Page 31 - DMGT302_FUNDAMENTALS_OF_PROJECT_MANAGEMENT

Fundamentals of Project Management

Notes 6. Durability: Demand forecasts should not be changed frequently. Durability of forecast is
subject to the followings:
(a) Simple and reasonable relationship between price and demand, advertisement and
sales, level of income and volume of sales etc
(b) Stability of relationship between the above variables
7. Flexibility: Flexibility of forecast is an added advantage. It is desirable to be able to adjust
‘coefficient’ of variables from time to time to cope with the changing conditions.

Methods of Forecasting Demand

To facilitate proper and reliable appraisal of investment proposal, we require a reasonably
accurate forecast of demand. Starting with qualitative methods like survey of collective opinions,
buyers’ intention, Delphi approach and its variant, a number of quantitative methods are used
for compiling and computing demand forecasts as detailed below:
1. Collective Opinion Survey: Sales personnel are closest to the customers and have an
intimate feel of the market. Thus they are most suited to assess consumers reaction to
company’s products. Herein each salesperson makes an estimate of the expected sales in
their respective area, territory, state and/or region, These estimates are collated, reviewed
and revised to take into account changes in design/features of products, changes in selling
prices, projected advertising and sales promotion campaigns and anticipated changes in
competitors: marketing policies covering product, people, price, promotion and place.
Opinions of all managers involved at various levels of sales organisation are also included
in the survey. Thus collective opinion survey forms the basic of market analysis and
demand forecasting.
Although this method is simple, direct, first hand and most acceptable, it suffers from
following weaknesses:
(a) Estimates are based on personal judgment which may not be free from bias.
(b) Adding together demand estimates of individual salespersons to obtain total demand
of the country maybe risky as each person has knowledge about a small portion of
market only.

(c) Salesperson may not prepare the demand estimates with the requisite seriousness
and care.
(d) Owing to limited experience, usually in their employment, salesperson may not
have the requisite knowledge and experience.
This method may be useful for long-term forecasts. It is also used for new products or new
variants of existing products.

2. Survey of Customers Intention: Another method of demand forecasting is to carry out a
survey of what consumers prefer and intend to buy. If the product is sold to a few large
industrial buyers, survey would involve interviewing them. If it is a consumer durable
product, a sample survey is carried out for questioning a few representative consumers
about what they are planning or intending to buy. It is neither realistic nor desirable to
query all consumers either through direct contact or through printed questionnaire by
mail.
These surveys serve useful purpose in establishing relationships between:
(a) Demand and price;

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