New Product Forecasting: 8 Steps to Success
New product forecasting can feel like rolling some dice and picking whatever numbers they land on. After all, how do you accurately predict sales of something you’ve never sold?
It’s possible to accurately predict demand for new products as long as you use the right methods and inventory planning software. A new product launch takes time, care and consideration so don’t let poor new product forecasting hurt your bottom line.
In this article, you’ll discover what new product forecasting is, why it’s important, the steps to make it a success and how the right inventory planning software can help to improve its accuracy.
Forecast demand, issue and track POs, re-order on autopilot, and step up your reporting game across multiple channels and locations. Get in touch to see how Singuli can help you optimize your inventory.
Table of Contents
- What is New Product Forecasting?
- The Importance of New Product Forecasting
- 8 Steps to Successfully Forecast New Products
- Use Inventory Planning Software to Improve New Product Forecasting Accuracy
- Get Comfortable With New Product Forecasting
What is New Product Forecasting?
New product forecasting is a sales volume prediction for a new product over a specific period of time. Modern inventory forecasting software uses machine learning and sophisticated algorithms to understand trends, seasonality, size curves and anything else that could affect the accuracy of a new product forecast.
The Importance of New Product Forecasting
Buying the right amount of inventory at the right time to match the needs of your customers is as important for new products as it is for replenishing current stock. New product forecasting can help you:
If you don’t have enough stock to meet demand, you could lose sales and possibly lose customers for life.
Stockouts are a burden for suppliers, too. They forecast just like you do and if they have to rush an order to meet your needs, it causes difficulties with their inventory management. Your suppliers may increase their prices for rush orders or prioritize better organized customers in the future.
If you have too much stock, you run the risk of tying up cash in inventory versus having the funds to spend on sales and marketing to increase sales. You’ll also incur higher costs of inventory such as holding costs and you’ll take up space for other products that could be earning you revenue. Accurate product forecasting puts a stop to this but there are challenges because you don’t have historical data.
Forecast New Product Demand Without Historical Sales Data
Even with existing products, you need to take geography, demographics, seasonality, trends, competition and many other factors into account but at least you have historical sales. New products have no history to base forecasts on, so what do you do?
This is where the best inventory planning software does its magic. It can use data from similar products and product attributes, combined with information on marketing campaigns, trends and more to improve new product forecasting. Even difficult to measure data like brand cannibalization, where the launch of one product affects the sales of others are taken into consideration.
📌Get Started: With Singuli’s Advanced Forecasts, it’s easy to analyze historical data, market trends and customer inputs, which saves you or your inventory planner time and increases forecast accuracy.
With that in mind, let’s look at 8 steps to successfully forecast new products:
8 Steps to Successfully Forecast New Products
Follow these steps to increase your chances of successfully forecasting new products:
1. Analyze Supply Chain Possibilities
You don’t want to make promises you can’t keep so it’s important to make sure you can fulfill customer expectations. In order to do this, strong supplier relationships are important.
Check capacity and flexibility on the supplier side and have back-up suppliers ready just in case one is experiencing delays. Make sure everyone’s on the same page with lead times, raw materials needed and if you have special package requirements, give your suppliers thorough instructions.
When you find reliable suppliers, use inventory planning software to automate shipnotice creation, keep track of landed costs and get a visual timeline of your whole supply chain.
📌Get Started: Stay on top of what’s happening when, how and why in your supply chain — track shipments and landed costs, sync freight forwarding details and automatically log all PO updates with Singuli’s Purchase Orders & Shipments.
2. Choose the Right Inventory Forecasting Method
Your business has unique needs and data to work with so it’s important to choose the right inventory forecasting method. Assess qualitative data, like one-to-one interviews or focus groups, create models based on quantitative data like historical purchases and evaluate trends to plan for seasonal spikes and dips.
You’ll likely need to combine two or more methods to get the most accurate forecasts. Improving accuracy depends on the data you input and the software you use. For example, you’ll get better results if you can measure size curves, plan for performance marketing and see multiple versions of the future with different assumptions.
💡Pro Tip: Use Singuli’s location-level forecasts and replenishment alerts to optimize your inventory. If you have a mixture of retail and e-commerce channels, Singuli bases your forecasts on distinct models to reflect the variations in inventory patterns.
3. Review Previous New Product Launches
Your previous new product launches provide accurate data on what went well and what went badly in the past. With this information, you’ll have insight into how quickly you sold new products in the past, whether sales were steady or fluctuated over time and the level of resources you put into marketing and sales. Some of this will change for your new product launch but previous launches offer a good baseline.
4. Compare Trends in the Same Category as Your New Products
Use sales data from similar products in the same category, collection or from the same brand/vendor to gain insight into possible outcomes for your new product launch. This isn’t a foolproof technique as there are always variables but it’s useful as a guide.
5. Asses Historical SKUs in Detail
A particular product may be from the same category, collection, brand or vendor as another one, but it could also have a wide selection of attributes within each SKU (stock keeping unit) that make it different. Take size as an example.
You could base your new product forecast on a previous top selling t-shirt in the same collection. You could order enough new t-shirts to meet demand and you might feel like your inventory planning is going well. The problem is you manage to sell all of the small and large size t-shirts but less than half of the large. That’s because you didn’t take size curves into consideration.
To make accurate forecasts, think about all the attributes of your new product — size, color, style, etc. Compare the promotional and marketing efforts that went into selling historical SKUs and how it affects your attribute analysis.
💡Pro Tip: Get a holistic view of your inventory data with Singuli’s Reporting & Analytics. Track not only inventory data, but also marketing, promotions, site traffic, historical sales and customer behavior. You’ll have all of your information in one place, ready to use in inventory forecasting and planning.
6. Merge the Historical Data of Similar Products
When you’re phasing out an old product and replacing it with something very similar, you can often use historical data of the product you’re replacing to forecast your new product.
Take sneakers as an example. Every year, you sell an almost identical pair. The only attributes that change are the colors. Looking at the last pair you sold will give you a good basis for the new one.
7. Forecast Initial Sales Volume
Once you’ve gone through the previous steps, you can forecast your sales volume for the initial sales period and base your inventory planning on the results. Consider historical sales data from similar products, break it down into attributes, analyze the marketing and promotional campaigns behind it and look at trends and seasonality.
This information will put you in a good place for an accurate new product forecast as long as it’s analyzed properly and all variables are considered. The right software will do much of it for you.
📌Get Started: Forecast accurate initial order recommendations with Singuli’s New Product Forecasts. Use your past product sales and product attributes for greater accuracy.
8. Use Early Sales and Customer Feedback to Improve Future Forecasts
Once you’ve made some sales and have some qualitative data, reassess your forecasts. See if your sales are aligning to your original forecast. Input your new data and make tweaks based on real life changes. With the right inventory planning software, you can automate much of the data input process.
💡Pro Tip: Use Singuli to automate your inventory planning. Automatically sync your expected receipts with the warehouse, keep track of your landed costs and share ETA dates with your freight forwarder with Purchase Orders & Shipments.
Use Inventory Planning Software to Improve New Product Forecasting Accuracy
New product forecasting can feel like a lot of work, especially if you do it manually, but you can save a lot of time and resources by using the right inventory planning software.
Look for a tool that helps you communicate with suppliers. Use it to combine inventory forecasting methods and look at previous product launches. Make sure it accounts for trends, historical SKUs and size curves and automates any repetitive tasks. With the right software, you can create more accurate new product forecasts in less time.
💡Pro Tip: Use your past sales and product attributes to recommend accurate initial inventory orders with Singuli’s New Product Forecasts.
Get Comfortable With New Product Forecasting
Now that you know what new product forecasting is, why it’s important, how to get it right and the importance of using the best inventory planning software, you’re ready to start your new product forecast.
Forecast demand, issue and track POs, reorder on autopilot, and step up your reporting game across multiple channels and locations. Get in touch to see how Singuli can help you optimize your inventory.