Methods of Demand Forecasting for a New Product

The demand forecasting is the scientific tool to predict the likely demand of a product in the future. It is the starting point of fulfilling a customer order and based on the forecasted demand, a firm commits its resources, capacities and capabilities for a period of time to create goods and services that its customers value and are willing to pay for. Hence, According to American Marketing Association, “Demand forecasting is an estimate of sales in dollars or physical units for a specified future period under a proposed marketing plan.” The demand of new product can be forecasted by anyone of the following techniques:

Substitute Approach

It is based on the assumption that a new product will be analyzed as a substitute of an existing product. In this method, the demand of substitute product is analyzed and on the basis of such analysis (or survey) forecasts are made for the new product to be introduced in the market.

Evolutionary Approach

This method of sales forecasting is based on the assumption that the new product will be considered an improvement over existing products. It is further assumed that the new product can follow some life-cycles as of existing products. The sales of existing product are analyzed and efforts are made to forecast the sales of the new product of the enterprise on this basis.

Buyers or consumers view

In this method, the potential buyers of the product are contacted and efforts are made to know their opinions regarding new product. Efforts are also made to guess the quantity to be purchased by these consumers. Sales forecasts of the new product are based on these opinions and estimates.

Vicarious approach (or Experts’ opinion)

This approach of sales forecasting of new product is based on the opinion of experts in the field of marketing, who know the needs, desires, tastes and preferences of customers. Experts are contacted and their opinions are collected regarding the utilities and possible demand of the product. Sales forecasts are prepared on the basis of opinion of these experts.

Sales experience approach (or Market test method)

In this method, the new product is offered for sale in a sample market for a fixed period. The results of the sales of the product are considered to be the base of forecasting the demand for the new product. The results of sales of the product in these segments are collected and deeply analyzed.


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