There is nothing more exciting than launching a new line of products in your inventory. It keeps your portfolio fresh and is essential to attracting customers for repeat sales. But we have been noticing that customer demand is not stable in the last couple of years. In situations like these, you might want to consider effective demand planning software to test out how your new product will perform when it gets launched.
It seems like a mystery to determine how customers will react to new products or understand how much to order without any previous sales history. But with effective KPIs and complete visibility, you can access end-to-end transparency to your supply chain and make better decisions. This article will emphasize 10 crucial steps to evaluate the future demand for new products.
Take a collaborative approach
While creating a forecasting strategy for a new product launch, make sure that you pick selected, proactive people from the marketing, sales, and technical departments to deliver enriched information for a successful launch strategy. This core team will mainly focus on providing a comprehensive roadmap to launch the new line of products in the market and evaluate the demand planning and forecasting strategy.
Give weight to assumptions
Collectively understand the resources you get from market research, potential future customers, buyer surveys, and marketing. While evaluating future demand for new products, consider giving weight to assumptions such as:
- Number of target customers
- Potential buyers who can purchase a sizable number of products
- The ideal time of purchase
- The pattern of repeat sales and replacement orders
Apply a granular model
Not all customers will go for a new product at the same time. Some might stand in line for hours to buy the product, and some might wait till the product is widely available. So, it is important to develop an adequately granular demand planning process to reflect how and when various market segments in different regions might buy the product and at which price.
Employ flexible periods
The first few days and weeks in the life of any newly launched product are crucial. To ensure accurate future forecasts, every movement must be monitored. Sales and finance might only be interested in the monthly data, but every little movement is vital for your business when it comes to demand planning and forecasting.
Create multiple forecasts
Go through several repetitions, changing various probabilities and assumptions in the model to develop a range of forecasts. This can be easily done with efficient demand management software that can analyze data in real-time, like an internal expert, and business leaders can generate and test alternate scenarios as they go.
Deliver a quickly responsive output model
While launching a new product line, you may have anticipated an effective product replenishment strategy. However, when you do it on a larger scale, it isn’t easy to understand which product needs to be at which place at which time. Demand planning software efficiently forecasts these details and quickly delivers comprehensive reporting for product replenishment within an accurate period.
Leverage various techniques
The bottom-up approach based on buying intention is not the only method used in the demand planning process for new products. Narrow windows of opportunity make it vital to consider demand as accurately as possible. The most problematic situation is having a stock shortage while the product is still new, resulting in disappointment and lowered customer satisfaction, in addition to lost sales.
Sophisticated modeling techniques backed by state-of-the-art technology that utilizes substitution and diffusion rates to predict the exact future demand are crucial. That is why combining various techniques while evaluating forecasts is paramount.
Give your forecasting the much-needed reality check
Whenever historical data exists, consider using demand forecasting software to check future demand against the sales journey of comparable products to see if the projection is realistic. Furthermore, it’s wise to evaluate how your market share might differ as new competitors come into this emerging category, and how the overall market might increase or otherwise change.
Reforecast for more clarity
Once your new product line is launched, actively monitor sales and qualitative feedback such as customer feedback, media mentions, and product reviews. This process gives you a more rounded understanding of how your product is performing in the market. As a core entity of the new product working group, understand how the model’s assumptions might need some reconsideration according to customer demand. If possible, forecast regularly with demand planning tools.
Be ready to slash your losses
Last but not least, always consider having a contingency plan. An excessive amount of product failure is not good for any business. It is better to pull the plug on a new product that is not performing well and will most likely eat up your profits in the long run. With effective demand planning solutions, always quantify and agree on which new product will perform poorly before it is launched. This way, the strategic decisions will be swift, and the current stocks can be depleted quickly and efficiently.