Imagine you work for a breakfast cereal company that makes prepared products that are served cold. Your company wants to introduce a new hot breakfast cereal that would require some minimal preparation by the consumer.
1. How would you propose forecasting initial demand for this product?
2. Identify one quantitative and one qualitative technique.
3. How do the techniques complement each other?
Ways to Perform the Demand Forecasting
Demand forecasting is used to know about the prospective demand for any product in the market. It can be done for both the existing products as well as for the new market exploration. There are many methods of forecasting, that can be used for determining the demand for the products.
Answer and Explanation:
1. The company wants to judge the initial demand for the hot breakfast cereal in the market. For doing this, it has to use the different demand forecasting techniques for making this prediction. Some of the ways by which the initial demand of the products can be judged are by -
- Observing the consumer's buying pattern regarding hot breakfast cereal.
- It can also be predicted from the sale of competitive products.
-Past data about the demand for this product (if available) can be studied.
-Market experts can also be asked about their views about the demand the product can generate in the market.
-Various statistical methods can also be used for predicting the initial demand for the product.
2. A quantitative method of demand forecasting is mainly based on calculation and analysis by using statistical or mathematical techniques. One of the common quantitative methods of demand forecasting is multiple regression techniques. For this purpose, a questionnaire can be used to collect the data from the prospective buyers about their choices regarding the breakfast cereal. From the data, the factors affecting the demand for the product can be used to predict the demand for the upcoming product and is treated as an independent variable. The demands for the product will be the dependent variable. The qualitative methods are the methods used to determine the demand for the product, from the behavior and opinion of the people. One of the qualitative methods used for data forecasting is consumer surveys. These surveys can be done by personally asking the customer about their choices or by asking over the telephone or online. This helps the company to know about the exact expectation of the consumers about the products.
3. Multiple regression and consumer surveys are complementary to each other in the sense that from the consumer survey, researchers get to know about the liking, disliking and desired attributes of the product. From multiple regression, the researcher can get to know about the importance of these liking, disliking and desired attributes of the product in quantitative terms. A researcher, by performing the quantitative analysis, can get to know about the priority of the attributes that a consumer needs in a product.
Learn more about this topic:
from Business Analysis TrainingChapter 5 / Lesson 2