Demand Forecasting In modern business, production is carried out in anticipation of future demand. There is thus a time-gap between production and marketing. So production is done on the basis of demand forecasting. The success of a business firm depends to a large extent upon its successful forecasting.
The following methods are commonly used in forecasting demand.
1. Expert opinion method – experts or specialists in the fields are consulted for their opinion regarding future demand for a particular commodity.
2. Survey of buyers’ intentions – generally a limited number of buyers’ choice and preference are surveyed and on the basis of that the business man forms an idea about future demand for the product it is going to produce.
3. Collective opinion method – the firm seeks opinion of retailers and wholesalers in their respective territories with a view to estimate expected sales.
4. Controlled experiments – the firm takes into account certain factors that effect demand like price, advertisement, packaging. On the basis of these determinants of demand the firm makes an estimate about future demand.
5. Statistical methods – More often firms make statistical calculations about the trend of future demand. Statistical methods comprising trend projection method, least squares method progression analysis etc. are used depending upon the availability of statistical data.