Launching a new product comes with several risks as companies attempt to penetrate a market with established lines. In order to gain a competitive edge, businesses need a plan that outlines the supply chain. With a new product forecasting process, businesses can reference data from similar products to optimize the product launch, minimize risks, and preserve profit margins.
Forecasting in business refers to the use of software, automated tools, and analytics to predict future developments. Modern forecasting software uses machine learning to develop trends from historical and real-time data. Automation tools also create best-and worst-case scenarios, detect anomalies, and help companies anticipate fluctuating market trends. Business forecasting can be applied to various segments, from customer demand to spend management. This enables organizations to improve their business strategies to promote profitability. For example, demand forecasting software may predict that sales for a particular product line will decrease within the next year. Companies can then adjust their ordering strategies to keep minimal on-hand stock, reducing inventory and storage expenses to maintain a profit.
A Practical Guide to Forecasting New Products
Why is it important to forecast product sales?
It is important to forecast product sales because it helps avoid financial losses and maximize your potential gains. Though forecasting isnt an exact science, it provides you with a statistically detailed look at what you can expect for the future. With this insight, your business can:
Here are some other factors thatcan affect your product forecast:
What is forecasting?
Forecasting is the method of analyzing the variables that affect the outcome of your sales and then using that information and data to anticipate how much profit you will make. Accurate forecasting is challenging, but it is a necessary step to ensure that your estimates align with your product forecast sale numbers. Forecasting can also become easier over time as you see trends forming and look to your developing sales history for guidance.
Here are some points to keep in mind when you forecast:
The consumers of forecasting
The consumers of forecasting are the people who buy your products and affect the “bottom line” or final sales numbers. Businesses can analyze the buying habits of consumers from their historical data and through rigorous research. You should identify and answer these questions before you make your sales estimates:
Forecasting for existing businesses
A general principle is that forecasting for existing businesses begins with the historical data of their sales from the previous year. This can save time and help avoid having to conduct lengthy market research studies. Based on the level of sales of their consumers from the previous year, businesses can find out whether customers are likely to buy more or less next year. Depending on the data, an existing business can expend more resources to accommodate their forecast of higher incoming sales figures.
Forecasting for new businesses
New businesses dont have historical data, so they are likely forecasting for a new product. To compensate, new businesses conduct market research studies to understand consumers wants and needs. In addition to analyzing the buying trends and sales of their competitors consumers, they must also make solid judgement calls to ensure they minimize any potential losses if they invest in a consumer market that is not in line with their sales forecasting figures.
How to forecast product sales for a new product
You can measure a business by its sales growth, and higher sales growth means greater outcomes for expansion and profits. To forecast product sales for a new product, consider following these steps:
1. Conduct an affordable market research study, survey or pilot project
Launching new products carries some risk, but you can mitigate that risk by conducting an affordable market research study. The sales and marketing department representatives can conduct surveys, gather research and assess market trends and tactics used by competing businesses. Starting a small-scale pilot project, sending out tailored surveys and conducting market research studies with those participants is economical and easy to reproduce for gathering data.
2. Create a sales plan
When creating your sales plan, its important to consider where to put your focus. After you have conducted your research, try crafting actionable and practical steps to follow. Determine how you plan to integrate your product into the market and seek out opportunities to boost the average sale of your customers. A sales plan benefits from a team of sales experts and marketing specialists. This is the step where you set your goals and identify your objectives.
3. Monitor your results
With any new product, forecasting your sales will take time, patience and some educated guessing. After you have gathered substantial data from ongoing surveys, research studies, pilot projects and early stage sales numbers, its beneficial to track those results. With this data, you can adjust the elements of your new product to align with what the consumers expect from it. You can further asses the data and change your product sales forecast accordingly.
Tips for forecasting a new product
One of the best ways to forecast for a new product is by avoiding the forecasting pitfalls. It is important to remain optimistic but realistic about what is achievable in the current market for your product. It is usually safer to undersell your forecast because if the product does over-perform, you gain the benefit of being able to add more resources to accommodate the increasing sales figures.
Here are some additional tips on how to forecast for new product sales:
What are the three types of forecasting?
- Step 1: Make it a collaborative effort. …
- Step 2: Identify and agree upon the assumptions. …
- Step 3: Build granular models. …
- Step 4: Use flexible time periods. …
- Step 5: Generate a range of forecasts. …
- Step 6: Deliver the outputs that users need quickly.
What is product forecast in business Plan?
What is the example of forecasting?
- Forecast Initial Sales Volumes of New Products. …
- Estimate Brand Cannibalization Impact. …
- Assess Raw Material Suppliers. …
- Assess Finished Goods Manufacturing Capacity. …
- Determine the Initial Production Quantity. …
- Determine the Initial Production Distribution. …
- Monitor Sales and Customer Feedback.