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Forecasting product demand

Provided by SME.com.ph

A demand forecast will help determine the number of products you produce, how many people to hire, how much raw materials to purchase, and how much financing to raise.

If you are operating a convenience store in a neighborhood, you will consider how many people live in the area within, say, a five-kilometer radius. However, it is not enough to know the number of people. Your relevant market consists only of the people who would be willing to pay a higher price for convenience and who can afford your higher pricing.

Two common methods of sales forecasting are a survey of buyers’ intentions and test marketing.

Asking your buyers directly in a survey could help you determine product demand. The main assumption is that the purchase intention is a surrogate of actual buying behavior.

Test marketing, on the other hand, is a small-scale experiment of selling your product in an area that is supposed to represent your target market area. You will sell your product at the intended price, using your planned distribution and communication strategies. You then project your sales in your test market area to determine product demand.

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