How to forecast demand for new products?

How to forecast demand for new products?

Demand forecasting for the new products requires special skill and techniques as they are new products and no previous data will be available about their sales.

How to forecast demand for new products

How to forecast demand for new products

The method or techniques should be carefully tailored for the product. makes six possible approaches towards forecasting of new products. They are as follows:

1. The Evolutionary approach in forecasting demand

The principle behind this approach is that the demand for a new product is only an outgrowth and evolution of the existing product. It means that the demand conditions of the existing product should be taken into account while accessing the demand for the product.

Examples: Color TV sets from black and white TV sets; Left-side steering cars from right-side steering cars, etc. But this approach is useful only when the new product is very close to the old existing product.

2. Substitute approach in forecasting demand

By this the new product is analyzed as a substitute for the old existing product or service.

3. Growth curve approach in forecasting demand

The estimates of rate of growth and ultimate level of demand for the new product will be established on the basis of some growth patterns of an already established product.

For example, the average sales of Talcum powder will give an idea as to how a new cosmetic will be received in the market.

4. Opinion Poll approach in forecasting demand

Under this, the demand for the new product will be estimated by making direct enquiries from the ultimate consumers. This is done by sample survey method. But, this is a very complicated process as there will be problems of sampling, probing the real intentions of the consumers, etc..

5. Sales Experience approach in forecasting demand

According to Sales experience approach method, samples of new products shall be offered in a sample market to forecast demand. This is done through distributive channels like departmental stores or cooperative society, etc., or by direct mailing. Total demand is predicted on the basis of the sample market. But, the difficulty in this lies in determining the allowance to make for the immaturity of the sample market and full-fledged market.

6. Vicarious approach in forecasting demand

Through vicarious approach method, the reaction of the customer towards new product can be found out indirectly through the specialized dealers who are able to judge the needs, tastes and preferences of customers.

The dealers being the link between the producer and the ultimate consumers, will be able to know how the customers will receive the new product.

Which is the best method to forecast demand of product?

All the above methods of forecasting demand for the new product are not mutually exclusive.

According to Joel Dean,

a combination of many of them is often desirable when they can supplement each other.

When a new product is only an improvement of the old product, evolutionary approach becomes useful in forecasting the demand. The growth-curve approach has only limited application.

The vicarious approach appears to be very simple, but very difficult to implement in forecasting demand for new products in market.

Leave a Reply




Recent Posts


Related pages


types of cluster samplingwhat is the meaning of dishonouredwip inventory formulamethods of depreciation of fixed assetsstore retailing definitionsidbi bank branchesadvantages of authoritarian leadershipbombay stock exchautocratic leadership in businesscaveat emptor to caveat venditornonprobabilistic samplingdefine inpersonalrbi policiespv factor formulabenefits of mboimportance of audit documentationopen 0fficecash ledger bookhow to calculate the payback periodadvantages of non probability samplingconsumer oriented sales promotion definitionnpv irrtypes of bailmentsinventory auditor job descriptionlifting of the corporate veilfob cost definitionwhat is franchising definitionmbo managementdefine dishonourinductive & deductive methodmeaning of sole trading concerntpm check sheetaims of wtodisadvantages of centralisationdisadvantages of npvadvantage and disadvantage of bureaucracywhat are the benefits of fdiitinerant meansdisturbance handlerdefinition of acid test ratiodefine alphanumericalfeatures of sebiscm benefitswindow dressing financial statementsalphanumeric definemeaning of decentralization in managementconglomerate integration examplesdefine rbiproforma of fund flow statementexpressly declared void agreementsarr accountingdefine decentralized organizationhow to prepare sales budgetmeaning of quota samplingasset securitization definitionlimitations of elasticity of demanddirect costing and absorption costingprecies meaningadvantages of pricing strategiescreditors turnover ratio formulasalient features of mixed economymerits and demerits of secondary dataunderwrite meaningdifference between joint stock company and partnershipdistinguish between formal and informal organisationinsurable interest in fire insurancestaff turnover rate calculationvoid ab initio meaningauditing tick marks legendpetty cash accounting proceduresmeaning of paybacklimitation of managerial economicsadvantage and disadvantage of probability samplingessential of valid contract in business lawkey features of socialismunctad commoditiesbusiness process reengineering pdfstaff turnover rate calculationdefine treasury billremunerations meaning in hindicharacterstics of managerial economicsdebt equity ratio significanceskimming strategy marketing