Tips for Forecasting New Product Demand

Few things are more exciting than bringing new product lines into your inventory—it keeps your catalog fresh and is an important part of attracting customers for repeat purchases. That said, consumer demand can be difficult to predict, making launching new and untested products into the market a risky proposition.

Getting your demand forecasting right can mean the difference between a wildly successful product introduction and overstocked shelves gathering dust. Accurately predicting how much inventory to stock for a new item hitting the market is critical for maximizing sales, avoiding stockouts that disappoint customers, and preventing profit-eroding oversupply.

However, short of consulting a crystal ball, it can be a mystery to try to figure out how customers will react to new products or know how much to order without any prior sales history. You can’t simply rely on past sales figures or apply typical forecasting methods used for existing product lines. To set your new product up for success, a more comprehensive, multi-faceted forecasting approach is required.

In this guide, we’ll cover proven strategies and best practices for effectively forecasting demand prior to launching a new product. From scrutinizing previous new product introductions to conducting in-depth market research, analyzing economic and industry trends, and looking at brand, category, and option set trends—we’ll walk through techniques you can use to arrive at accurate new product demand forecasts.

1. Look at previous new product launches

Since your own previous sales figures are the most readily available data, consider what you have done regarding new product launches in the past. In general, have your previous new products sold quickly upon release – or does it take your customers weeks or months to warm up to a new product? Examine the month-over-month increase for previously launched products and use that as a guidelines, assuming similar launch resources are being invested into this new product.

Here’s a hypothetical example: you sell clothing, and previous product launches with sundresses, maxi skirts, and swimsuit coverups saw strong sales in the first six weeks; then a drop-off during the following months.

Applying that same pattern to your new product line of of beach-ready summer dresses,  it’s fair to estimate there will be a drop in sales after six weeks.

2. Look at trends within the same category or brand as your new products

It’s likely you have products with similar attributes to your new line, such as same category, collection, brand or vendor. Take a look at how those items are selling to offer some insight into your new launch.

For example, Cora’s Candles show solid sales across all available scents. When considering Gingerbread as a new scent release, we can look at the sales velocity of other festive flavors, such as Christmas Tree and Spiced Cider, to approximate future sales for the Gingerbread candle.

Looking at other scents at Cora’s Candles, there’s a pattern of a strong sales increase  in the second and third months after launch. Seeing this pattern in several other launched scents can offer some solid guidance into how the new Gingerbread candle might perform.

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3. Assess the history of option sets

Option sets refer to different colors, sizes or flavors of the same item. For example, when assessing t-shirt sales, you could look at the historical sales of different sizes (small, medium, large, etc.).  How much of each size you usually sell can guide your initial order of a new t-shirt. If you sell 25% size small, 50% medium, and 25% large, use this same distribution when determining size proportions of the new style.

4. Merge the sales history of similar products

Merging sales history is a great option for when you have an old product being phased out to be replaced by a new product that is very similar.

A good workaround here is to link the sales history of the old product to the new product – so that even though you don’t have any sales history available, you still have a good idea of how it might sell.

An example: a food item that usually sells in a 2 oz. size is being replaced with one of a 2.1 oz. size. Here is a good opportunity to merge  sales history so you can see how the 2.1 oz. will perform based on how the 2 oz. one sold. The change in size is not significant enough that we would expect a change in the rate of sales.

Watch the short video to see how Inventory Planner helps you easily forecast demand for a new product.

5. Conduct Market Research

Conducting comprehensive market research can help you accurately forecast demand when launching a new product. Retailers can deploy a variety of tactics to gather insights from their target customers. Consumer surveys and focus groups allow you to quantify interest levels and preferences when it comes to new items in your catalog.

Social media listening also provides a valuable voice-of-the-customer perspective by revealing organic conversations, buzz, and sentiment around the new product category and potential competitors. By leveraging multiple market research methods—from surveys and focus groups to data mining and social analysis—retailers can gain a 360-degree view into consumer needs, the competitive landscape, potential demand drivers, and pricing sensitivities.