry. The
background and the past experience of the company is also
considered to understand the tastes, preferences and the
purchasing power of the customers. An eye is also kept on the
strategies adopted by the competitors and analyse the role of
the middlemen.
If adequate information is generated regarding the market and
the +-demand than revenue can be forecasted, it provides the
management with a reasonable assurance. In such a situation,
there is no further requirement to conduct surveys especially
when the underlying cost and time do not permit.
6. Collection of Data
Every possible aspect is touched for data collection. Thus, the
data can be classified into two categories:
1) Primary data
2) Secondary data
Collection of Primary Information
The first-hand information that is collected to fulfill the
current requirement is known as the primary data. Broad
guidelines collecting the primary data. To draw the guidelines,
initially the objectives are laid down so that the data meets
the parameters. While collecting the primary data, the cost
and benefit analysis is also carried out to avoid overdoing.
7. The objective set should be economically feasible, precise
and attainable. This will ensure that the data collected is
reliable, valid and accurate and the chances of errors and
deviations will be reasonably less. If the data collected is
valid, it means that it is more likely to meet the purpose.
The experienced and the qualified researchers try to
eliminate the collection of the inaccurate as well as the
invalid data and provides better results.
8. Primary Data Collection Methods
This first-hand data is collected while carrying out the projects
which had not been undertaken in the past. The information
available for these projects is not available and if available is
very limited.
Thus, there arise the need for collecting the data. The data can
be obtained by way of observation or by communicating directly
with the respondents in any manner and by conducting the
personal interview. So, there are numerous methods for
collecting the primary data and especially in case of descriptive
research and surveys. Few of the important methods are as
follows:
Collection of Primary Data
1) Observation Method
2) Survey Research
3) Other Primary Data Collection Methods
9. 1) Observation Method:
It is the technique of data collection merely by using the
senses and observing surrounding environment. The activities
are simply observed and without getting noticed data is
collected. This method is frequently used when the data
related to behavioral sciences is to be collected. In our daily
routine, there are a lot of things that we observe but this is
different from others as there is intent behind this observation.
This observation is systematically planned and derives a
specific purpose. This is further followed by checks which
ensure the validity and the reliability of the data. Under this
method, the respondents are not contacted and only the direct
observation of the investigator formulates the data.
10. 2) Survey Research: It is frequent and an over-used method.
It saves time & cost. It is the first choice of researchers being
a flexible method. Majority of time, poor choice and bad
structuring of questions make it an abusive method. The
interviewers who carry the onus of data collection are poorly
trained and even the answers of the respondents are such that
they cannot be relied upon. The respondents are thus not the
true representative of the population. There are three
categories of survey:
Interview Method: It is an oral discussion between two or
more persons. The questions are framed and asked by
interviewer to interviewee directly. On the basis of replies
given by interviewee, data is compiled by the interviewer.
Most commonly, the interviewee is directly contacted,
however, where the geographical limits do not permit, the
same may be conducted over the telephone as well.
11. Questionnaire: It is method in which a series of questions are
prepared by the researcher about a pre-defined problem. The
same is then circulated among different groups or persons for
their responses. Such a questionnaire form prepared is termed
as the "schedule" and this gives the insights which the
respondent was reluctant to share during the interview.
Schedule: This is also termed as the social research
methodology. This is applied when the survey method is used
and the field data is collected. It is a sub-division of the
indirect interview method.
It comprises of the blank tables and the questions which on
attaining information from the respondents are duly filled by
the investigators themselves. Prima facie, questionnaire and
schedule, appear to be the same, however, there exist
between the two.
12. 3) Other Primary Data Collection Methods: Following are the
other methods:
i) Warranty Cards: They are the small postal shape cards that
are used by the dealer of the consumer goods to gather the
information related to the products they deal. Such
information comes in a printed form on the cards which are
placed in the product and the customers are further
requested to fill the balance information with their responses
and post the same to dealer.
ii) Distributor or Store Audits: These type of audits are
conducted by the manufacturers and the dealers by engaging
their sales personnel at periodic intervals. Product
distributors utilize the services of the salesmen to conduct
the same and an estimation of the market, consumer
preference, price and pattern is made on the basis of their
responses. Instead of questioning.. more focus is put on the
observation.
13. iii) Pantry Audits: These types of audit techniques are used
in estimating the consumption level of the bucket of products
with the consumers. Under this, the investigator gathers
information related to type, price and quantities of the
commodities consumed by the consumer. The consumption
acts as the base for data collection by examining them.
iv) Consumer Panels: It is an extension over the pantry
audit. The only difference being that the audits are
conducted on more frequent basis than pantry audits. Under
this, a panel of the consumers is formed who provide daily
record of their consumptions and it is provided to the
investigators when demanded by them. In short, it can be
said that it is the group of consumers where the interview is
conducted on routine basis.
14. v) Use of Mechanical Devices: Mechanical devices have been
introduced across the globe for collecting the information indirectly.
Pupil metric cameras, eye cameras, motion picture camera, psycho-
galvanometer and audio meter are some of the devices that are being
used by the new generation corporate houses to collect the
information and derive better results.
vi) Projective Techniques: They are also termed as the indirect
interviewing techniques and are used for collecting data on the basis
of the behavior of the respondent Services of a psychologist are
hired to understand the respondent's response to certain scenarios to
which he either hesitates or himself is undecided. In this kind of
technique, the respondent while providing the information either
behaves unconsciously to predict his own behavior on the subject
matter or knowingly hides the same. While conducting the attitude
surveys or the motivational researches this technique play a handy
role.
15. vii) Depth Interview: In case, the structured questionnaires
are not used, then it is the will of the interviewer to decide
the level and the depth of the interview he wants to conduct.
Such types of interviews are informal in nature and do not
follow a pre defined procedure. Sensitive issues which require
in-depth information are most suited to this type of interview.
viii) Content Analysis: It comprises of analyzing the details
that are contained in magazines, periodicals, books,
newspapers and other materials that are available either in
verbal or in written form.
16. Collection of Secondary Information
The information which has already been gathered by some other
researchers or may even have been used by them in conducting their
respective studies is known as secondary data. But, in case of the primary
data, the information collected was first hand and never been used before.
Secondary information serves as the start up while conducting the market
analysis and demand analysis.
Methods of Secondary Data Collection
There are two main sources for collecting the secondary data:
1) Internal Secondary Data: The data that is available within the internal
data. But if the same is collected for a varied purpose, then organisation
and which requires no fresh study are known as the same is known as the
internal secondary data. This data may be transformed for conducting the
market research. It may be formal or informal in nature. Availability of the
formal data is in routine and regular as on monthly, quarterly, semi-
annually or annually basis and thus comparison can be made all the time.
While, on the other hand, informal data provides with the market report
but on a non regular basis.
17. Sales analysis, invoice analysis and the accounting records are
considered as the significant source of internal secondary data:
i) Sales Analysis: An indispensible part of marketing research.
Marketing research initiates with this step and acts as a stepping stone
in conducting further research work The present operating problems
that are faced in the market are exposed alongside possibility of
exploring the smaller organizations.
ii) Invoice Analysis: Invoices of company provide good volume of
information. Such invoices are kept either by punching and saving the
same in files or scanning and saving them in electronic mode. Such data
may be grouped or classified on the basis of the product, customer,
geographical area, etc. Such invoicing records will meet the desired
purpose if same have been store in a careful manner and are utilized
optimally.
18. iii) Accounting Records: Sales are only underlying base
from which accounting records can be obtained. A normal
sales invoice usually contains all the required information like
the customer's name, customer address, particulars of the
material. material rate, shipping details, discount rates,
indirect taxes detail, etc. Apart from this, other details may
include sales region, sales personnel details, warehousing
and storage information. This information is supported by
cost data and product classification along with sales call
detail, it aids in complete study of sales by customer, product,
geographic area, industry, sales representative. Profitability
levels on different kinds of sales product can be viewed. In
the present-day system, majority of the firms do not have such
a design and still rely on some other means of information.
19. 2) External Secondary Data: It constitutes second and a
significant form of collecting secondary data. Under this,
information is generally published and available externally in
different modes and from varied sources. Few sources from
where this data can be derived are as follows:
i) Libraries: Basic source of collecting data by researchers.
Data is available in abundance which researchers can explore
them up to any limit. Libraries may be public, private, college
and universities libraries, etc. and information relating to
business, finance, IT may be available in good and sufficient
volume. Other books, like management, annual publications,
international magazines may also be consulted if required.
Various organizations like research institutes, management
institutes, insurance companies, banks have maintained
sufficient libraries.
20. ii) Literature: A good quantum of data is available in the form of
literature especially in the field of marketing. As marketing has found its
roots in many countries and growing at a much faster rate, the subject is
taken up seriously nowadays and fresh studies are coming in.
They are available in various publications that are issued by
international publication houses. The consultants of these publications
can be consulted as and when required.
iii) Periodicals: Publications that are regularly published i.e. weekly,
fortnightly, monthly or annually are the main and reliable sources for
majority of the researchers and the marketing executives.
In order to use the data and rely on that data, the researchers draw
certain parameters.
21. iv) Census and Registration Data: Initially it was considered
only to concentrate on the population data but with time, the
scope has widened. Both the census and the registration data
constitutes a comprehensive source for conducting the
marketing research.
a) Census of Population: At the beginning of every decade,
i.e., 1951, 1961, 1971 and so on, a population census/total is
carried out. This not only provides the total population but
also reveals some very interesting facts which may be
considered for the research.
b) Census of Agriculture: This has recently been introduced
in the system. Earlier it was found in the Western countries.
Information like size of farms, number of farms, their
productivity, value addition, expenditure, equipments used,
etc. is revealed.
22. c) Census of Livestock: Few sample surveys are conducted in
the nation to get a count of the number of milk producing
animals like cows, goats and other animals like sheep, horses,
etc. These animals aids several industries and a study shows
the possibility of the expansion of these industries which rely
on the animals.
d) Census of Trade: The census of the wholesalers, retailers,
service providers has provided the details regarding the
number of people falling under each category and similarly
drawing a policy on its merit.
e) Census of Transport: This census report is formulated at
periodic intervals. Ministry of Transport is the authority
behind taking this census. The report unveils the availability
of the transport facility and the future development of the
same.
23. f) Census of Industry: It is also conducted at periodic intervals. The
census reports the position of the mining, industrial, manufacturing and
service industries and the measures adopted for improvement of the
same.
g) Census of Banking and Finance: RBI is regulatory authority for
bank and financial system in India. It prepares and conducts studies in
market and lays down the policies to be adopted by banks and the
financial institutions in India.
h) Registration Data: The data relating to number of private
companies, public companies, their financial structure, sales, expenses,
profit volume, etc. all are available with the registrar of companies. The
ministry is concerned in issuing the certificates and licenses to those
who adhere the conditions. Such data available is also circulated to the
public for their reference and other data pertaining to industry, trade
and business is also available with the Ministry of Commerce.
24. v) Trade Associations: One of the best sources of collecting the data
related to an industry. Trade associations of two different industries
exchange data with each other and similarly one firm may also
exchange the data with the other firm falling in same industry. So,
trade associations play a key role in providing industrial data.
vi) Government Departments: There are certain data with the
government departments that is not available in the libraries but the
same is extremely useful in conducting the study. The same can be
taken up by the researchers while carrying their research activities.
Some significant data relating to industry, agriculture, servicing,
trade, finance, insurance and banking can be gathered from the
respective government departments maintaining the same.
25. vii) Private Sources: It comprises of different sources like bulletins,
books, journals, monographs, commercial reports, etc. These sources
generally cost some price and sometimes need to be pre-ordered.
While some sources are extensive in nature and carry detailed
information and some are only briefing i.e., they carry only the
highlights. The Indian Marketing Association, All India Management
Association, Economic Times, Commerce Ltd, The Financial Express
are few major agencies from which the data is published through their
books, journals and periodicals. The data extracted from these sources
is reliable.
viii) Commercial Data: With growing importance of data and
information, many start-ups have emerged as the commercial data
providers. The consumer and the marketing data is available with these
companies and a price is charged by them in lieu of the data. The
research and collection of data can also be customized on the basis of
the client's requirement. Data is primarily collected by these companies
through survey and investigation and remitted to the desired ones.
26. ix) Financial Data: Different companies that are listed on the stock
exchange as a regulatory requirement publish their data in the
newspapers, magazines, and other trade journals. The Income Tax
Department also issues the data relating to their gross and net
collection periodically. Such data published by the different
organisations are taken up for the collective study to estimate and
make future projections for the growth and demand in a particular
segment.
The investment details of the big corporate houses are also India, etc.
Which gives an insight of the overall economy. This published by the
Commerce Private Ltd., Economic Times of data helps the researchers
to undertake their tasks
27. x) International Organizations: Few of the Organizations like The
World Bank, International Monetary Fund, United Nations Organisation.
The African Bank, The Asian Bank and the Foreign embassies, etc. also
regularly publishes data which are taken up by the researchers for the
study quite oftenly. Such statistics may be relating to trade population
problem, environment change, culture, institutions democracy, literary
levels, hygiene and sanitation, pollution control, education,
transportation, technology, servicing manufacturing and many others
streams.
xi) References and Bibliography: At the end of every publication the
references and bibliography is provided which states the sources from
which the information is obtained. This itself is very good source of
collecting the data by the researchers.
28. xii) Volumes of Statistics: In India, there exist numerous organizations
that prepare a summary of the statistics For example, Statistical Abstract,
Times of India is published by the Indian Statistical Institute and
directories on different subjects is compiled by the Financial Express.
Regularly. The Economic Survey of India is also published by the
government which contains the data relating to all economic activities
of the nation in an organized manner.
xiii) Advertising Agencies: Advertising agencies have a major role to
play in the field of marketing research. These agencies provide the
realistic and relevant data regarding the operations and the activities that
are happening in the market. A researcher can plan his activities on the
basis of the data obtained from these advertising agencies.
v) Other Sources: Apart from the sources that are discussed above there
are many other isolated sources from where the data can be obtained.
Different individuals make their own assessment and then sell them to
the other institutions. There may also exist some research organizations
that are specially designed formulated to conduct the research related
activities.
29. Conduct of Market Survey
It is not necessary that the secondary information being significant
other forms a basis for the study of the market and the demand. It is
the combination of both primary and secondary information taken
in a optimum mix to carry the study for the undertaken project.
Market survey done is basically sample survey but cannot be
implemented on the whole population. Under this, only a selected
sample among the population is selected for observation and the
study is done on it. The criteria of the sample remain to be the same
for the complete population.
30. The following information can be revealed from a market survey:
1) Demand and the growth rate of demand.
2) Demand in the varying market segments.
3) Income and Price elasticity of the demand.
4) Buying motives of the consumers.
5) Purchase of plan and insertion.
6) Consumer satisfaction level with the existing products,
7) The needs that remained unfulfilled,
8) Consumer's response towards the available alternate products,
9) Different trade parlance and consumer preferences
10) Features and responses of the buyers.
31. Steps while Conducting Market Survey: There are 11 main steps in
conducting a market survey. They are as follows:
1) Objectives of Conducting Survey: A survey is initiated by
describing the objectives and need behind conducting survey. It is
often observed that when a progress is made in the survey, it tends
to deviate from the basic objectives and the requirements of the
organisation are not met. The progression and the objectives of the
survey should move collectively.
A problem arises when there is choice among the average or the
total values. The techniques that are adopted remains different with
the selection of optimal sample size and estimated factors. Different
agencies uses varied factors to study the impact made on the
economy. Alongside, one cannot neglect the existence of the
importance for their contribution to the economy.
32. 2) Population that is to be Sampled: One may face certain
problems that are imposed by defining the population as there is a
need to consider all the perspective along with their technical and
the physical qualities.
The selected sample of the population should carry all traits and
characteristics of the population for which the research is
undertaken. It may appear that the sample population is limited and
the actual population is broader which is in fact true. So, the results
derived are on the basis of sample population only and reasonable
care should be taken while implementing these results on the actual
population. Any other information as deemed fit may be collected
and infused in the study to reduce the deviations that arise as a
result of implementing the sample results to the total actual
population
33. 3) Data to be Collected: The collected data should be valid one and
contain all significant information. While collecting data, many
questions are put, but only few goes through the next round of the
study while some fails to maintain their position. A watch should be
there to ensure that the significant ones are not neglected. A lengthy
and meaningless questionnaire however deteriorates the quality of
the answers.
4) Desired Precision on Surveys: There is always some uncertainty
on results that are obtained from sample survey. This cannot be
precisely said to apply to complete population. To reduce this, aid
can be taken by use of better measuring tools and taking a larger
sample size. This will also result in more application of cost and
manpower. The individuals who are conducting sample survey
should move in a precise manner and ensure that all aspects of
population have been duly accounted for. They should also establish
certain tolerable limits i.e. extent to which sample results can be
relied upon.
34. 5) Questionnaire and the Choice of the Data Collectors: The method
adopted to conduct a survey and instruments used in same may vary
from individual to individual. The sample survey questions to be selected
thus depend on the person conducting sample survey.
There may also be a difference in approach of person. He may get rigid
when interviewing one section of the society and may be flexible for the
others. Apart from this mode of transformation used may also vary e.g.,
e-mail, telephone, SMS, personal visit, etc. Care should be taken to have
a best mix of the same. Record forms that contain the responses given by
sample must be constructed correctly and no part of same should be lost.
When questions are straightforward and answers are almost alike than
there is a chance that one who have answered differently are recorded
with the same responses. So, in order to develop a good record, it is
important to know exact structure and summary finalized before finally
concluding There exist number of methods for survey in collecting
information which may comprise of telephonic interview, e-mail
questionnaire, personal talks or even postal surveys.
35. 6) Selection of the Sample Design: Number of different alternative
plans are used for selection of sample i.e. stratified random sample,
simple random sample, two stage sampling, cluster sampling, etc. For
plan that is undertaken, the sample size can be roughly estimated and
that too depends on bias of the person selecting. The time and cost
factors involved in selection are also considered. before final selection.
7) Sampling Units: Sample design must be considered while drawing
the sample units. There are several methods that can be used to draw the
sample units which further depends on sample strategy that is selected.
i) Sample with equal probabilities, and
ii) Sample with Probabilities Proportional to the Size (PPS)
In initial instance, probability of getting selected is same for all units in t
population but units have different probability in case of PPS sample.
The probability in this case is proportional to the following measure: Pi
= Xi/Xh.
where, i = A generic vessel, h = Stratum,
X= A size parameter, e.g. the overall length of a vessel.
36. 8) Pre-Test: Before implementing results on entire population, it is
suggested to apply the same on a relatively smaller scale and observe
outcomes. This will thus reveal the shortcomings of the questionnaire
and one will be able to know the improvements that is required while
implementing at a larger scale.
9) Organisation of Field Work: A good survey normally caters to all
the problems of a business organisation. The deputed personnel must
be adequately trained and equipped with the methods to be employed
by them while conducting the survey. Alongside there should be
provision for supervision so that, they do not deviate from the
objectives. Checking should be done at the initial stages to ensure that
the survey is moving in the right direction. Alternate back-up should
also be available if the personnel is not able to obtain the information
from some of the units of the sample
37. 10) Summarizing and Analyzing Data: After the data has been
collected, the next step is to transform the same in the form of the
information. The complete questionnaire is summarized and the
errors are rectified. It is also made sure that any erroneous data does
not go further Specially designed computer software's and programs
are used to correct the erroneous values and frame the correct
statistics report. Such computer programs are based on graphic
analysis of the elementary data.
After such compilations, estimates are made by using different
methods for future computations. While presenting the results, it is
often suggested to report the probable error that may arise as a
result of use of the estimates Even if the volume of non- responses
is relatively high, by still using probability sampling, such
statements can be formulated
38. 11) Information Gained for Future Surveys:
The volume of information about the population and the accuracy of
the results are directly related to each other. The information and the
adequate sample not only guides the project in hand but is also useful
for the future projects. The probability of deviations and errors are
significantly reduced if the information is reliable O Considerable
costs for the future projects is also reduced as a result of the same.
39. On the basis of information obtained by conducting market survey
and through secondary sources, the market can be characterized as
follows:
1) Effective Demand in Past and Present: The effective demand
represents actual demand of goods. It is the sum of the goods
produced and the total imports made as reduced by the total exports
out of the production and also giving the effect of change in the stock
levels. The expression of effective demand is given as follows:
Production made+ Total Imports - Total Exports - Change in Stock
Level.
2) Break-down of Demand: In order to obtain the real demand, the
total demand is segregated into different segments such as the
consumer groups, type of product and geographic distribution. This
information is useful to formulate correct strategy for the different
segments. For example, demand for woolen clothes may be more in
the northern region than the southern region.
40. 3) Price: Data about price is as important as data regarding quantity of
product. Not only product, but also price formation regarding substitutes
is observed carefully.
4) Method of Distribution and Sale Promotion: Distribution method is
dependent on nature of product, prospective buyers, price of product and
many other factors. Different distribution methods may be used for
consumer goods, intermediate goods and the capital goods. It determines
the advertising, discounting schemes and the modes of distribution.
5) Consumers: Consumers can be classified on the basis of i)
Demographic and sociological, and ii) Attitudinal attributes.
Demographic and Sociological
Sex, Age, Profession, Income, Social background, Residence,
Attitudinal
Intentions, Preferences, Attitudes, Habits, Responses
41. 6) Supply and Competition:
There exists two main sources of supply from domestic and from
abroad. Supply and competition constitutes basic features of market.
Domestic sources of supply are characterized by production capacity,
location, utilization of the capacity, expansion, cost framework and the
production bottlenecks. Because of change in quality, price and
promotion, the consumer may shift towards some other product in the
market, the element of competition always exist.
42. 7) Government Policy: Government policy also plays an important
role in influencing the demand of the product in the market. The plans,
regulations and the policies framed by the official's impacts the market
conditions and drive the outcomes. The demand is affected by:
i) National production targets,
ii) Regulations and restrictions for import and export, iii) Levy of
import duty.
iv) Providing export incentive,
v) Imposing excise duty,
vi) Imposing sales tax,
vii) Issuing Industrial licenses,
viii) Preferential purchase from certain regions,
ix) Credit control and financial regulations,
x) Allowing subsidies and imposing penalties.
43. 8) Demand Forecasting: Depending upon information that is
collected about market and demand from primary as well as secondary
sources, future demand for different products is forecasted Provision
for adjustment is made in forecast to incorporate abnormalities arising.
This forecast is made on basis of different methods that are available.
3.1.6. Demand Forecasting
After analyzing and interpreting data and subsequently information
that is obtained from various primary and secondary sources, next step
is to adequately predict future demand for underlying product or
service. For facilitating these projections, numerous methods are
available which can be taken up by market analyst.
44. Forecasting is a technique that facilitates the process of planning and
enabling efficient decision-making. With these estimates, projections are
made for the future. Combining the aspect of forecasting with demand, it
serves with the future projections regarding the quantity demanded in
precise. Certain questions like which product will be in demand? What
will be the quantity demanded?
Where will be the demands demanded? are answered by demand
forecasting. It also helps in developing relation between demand and
price along with price of substitutes that are available. The change in
demand as a result of change in any of these factors is also revealed.
Demand forecasting serves as a mechanism to forecast and estimate with
precision future demand of product also.
According to American Marketing Association, "Demand forecasting
is an estimate of sales in rupees or physical units for a specified future
period under a proposed marketing plan".
45. 1) Opinion Polling Method: This method is characterized by opinion
of different forces that drives the demand i.e. buyers, experts, retailers,
etc. The information provided by them serves base for demand
forecasting. This method is further classified in three categories:
i) Consumers Survey Method: Most commonly used direct method in
short run for projection of demand. Different surveys are organized in
routine to gather information about likes and dislikes of buyers and
probable future purchases. It includes:
a)Complete Enumeration Survey: Survey is done by visiting all
houses during forecast and all household opinions are taken into
consideration.
46. b) Sample Survey and Test Marketing: Not all households, but
some are selected randomly and their opinions are sought. It is
assumed that sample is true indicator of population. As a result of
sample survey test marketing has evolved. Under this, product handed
over to different users on random basis for specified time and their
responses are noted down. As an outcome of their response future
demand is projected.
c) End-Use Methods: Demand survey is conducted for industries
that are actively using product as an intermediate. The consumption
of intermediate product is considered as base for future projections of
final product.
47. ii) Sales Force Opinion Method: It is also termed as Collective
Opinion Method. Under this, rather than approaching consumers for
their opinions, verdict that are affecting sales must be given priority
i.e., shopkeepers and salesmen.
The salespersons who are engaged with company are to make spate
projections of their sales to the respective regions. These individual
forecasts are put forth for further study and final data for organisation
as whole is prepared.
iii) Delphi Method: It comprises of certain rounds of structural
surveys and those who participate in survey are experts of their own
field. This survey is conducted in different rounds and results of
initial rounds are given as feedback in later round for purpose of
follow-ups.
It can be observed that expert's responses in second round are
influenced by opinion of others. It is basically a group
communication system structured for survey, so that incomplete
information or knowledge is utilized to derive the most appropriate
outcomes.
48. 2.Statistical or Analytical Method: It is a very frequently used
method and best technique that is available for demand forecasting.
There is an extensive adoption of mathematical models, techniques
and equations under this to accurately predict demand of product. As
there is extensive usage of mathematics and statistics, this method can
highly be complicated and services of professionally qualified person
are required.
The most frequently used statistical methods are as follows:
i) Trend Projection Method: The data of the past can be used as a
stepping stone for the future demand projections. A trend can be
established on the basis of the past figures. Such trend can be
graphically or equationally established Following four methods can
be used to establish a trend:
49. a) Graphical Method: Past data of sales in different regions are
plotted on graph and sales trend line is drawn by joining all points.
The line shows the most likely trend in which may be upward or
downward. As only direction of trend is reflected but actual figures
cannot be predicted precisely.
b) Least Square Method: This method assumes consumption that
previous rate of change continues prevail in future. A trend line is
drawn mathematically considering past data in a manner that
difference between calculated and that of observed value is minimum.
A trend line is formed which is the best fit for data that is available.
The trend line is based on two variables, where one variable is
dependent and the other variable is independent. The value of
independent variable is put forth to estimate the value of dependent
variable. This method is simple to use and the cost associated with this
method is also very less.
50. c) Time Series Methods: These methods (graphical and least square)
are dependent upon analysis of the past data. Just like the other
methods, this method also assumes that the past data can be effectively
used to predict the future demand of the product.
Usage of different methods like simple moving average and weighted
moving average is adopted on the same assumption that future events
are based on past figures.
Time Series Demand has the following components:
Average: It is an arithmetic mean of all observations.
Trend: Timely increase/decrease in the outcome over different periods.
Seasonal Influence: Other cyclic behavior that also remains constant
over different time periods i.e. daily, monthly, seasonally, yearly, etc.
Cyclical Movement: It refers to the unpredictability a result of long-
term cyclical behavior because of lifecycle of a product or a service.
Random Error: Other aspects that was not covered by above four
components.
51. d) Exponential Smoothing: Under this method, past data of
demand is used considering weights and weights used are
exponential in nature. Higher weights are allotted to the most
recent period and it goes on decreasing exponentially as we go
down. It can also say that weights used are not linear rather
they are exponential and the magnitude of weights decrease
for later years.
ii) Regression Method: The most commonly used methods in
forecasting of demand. Here, relation between quantity
demanded being dependent variable and other independent
variables like price, income, price of substitutes, etc. is
established and a regression equation is formulated as Y = A +
BX. Such relation between dependent and the independent
variables is often a linear one but sometimes it may also be
curvy-linear. After formulating the regression equation, the
value of variable Y can be calculated by using the value of
dependent variable X and the two constants i.e. A and B.
52. iii) Simultaneous Equations Method of Forecasting: When there is
more complex relation between economic variables and a single
equation cannot be formulated, then this method is used. Under this,
several simultaneous equations are used for forecasting purposes.
Further these simultaneous equations are used to get the exact
calculations. This method is complicated in nature.
iv) Barometric Method: Also termed as leading indicators
forecasting. National Bureau of Economic Research of U.S.A. has
spotted three different indicators under this method i.e. leading
indicator, co-incidental indicator and lastly the lagging indicator.
To get better result a relation between sales of product and economic
indicators need to be studied in order to arrive at accurate projection
of sales as well as the effect of the indicators on the sales. In case,
where product is new to market and no past data is available,
establishing relation may be difficult.
53. Market Planning
After formulation of strategies, manager proceeds to formation of
marketing programs. This constitutes marketing mix, marketing expense
budget, market allocation, etc. Various organizational resources should
be organized in an effective manner to formulate organizational plans
and keeping expenditure budget for the same. The plans made should
also be flexible so as to incorporate the requirements resulting out of the
dynamicity of the market. As a market manager, the focus should be to
develop such marketing plans so as to generate new demand and meet
the overall organizational goals.
Formulation of Marketing Plan
Such plans may vary depending upon market, product, price, substitutes,
size of industry and most importantly view of marketing manager
regarding market. But all marketing plans should address key issues,
measuring results and mobilization of resources. An optimum mix is
developed to incorporate all activities of targeted market segment. A
manager should consider following while formulating marketing plan:
54. 1) Determination of financial impact of the substitutes,
2) Deciding the alternate course of action,
3) Deciding the optimum marketing mix and allocating the
expenditure among the four constituents i.e. product, promotion, price
and the place.
The marketing plans further have different parts which are given
below:
1) Executive Summary: The plan should initialize with a brief
narration of overall objectives of organisation followed by
suggestions from marketing manager in board meeting. This will
enable top management and other board members to reach grassroot
of plan. Executive summary should be further followed by a content
table describing order of plan and its constituents.
55. 2)Present Marketing Situation: This reveals the present marketing
scenario with details regarding the market, competitive edge, products
available, distribution network and the other environmental factors.
Presentation of the data is done in accordance with the market as a whole
and different segments of the past years Consumer behavior, demand,
sales projections and market trends are analyzed and interpreted and the
results give a complete idea of the market. All the products are described
according to their prices, sales volume and the distribution.
3) Opportunity and Issue Analysis: Keeping the present market situation
as the base the next step for the marketing manager is seize the
opportunities arising. The manager is required to make the SWOT analysis
of the organisation and based upon the strengths, be can plan the timings
when the opportunities are likely to arise and ensure that adequate
resources are available to encash the same.
4) Objectives: By now, the management has understood the most likely
opportunities and the issues that are related with it and the adjustments
they have to make in their planning. There may be two types of
objectives i.e. marketing and financial. Marketing refers to bringing old
and the new customers back to the organisation and financial refers to
making the money available to execute all the plans.
56. 5) Marketing Strategy: After the initials have been done, the manager now
frames the marketing strategy based upon the different inputs gathered. This
may be done in a statement, tabular or a graphic form. The basic idea is to cover
all the aspects. Given below is hypothetical strategy which is formulated on the
basis of marketing objectives suggested by Steppenwolf Theater's
Target Market: Subscribers who are long-term and where they have not paid
for the last couple of years.
Positioning: Country's best and the most reliable theatre group.
Product: On-the-edge programming which is selected by committee
constituted by Steppenwolf's famous founders who play key role in the
upbringing of the theatre.
Price: Offered discounts for the early enrolments and thus making quite
competitive.
Distribution: Better sitting arrangements making it more comfortable.
57. 6) Action Programme: It refers to operationalization of strategy and
is illustrated by following example:
A holistic strategy is adopted by the Tata group in their marketing
activities which ensures that the interest of society, customers and the
environment are protected. Customers are charged a fair price for the
products that are offered and at the same time, the product is eco-
friendly.
The environmental factors are also considered while carrying out the
production process and as part of the responsibility towards the
society, contribution is made in a big way by making schools and
hospitals Quite an intensive marketing approach is followed where
the product is easily available to the customers and the force is
applied from all sides to make the product popular. Some of the most
successful brands under Tata are Tea, Cars, Salt, Goods vehicle and
many others.
