Methods Of Demand Forecasting
Demand forecasting helps the company to produce the required quantities of products at the right time and to arrange the various factors of production in advance. Forecasting demand accurately also helps a company to estimate the future demand for its products and plan its production. There are different methods of demand forecasting in business which are commonly known as demand forecasting techniques.
There are mainly two methods of demand forecasting in business, namely – Survey method and statistical method. However, the Methods Of Demand Forecasting In Economics are presented below:
Different Methods Of Demand Forecasting In Economics
1. Survey of consumers intentions: In this method information will be obtained by asking consumers about their buying intentions. This is direct method of estimating demand of consumers as to what they intend to buy today or in upcoming future. Almost every business organization makes survey on the choice or habits of its buyers’ either online or in other modes.
2. Collective opinion or field force composite method: According to this method salesmen estimate sales in their respective geographical areas. The total estimated sales will be obtained by consolidating the estimations of various salesmen. These estimates are revised from time to time with respect to the factors affecting demand, like purchasing power, sales price etc.
3. Trend projections: Generally a firm prepares its own data of sales at different periods. When the firm arranges its data in a chronological order, it gets time series. Time series represent the past pattern of its effective demand. A trend line could be filled through the series in visual or statistical way by the method of least squares and then projected into the future for purpose of extrapolation. So, this can be used for further analysis.
4. Economic indicators: Under this method, demand may be estimated on the basis o f some economic indicators like construction contracts, personal income, agricultural income, and automobile registration. This method of demand forecasting is well suited where relationship of demand with a particular indicator is characterized by a Time Lag.
5. Controlled experiments: Demand Forecasting will be undertaken by changing the determinants of demand like price. advertisement, packaging etc. This may be done either by changing them over different markets or time periods in the same market.
4. Executive Judgment Method: In this method, expert judgments are sought from top executives in the related field. Collected judgments are combined, averaged out and analyzed to figure out the demand forecasts.
7. Expert’s Opinions: Here in methods of demand forecasting, expert opinions are taken from specialists in the related field, collected opinions from various sources like print or electronic media. Then, these opinions are analyzed to figure out the demand forecasts.