Statistical methode

Demand estimation is predicting future demand
form a product. The information regarding future
demand is essential for planning and scheduling
production, purchase of raw materials, acquision of
finance and advertising.
The various techniques of demand estimation: -
1) Survey Method
2) Statistical Method
· Survey Method Survey method is generally
used where the purpose is to make short run
forecast of demand. Under this method, customer
surveys are conducted to collect information about
their intentions and future purchase plan. This
method includes
(a) Consumer survey method
(b) Opinion Poll method
Consumer survey method May be in form of a)
Consumer enumeration: - In this method, almost all
the potential users of the product are contacted
and are asked about the future plan of purchasing
the product in question. The quantities indicated by
the consumers are added together to obtain the
probable demand for the product.
b)    Sample survey method: - Under this method
only a few potential consumers selected from
relevant market through a sampling method are
surveyed, on the basis of the information obtained,
the probable demand may be estimated through the
following formula.
D = HR (H.AD)
Hs
Where D = probable demand forecast
H = Census number of
households from the relevant market.
Hs = number of households reporting demand for
the product.
HR = number of households reporting demand for
the product.
AD = average expected consumption by the
reporting households.
c) End User Method: - The end user method of
demand forecasting is used for estimating demand
for inputs. Making forecast by this method requires
building up a schedule of probable aggregate future
demand for inputs by consuming industries and
various other sectors.
Opinion poll Method The opinion poll methods aim at
collecting opinion of those who are supposed to
possess knowledge of the market e.g. sales
representative, professional marketing experts and
consultants. The opinion poll method include
a) Expert opinion method: - Firms having a good
network of sales representative can put them to
work of assessing the demand for the product in
the areas that they represent. Sales representative,
beings in close touch with the consumers are
supposed to know the future purchase plans of their
customer, their reaction to the market changes, their
response to the introduction of new products and
the demand for competing products. They are,
therefore, in a position to provide an estimate of
likely demand for their firm’s product in the area.
The estimates of demand thus obtained from
different regions are added up to get the overall
probable demand for a product.
b)    Delphi Method: - Delphi method is used to
consolidate the divergent expert opinions and arrived
at a compromise estimate of future demand.
Under Delphi method the expert are provided
information on estimates of forecast of other
experts along with the underlying assumptions. The
experts may revise their own estimates in the light
of forecast made by other experts. The consensus
of experts about the forecasts constitutes the final
forecast.
Although this method is simple and inexpensive, it
has its own limitations. First estimates provided by
sales representations and professional experts are
reliable only to extend depending upon their skill to
analysis the market and their experience. Second,
demand estimates way involve the subjective
judgement of the which may lead to over or under
estimation, finally, the assessment of market
demand is usually based on inadequate
information’s, such as changes in GNP, available of
credit, future prospects of the industry etc, fall
outside their purview.
c) Market studies and Experiments:- It is a
method of collecting necessary information
regarding demand is to carry out market studies and
experiments on consumer’s behavior under actual
through controlled market conditions. This method is
known in common parlance market conditions. This
methods is known in common parlance as market
experiment method under this method, firms first
select some areas of the representative markets –
three or four cities having similar features viz.
Population, income levels, cultural and social
background, occupational distribution, choices and
preferences of consumers. Then, they carry out
market experiments by changing prices, advt.
Expenditure and other controllable variable in the
demand function under the assumption that other
thing remains same. The controlled variable may by
changed over time either simultaneously in all the
markets or in all the markets or in the selected
markets. After such changes are introduced in the
market, the consequent changes in the demand over
a period of time (a week, a fortnight or month) are
recorded. On the basis of data collected elasticity
coefficient are computed. These coefficients are
then used along with the variables of the demand
function to assess the demand for product
The market experiments methods have certain serious
limitations. First, this method is very expensive and
hence cannot be afforded by small forms. Second,
being a costly affair, experiments are usually
carried out on a scale too small to permit
generalization with a high degree of reliability.
Third experimental methods are based on short –
term and controlled conditions that may exist in an
uncontrolled market. Hence, the results may not be
applicable to the uncontrolled long-term conditions
of the market.
· Statistical Method
Statistical method of demand projection include the
following techniques 1)    Trends Projection Method
2) Barometric Method and
3) Economic Method
Trends Projection Method Trend projection method is
a classical method of business forecasting. This
method is essentially concerned with the study of
movement of variable through time. The use of this
method requires a long and reliable time series
data. The trend projection method is used under the
assumption that the factors responsible for the past
trends in variables to be projected (e.g. sales and
demand) will continue to play their part in future in
the same manner and to the same extend as they
did in the past in determining the magnitude and
direction of the variable.
There are three (3) techniques of trend projection
based on time – series data.