Demand determines supply, this statement we know from economic theory. Enterprises receive income and profits from the sale of their products, but sales volumes are directly dependent on the size of demand. The study of the competitive situation in the market and demand is one of the main objectives in the business plan. We will talk about the information sources and methods of effective demand analysis, forecasting and planning in the present article.
I said that the company has three main types of revenue in the article about planning company revenues. Operational, financial and investment income belong to these basic types of revenue.
Revenue from sale of goods and services belongs to the company’s operating revenue. Demand analysis should be carried out precisely when planning the operating revenue of the company in this regard.
The main objectives of demand analysis are the following:
- Studying of the total demand in natural terms.
- Studying of the level of satisfaction of existing demand.
- Determining of the level of prices in the market.
- Determination of effective demand.
Determination of total demand in natural terms can be done by calculation based on the number of customers and average demand of one customer.
Determination of level of satisfaction of demand carried out by comparing the total demand volume and proposals of competitors.
The competitive product characteristics (advantages and disadvantages) should be taken into account in determining the level of satisfaction of demand.
If your products have some competitive advantages, your company can rely not only on unsatisfied demand, but also on the part of the satisfied demand. If your product does not have significant competitive advantages you need rely only on existing unsatisfied demand.
It is necessary to determine prices on a similar product of key competitors in the study of market prices.
We can define effective demand by comparing of existing unsatisfied demand and average prices for the products.
The volume of effective demand can be accepted as projected sales value of products.
Very different information is needed to determine all parameters listed above. This information can be obtained from various sources.
The main sources of information for demand analysis include the following:
1. State statistical observations.
These state statistics can be found on the websites of government statistical services. Data on population, size of turnover and lots of other interesting information can be found on such sites.
2. Data of specialized associations and public organizations.
Many companies are united in various associations. Such associations often publish reports on the activities of its members or the association as a whole.
Many public organizations, that monitor the economic situation, also exist in every country. These organizations collect information about different industries very often.
3. Data of special marketing companies.
Many marketing companies operate in the market. These companies specialize in collecting of different information. Your company can order market research, including the demand analysis, in such a specialized marketing company. However, you should note that you have to pay for such services and to plan these marketing costs in financial plan.
4. Data of commercial offers.
Company employees can determine the amount of effective demand through the study of market commercial offers (e.g. price lists, catalogs, quotations at stock exchanges, etc.). You can get a lot of specific information from this source not only about prices and quantities, but also about the contact details of your direct competitors, etc.
You need to use all available information sources except listed above. This can be data from the Internet and data obtained through personal acquaintances, as well as data from any other sources.
The collected demand data should be summarized in the marketing section of the business plan and indicators of demand should be used in the preparation of company revenue plan.