Marketing
Demand forecasting
Demand forecasting is an area of predictive analytics that seeks to estimate the quantity of a product or service your consumers are likely to buy.
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Demand forecasting vs The HOOF approach to demand forecasting
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Strategy
The HOOF approach to demand forecasting
Market size is all very well, but what often matters more in strategy development is what the market is doing, where it is going – the dynamics, as opposed to the statics.
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Use this when.
How many units of each product may sell in the coming months?
Use the process whenever a decision depends on future market demand.
Extracted signals
Strengths, limits, and pitfalls.
Demand forecasting
- Measure forecast error by product, location and horizon, then investigate bias separately from random variation. Clean, timely data are essential, but a disciplined feedback loop—forecast, observe, diagnose and update—is what improves planning over time.
- Past sales are only one signal. Search activity, product discussions, reviews, social text, price, distribution and test market results may improve the estimate, especially for changing or new categories. Google Trends can reveal shifts in attention, but attention is not identical to purchase demand and must be validated against actual outcomes.
Watch for
- Do not mistake sales for unconstrained demand. A promotion can create a temporary spike, while a stock out can hide purchases customers wanted to make. Record price, promotion, availability, weather and seasonal effects so that one off or constrained observations are not projected as the normal future.
The HOOF approach to demand forecasting
- Apply all four HOOF stages to every major segment and make the contribution of each demand driver explicit.
- Apply the stages separately to each important segment and keep real volume growth distinct from nominal revenue growth.
- Assemble a recent demand series from market research or a carefully constructed estimate. Do not anchor on the latest observation. A market that rose 8 per cent last year may not have an 8 per cent trend: it might have fallen two years ago, remained flat and then rebounded by 8 per cent, leaving average annual growth near 2 per cent.
Watch for
- Do not exclude a material driver simply because hard data are unavailable; document the qualitative evidence, uncertainty and judgement instead.
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