Sales forecasting is an essential step in budgeting. It is an essential act for a sustainable management of your company. Otherwise, you will navigate by sight following the currents without knowing where you are heading. In other words: blind! Which, if one wants to be professional, is totally incongruous? Sales forecasting of a product plunges you into a world of high-flying: the world of forecasts.
The first point is whether your product has already been sold or if it is a new product not yet launched on the market. In any case, it will be difficult gymnastics. And as in many areas of management, the more you practice, the better you will be.
Sales Forecasting of an Existing Product
You can, of course, rely on past sales by adjusting the figures based on quantitative data: changes in the market, the economic and competitive environment, etc. You must also take into account the marketing and sales actions you will take. The most difficult is to weigh each point: for example, to estimate that such action will increase sales by x%. Nevertheless, by knowing the functioning of its market and its customers, it is possible to obtain quite reliable ratios.
The analysis should be conducted at the most relevant level. For a company with few products, thinking can be done article by article. A company marketing a broader offer will conduct its study at the product line level.
Competition of New and Existing Products in Market
There, the exercise is much more difficult because you do not start from nothing. It is important to distinguish between a new product launched in a market that does not yet exist and a market in a market already occupied by competition.
The first operation will consist in estimating the size of the market. If it already exists, you can rely on sales made by current suppliers (although it is not always easy to access information.
You will then need to determine the share of buyers that you can convert using your offer. The variables of the marketing mix are a good analysis grid for this exercise: for each variable you must estimate your strengths and weaknesses. Then, oh how difficult, translate this position into figures. To do this, you can interview experts with a solid knowledge of the market or target clients.
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To master this process, you can mount a small tool on Excel (or other spreadsheet), integrating all the variables and their weight on sales forecasts, very useful for simulating different scenarios.
If it is to attack a market that does not exist, you will not have the sales of your future competitors. One solution may be to look for a market approaching that targeted, with similarities in terms of needs covered, types of customers, competition, etc. The second solution is to rely again on experts to build a vision of your target, as before, you spend your “mix to the mill” to determine the share.
To estimate the sale of a product, one of the keys lies in an iterative process: as soon as your assumptions are asked, you must check them (even if this verification does not give 100% reliable results), the case appropriate, create new ones, check them again, etc. There are no quick fixes, but with a good methodology, you usually come up with some interesting results.
Hello everyone! This is Richard Daniels, a full-time passionate researcher & blogger. He holds a Ph.D. degree in Economics. He loves to write about economics, e-commerce, and business-related topics for students to assist them in their studies. That's the sole purpose of Business Study Notes.
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