Forecasting is simultaneously one of the most important and challenging aspects of launching a new product line for your business.
When you create product and sales forecasts, you can use market information and your previous launch data to determine the potential rate of sale for your products and the amount of inventory you should keep on hand to fulfill customer demand. If you launched a similar product to a similar audience in the past 12-18 months, you can expect the results of your new product launch to mimic your previous launch or launches. If your market has changed in the last 12 months, you can use market data to determine what changes might have disrupted your industry or market since your last launch. If your new products are in line with the shifts in the market and customer preferences, you can expect similar results to your previous product launches.
With a completely new product line, it can be more difficult to forecast potential sales and revenue, which also makes it difficult to forecast the appropriate inventory levels you should hold. Too little inventory on hand results in lost sales and disappointed customers. Too much inventory costs money and takes up valuable space in your facilities. Both have opportunity costs. If you are offering a brand new product line, look for something in your line that you launched to a similar audience or an audience of the same size in the past. Audience indicators are some of the best predictors of success and there is data available to any brand that does email and social media marketing within those tools. If your emails have an open rate of 65% with the same basic audience and you expect a slightly higher conversion rate on your latest launch, you can calculate that potential result using data you already have. If you expect to pay a lower cost per acquisition (CPA) for ads by 10%, you can forecast your potential ads revenue with a bit of calculation. Consider each aspect of your product launch calendar and the expectations for each channel where your brand participates. Add the totals together to forecast your expected total sales from the bottom up.
Once you have a basic formula for your rate of sale, you can determine the right amount of inventory to keep on hand. Use the rate of sale and the rate of time it will take to replenish your inventory as you run out. Each brand has a unique minimum inventory threshold and you will need to set this threshold for your brand. You can use this information, combined with the rate of sale and rate of replenishment to determine how many units of each SKU you will want on hand on the first day of your product launch.
When you create a launch plan for your products, take the time to forecast or a successful launch.
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