Demand forecasting the process of predicting future sales by using historical data to make informed decisions about inventory. Demand forecasting is one of the most critical and challenging aspects of your company’s success. It helps you estimate sales and revenue for a future period.
It can be difficult to look ahead and plan in a normal environment. But when there are outside forces that make significant impacts on your industry, it only intensifies the difficulty. Remember, without demand, there is no business. Demand forecasting will help you reduce risks associated with profit margins, cash flow, and allocations of resources.
Look for positive and negative demand. In good times and bad, many businesses focus on positive demand in their forecasting. However, your team should also look for “decremental” or negative demand. Both sides of the equation are critical to successfully navigating during trying times. Consider and track the factors that could drive or reduce demand for your offerings.
Be prepared to shift accordingly. You know the importance of pivoting in your business when challenges arise. That is because people’s buying patterns are continually changing. For example, people do not stop buying food from the grocery store; they just change their habits. History shows that we make fewer trips in challenging times. Currently, many consumers have made fewer trips and bought more per trip, often utilizing platforms such as Instacart. The takeaway is to learn how consumer demand is changing and figure out how to adjust.
Plan for pent-up demand. When creating demand forecasts, always account for pent-up demand. When there is a surge in one area of consumer buying, there may be a reduction in another. But that reduction may create later surges. Consider how your business can plan for pent-up demand that may arise as your audience adjusts to the fluctuating economy.
Look for disparities by geographic region. In difficult times, companies should be hyper-local in their demand forecasting. That is because the world has taken many diverse approaches to keep their economies healthy. It makes sense to focus on promotional efforts on clients that need the niche products or services you offer.
Pay attention to virtual or half-attended events. When looking ahead, recognize that half-attended or online-only events can impact demand, as well. For example, if businesses see a 50% attendance or customer rate, they will not experience the same level of increase in demand as they would for a full house. But, even 50% full will have an impact on any business.
The world is very much in flux with challenges beyond their control and will often stay that way for quite some time. You can prepare your team and your organization for recovery and react quickly as situations evolve. By considering the points above, you can be prepared for what comes next–and thrive.
Raine Digital is here to help during these uncertain times. Schedule your free strategy session today!