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DEMAND FORECASTING IN MARKETING *
When you finish this appendix you should

• Understand the principles of forecasting. • Know the differences between Time Series and
Regression Analyses.

• Understand how expert opinion, sales forces and consumer opinions can all contribute to better forecasts.

* by Beverley Thompson, The University of Western Sydney, Nepean

Demand Forecasting in Mar keting

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An important part of the marketing planning process is the setting of goals that are realistic and achievable, given a particular marketing environment and level of marketing commitment. In marketing, such goals are usually based on market share objectives and sales targets, both of which require accurate forecasts of total market size, market size of target segments and likely market share within a targeted segment.

W H AT A R E W E F O R E C A S T I N G ?
Accurate forecasting requires a clear definition of the market in question. Markets may be differentiated on the basis of the following variables.

GEOGRAPHY
A market may be defined at world, country, state, region, sales territory, town, store or customer level. When formulating a forecast or other marketing plans, the geographical dimension must be clearly indicated. Planning Coca Cola consumption for the year 2000 Sydney Olympics for example, will necessitate the forecasting of increased consumption for the Sydney sales region, but not necessarily for Brisbane.

TIME
A forecast must be defined for a specific time period. Initially several levels of forecast may be set at differing levels of specificity for the short term, the medium term and the long term, with increasingly larger confidence intervals around the forecasts, the further into the future the projection. So for the next year company X may forecast its sales of product B as being