Question #4: What is the best way to forecast demand for a new product?
When you introduce a new product to the world, you’re venturing into uncharted territory. So predicting and then planning for demand can seem like an impossible task. But all is not lost! There are numerous strategies you can adopt that, while imperfect, will help you prepare an informed demand forecast.
While you’ll not find an exact match, of course, take a look at the demand levels for similar products — yours or your competitors’ — that are already on the market. Another great strategy: identify existing products that follow a comparable life cycle. Then use the data you gathered to create an initial baseline forecast.
This is also a case where qualitative forecasting techniques will play more of a role. So once you’ve got your foundation, add a hefty dose of subjective data to produce a preliminary forecast. Data sources include market research, expert opinions from key players within your company, data from test or focus groups, any public response in the run-up to the product’s release, and your own judgment.
Finally, after the launch, pay attention to early indicators, such as Point of Sale (POS) data, and adjust your demand plan accordingly. If demand is greater than expected, that’s wonderful! However, that may also involve accelerating your restocking timeline.