23/11/2007
Demand: How many will buy?!
Asian School of Business,
Trivandrum 2007
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23/11/2007 Asian School of Business,
Trivandrum 2007
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• Market demand: total volume that would be bought by
– a defined customer group
– in a defined geographical area
– in a defined time period
– under a defined marketing program
• Company demand: the company’s estimate of market demand at different levels of it’s marketing effort, in a given time.
23/11/2007 Asian School of Business,
Trivandrum 2007
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• It need not be a fixed number, it shows the state of the market-prosperity/decline.
• Market Minimum : demand that takes place without any marketing expenditure.
• Market Potential : the upper limit, beyond which extra expenditure is useless.
• Market sensitivity: distance between MP & MM
• Market Forecast: Somewhere in between.
23/11/2007 Asian School of Business,
Trivandrum 2007
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• The company’s estimate. Depends on its own products, prices, ads and on the competitor’s
• Co. Sales Potential: sales’ upper limit as marketing effort increases.
• Co. Sales Forecast: expected sales based on a chosen plan. Leads to sales quota (higher).
• Sales Budget: conservative estimate of sales volume for production (lower)
23/11/2007 Asian School of Business,
Trivandrum 2007
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Current Demand: Total Market Potential
• Total Market Potential: maximum amount of sales.
• Common method -Potential number of buyers X average quantity purchased by him X price
• Potential number of buyersestimate total population & eliminate groups that will obviously not buy…leads to suspect. Suspect is researched to find prospect
23/11/2007 Asian School of Business,
Trivandrum 2007
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Current Demand: Total Market Potential
• Chain Ratio Method : multiply base with many percentages
• Demand =
Population X
X personal discretionary per capita income
X average % of income spent on food
X average % of food expense spent on beverage
X average % of beverage expense spent on alcohol
X average % of alcohol expense spent on beer
X average % of beer expense spent on light beer
23/11/2007 Asian School of Business,
Trivandrum 2007
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Current Demand: Area Market Potential
• Companies have to select the best territories to market
• Market Buildup Method: Identify all potential buyers in each area & estimate their purchases.
• Multiple Factor Index Method: Find out factors that may effect sales and give weights.
• Eg. Population, Disposable income, retail sales
23/11/2007 Asian School of Business,
Trivandrum 2007
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Current Demand: Area Market Potential
• Multiple Factor Index Method:
• E.g.. Population, Disposable income, Retail sales
• First, give weights based on data- 0.5, 0.2, 0.1
• If Kerala has 3% of India’s population, 2% of income and 1% of retail sales
• Buying Power Index: 0.5( 3 )+0.2( 2 )+0.1( 1 )=2.0
23/11/2007 Asian School of Business,
Trivandrum 2007
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Sales Figures in Kerala
Percent of
Indian brand sales A
Trivandrum 3.09
Alappuzha 6.74
Kochi 1.13
Percent of
Indian category sales B
Brand Dev Index
A/B X 100
2.71
10.41
0.81
114
65
140
Find out where brand is more developed than the category
23/11/2007 Asian School of Business,
Trivandrum 2007
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• Survey of buyer’s intention
• Sales force opinion
• Expert opinion
• Past sales analysis
• Market testing using prototype
23/11/2007 Asian School of Business,
Trivandrum 2007
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23/11/2007
End of Session
Asian School of Business,
Trivandrum 2007
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