There are several types of demand forecasting based on the different factors such as the size of the business, levels in the economic environment, the flexibility of enterprise, and others.
The Content covered in this article:
- Meaning of Demand Forecasting:
- 1.Active demand forecasting:
- 2.Passive demand forecasting:
- 3.Short term demand forecasting:
- 4.Long term demand forecasting:
- 5.External or National group forecasting:
- 6.Internal or Company group forecasting:
- 7.Macro-level forecasting:
- 8.Industry-level forecasting:
- 9.Firm-level forecasting:
- 10.Product line forecasting:
Meaning of Demand Forecasting:
Demand Forecasting is an estimate of sales during a specified future period based on the proposed marketing plan and a set of particular uncontrollable and competitive forces.
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Types of demand forecasting: On the basis of time and different levels in the economic environment, the demand forecasting can be classified as:
- Active demand forecasting
- Passive demand forecasting
- Short term demand forecasting
- Long term demand forecasting
- External or national group demand forecasting
- Internal or group demand forecasting
- Macro-level forecasting
- Industry-level forecasting
- Firm-level forecasting
- Product line forecasting
These are explained as under:
1.Active demand forecasting:
In-active demand forecasting, The forecasting is done on the assumption that the firm changes the course of its action. The prediction is done under the condition of favorable future changes in the operations by firms.
2.Passive demand forecasting:
It is a rare type of forecasting and mostly done by the businesses which are stable and having very conservative growth plans. The forecast is based on the assumption that the firm doesn’t change the course of its action. Small and local businesses prefer it for planning.
3.Short term demand forecasting:
In short term demand forecasting, forecasting is done for a shorter period of 3 months to 12 months. The demand pattern and the effect of the strategic decisions on customer demand are analyzed under this.
4.Long term demand forecasting:
When forecasting is carried out for a period of more than 12 months, such forecasting is known as long term demand forecasting. Long term forecasting is helpful in suitable capital planning, business strategy planning, sales and management planning etc.
5.External or National group forecasting:
The forecasting carried out by a company’s research wing or by outside consultants is known as external group forecasting. It deals with the trends in general business.
6.Internal or Company group forecasting:
It refers to the forecasting estimation by the operations of a particular enterprise such as production group, sales group and financial group. It includes a forecast for annual sales, forecast of operating profit, forecast of cash resources and forecast of a number of employees etc.
In this, the broad market operations are analyzed and then forecasting is carried out in macro economic environment. It is measured by an appropriate index of industrial production, national income or expenditure.
This type of forecasting is prepared by different trade associations based on the survey of consumers’ intention and analysis of statistical trends.
This forecasting is prepared from the viewpoint of managers and is related to an individual firm.
10.Product line forecasting:
This forecasting is related to the product or products being produced by the firm. It helps the firm to decide which of the products should have priority in the allocation of the firm’s limited resources.
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