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MEASURING DEMAND Is central for the success of a product, marketing program, and an organization. Companies must measure the demand of a product in terms of quantity, value, territorial location, and period. Measuring demand helps in estimating future sales revenue and making budgets accordingly. A total demand of a product category, for instance, a tooth paste, powder, and mouth wash in a region or country and analysis of a company’s past sales and its competitors sales contribute in setting sales targets for the future.

The most common techniques for measuring demand are Estimating the demand, Multiple factor analysis method, and Estimating industry sales and market shares.

ESTIMATING THE DEMAND:
It is determined by estimating total market potential. The formula is:
Q = nqp

Where
Q = total market potential
n = number of buyers of a specific product in a market
q = quantity purchased by an average buyer
p = price of an average unit

Suppose, 80 million people in Pakistan buy average two ball pens in a month, the average price of a ball pen is Rs8, then, the total market potential is: (80 m * 2 * 8) = Rs960 m. similarly, area or city wise market potential is also reckoned.

MULTIPLE FACTOR ANALYSIS METHOD:
The technique provides the following formula to measure the total demand:
Bi = 0.5yi + 0.3ri + 0.2pi

Where
Bi = percentage of national buying power in area i
yi = percentage of national disposable personal income in area i
ri = percentage of national retail sales in area i
pi = percentage of national population in area i

Suppose, Karachi has 30% of national disposable personal income, with 30% retail sales, and 10% of the country’s population, then the buying power index for Karachi would be:

0.5 (30) + 0.30 (30) + 0.20 (10) = 26

It means 26% of total sales of this product category is expected to take place in Karachi.

ESTIMATING INDUSTRY SALES AND MARKET SHARES: The sales of the total industry selling this specific kind of product will be tabulated or obtained from market researchers or statisticians.










SALES FORECASTING is the prediction or estimate of sales of a product or business of a future period. Sale forecast is central is sales management and marketing research because companies want to know their future sales revenue and incur their expenditures accordingly. Generally sales forecast is made through an analysis of past sales. Seasonal fluctuations in sales are also taken into account. Even the new companies predict their sales of new products on the grounds of marketing tools, for instance the product’s innovated features, attractive packaging, affordable pricing, promotional tools such as introductory price offers, advertising, distribution channels effectiveness, etc. Sales forecasting is done by experts including the sales force, marketing team, marketing researchers, consultants, franchisers, distributors, dealers, suppliers and even some government agencies sometimes.

Often, companies’ sales keep growing every year because the population keeps growing. Sometimes a products usage and acceptance increases its demand to an enormous level. For example, the awareness on environment friendly fuel and economy raised CNG sales to a remarkable level. That’s why companies regularly enhance their sales target and keep an eye on sales forecast.

In Pakistan, some research companies like International Marketing Services (IMS) provide regular sales data of all pharmaceutical products in entire Pakistan to their clients on subscription basis. For example, the sale of Zanax tablet, Augmentin tablet, Panadol tablet, etc can be known in quantity wise, value wise, territory wise (ie sales from Karachi to Khyber, in every city, town, street, village, etc), which helps companies formulate marketing strategies and plans.








SALES FORCE COMPOSITE: Sales force is asked to forecast the sales for a future period.
EXPERT CONSENSUS: The experts are asked to forecast the sales for a future period and a consensus is reached through discussions. In point forecast, the experts give a specific amount of sales in a given period, for instance, US$ 100,000. In interval forecast, the experts give a specific range of amount of sales in a given period, for instance, US$100,000 to 120,000. In Probability distribution forecast, experts give two or more specific ranges of amount of sales in a given period, for instance, US$100,000 to 120,000, 120,000 to 140,000 & 140,000 to 170,000.


DELPHI METHOD The forecasters get a questionnaire filled by the sales force / field force to finalize their forecast.

TIME SERIES ANALYSIS AND SALES PROJECTIONS
It’s a very famous technique used in business and marketing research and statistics. It analyzes some variables, such as sales in relation with time. It includes four important factors or components including trend, cycle, season and random variation or erratic events. The forecasters notice the sales trends of their products and competitors products in various periods. The sales flow or cycle is directly linked up with the economic activity, if the economy is at recession stage or slow pace, the sales will suffer. In the seasonal fluctuation periods, high sales or low sales will occur. Almost every business face some periods of fast and slow sales periods, called peak and slack or slump season. For example, in the periods of marriages in Muslim countries, the sales of garments, clothes, footwear, jewelry, furniture, decoration, catering, marriage halls, etc will increase substantially. Finally random variations include non-routine disturbing events like strikes, sabotages, riots, natural disasters, earthquakes, wars, etc, which can also suffer both production and sales, so the sales forecasters also take into this factor to reach at a final sales figure estimate.


OTHER STATISTICAL METHODS AND INTENTIONS-TO-BUY SURVEYS are also used in forecasting. A formal or informal survey from existing or potential customers helps in predicting the future sales. Product sales are forecasted in units or quantity wise, value wise, territory wise, and period wise like days, week’s fortnights, months, quarters, and years i.e. yearly sales.