1. Marketing Management 2nd Edition
Michael R. Czinkota and Masaaki Kotabe
Chapter 6:
Estimating Market Demand

2. 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

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

4. Time Spans for Forecasts
Short-
term
Tactical
Monthly or quarterly
Medium-
term
Annually
Long-
term
Every 5 years
Strategic

5. Short-Term Forecasting
Production scheduling
Information transmission
Control
1st
Quarter

6. Medium-Term Forecasting
Input to annual marketing plan
Input to annual budget
Fiscal
year
2000

7. Long-Term Forecasting
Strategic direction
Resource planning
Communication
5-year
Strategic
Plan

8. Forecasts into Budgets
Sales force
targets
Set high for optimistic targets OR
Set low to ensure achieving
targets
Manufacturing
forecasts
Set high to ensure inventory OR
Set low to to avoid excess costs
Profit
forecasts
Set low to be conservative

9. 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.

10. Derived Forecasts World & national economies Market forecasts Product
Based on economic cycles
Made by governments or OECD
Market
forecasts
Based on historical trends OR
Based on customer behavior
Product
forecasts
Based on sales by product

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

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

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

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

15. Alternatives to Forecasting
Insurance
Example: cover future changes in
exchange rates by hedging
Portfolios
Speak risk by entering many
different markets or offering a
variety of products
Flexibility
Coping rapidly with unexpected
changes

16. Factors Limiting Forecasting
Errors & biases that may affect forecasts:
Hockey stick effect
Lack of knowledge of managers