When a company already has a product in the market, predicting its future demand requires a comprehensive evaluation of various factors. Here’s how to forecast market demand for an existing product effectively:
Listening to Stakeholders
- Salesforce Opinion: Gather insights from the sales team, individual salespeople, or sales units. These perspectives are derived from historical performance and understanding clients’ needs. Effective collection of these opinions hinges on the sales force’s familiarity with client preferences to avoid speculative estimations.
- Expert Opinions: Seek insights from industry experts, observers, veterans, or technical resources from bodies like the Department of Trade and Industry. Expert opinions can offer valuable insights into market potential and product acceptance. However, remember that even experts’ opinions are educated guesses and not guaranteed predictions.
Quantitative Forecasting Methods
- Time Series Analysis: This method utilizes past data to predict future sales. The basic approach involves a status quo projection or incorporates trends. For instance, if sales increased by 5 percent annually over the past three years, you might forecast this year’s sales as last year’s sales multiplied by 1.05. Sophisticated analyses can be performed using statistical software.
- Regression Analysis: This advanced statistical technique predicts outcomes based on multiple potential factors. It establishes correlations between factors and sales using historical data. If a factor shows a strong correlation, a regression model—a formula—is developed to predict sales based on those influential factors. Factors can include economic indicators, industry performance, and leading indicators that anticipate industry performance.
In 2007, an estimation of national dark spirits (whisky, rum, brandy) consumption was made. Retail surveys and price analysis of imported and local spirits were used to deduce that imported dark spirits constituted 11.85 percent of the market’s peso revenues.
Effective demand forecasting requires a balanced approach using both qualitative (opinions) and quantitative (data-driven) methods. By listening to stakeholders and employing advanced statistical analyses, businesses can refine their understanding of market demand and make more informed decisions.
Understanding the nuances of these methods empowers companies to make accurate predictions, enhance their planning, and adapt to changing market dynamics effectively.