Marketing Management

2nd Edition

Michael R. Czinkota and Masaaki Kotabe

Chapter 6:
Estimating Market
Demand

© 2000 South-Western College Publishing Slide #

 Chapter Outline
 Forecasts vs. Budgets
 Time Spans for Forecasts
 Short-Term Forecasting
 Medium-Term Forecasting
 Long-Term Forecasting
 Forecasts Into Budgets
 Micro and Macro-Forecasts
 Derived Forecasts
 Forecasting Techniques
 Alternatives to Forecasting
 Factors Limiting Forecasting

© 2000 South-Western College Publishing Slide #

 Forecasts vs. Budgets

Forecasting:
 Predicting what will
happen in the future
Budgeting:
 Planning the allocation
of tasks and budgets to
accomplish goals set by
the organization.

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 Time Spans for Forecasts

Short- Tactical
term Monthly or quarterly

Medium- Annually
term

Long- Every 5 years

term Strategic

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 Short-Term Forecasting

Production
scheduling
s t
1 ter
u a r Information
Q transmission
Control

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 Medium-Term Forecasting

Input to annual
ca l marketing plan
is
F ar
ye 0 Input to annual
00 budget
2

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 Long-Term Forecasting

e a r Strategic
y
5- tegic
direction
r a
St Plan Resource
planning
Communication

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 Forecasts into Budgets

Sales force Set high for optimistic targets OR

Set low to ensure achieving
targets targets

Manufacturing Set high to ensure inventory OR

forecasts Set low to to avoid excess costs

Profit Set low to be conservative

forecasts

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 Macro and Micro-Forecasts

Macro Forecast:
 Predict what large-scale
forces will result in
macro changes in the
environment.
Micro Forecast:
 Build on the predictions
of individual or group
customer behavior.

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 Derived Forecasts

World & national Based on economic cycles

economies Made by governments or OECD

Market Based on historical trends OR

forecasts Based on customer behavior

Product Based on sales by product

forecasts

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 Forecasting Techniques:
Qualitative Forecasting
 Individual or expert
opinion
 Sales force
 Customer contact
 Expert panel method
 Technological
forecasting
 Envelope curve
extrapolation

© 2000 South-Western College Publishing Slide #1

 Forecasting Techniques:
Qualitative Forecasting (cont.)
 Delphi method
 Role playing
 Analogy
 Decision tree
 Probabilities
 Pay-offs
 Scenario

© 2000 South-Western College Publishing Slide #1

 Forecasting Techniques:
Quantitative Forecasting
 Sales trend forecasting
 Mathematical models
 Period actual & percent
changes
 Exponential smoothing
 Advance time-series
analyses & models

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 Forecasting Techniques:
Quantitative Forecasting (cont.)
 Mathematical models
(cont.)
 Multiple regression
analysis
 Econometric models
 Leading indicators
 Game theory

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 Alternatives to Forecasting

Insurance Example: cover future changes in

exchange rates by hedging

Speak risk by entering many

Portfolios different markets or offering a
variety of products

Coping rapidly with unexpected

Flexibility changes

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 Factors Limiting Forecasting

Errors & biases that may

affect forecasts:
 Hockey stick effect
 Lack of knowledge of
managers

© 2000 South-Western College Publishing Slide #1