What Is a Marketing Forecast?
Updated June 24, 2022
If you need to estimate the amount of revenue that your company will make in the future, one way of accomplishing this is to create a marketing forecast. This type of analysis allows you to use data to make educated guesses about numbers you expect in the future based upon market research. Learning about different methods for completing marketing forecasts can help you determine the approach you want to take.
In this article, we discuss what a marketing forecast is, why it's important, the components of a marketing forecast and how you can use one yourself.
What is a marketing forecast?
A marketing forecast is an analysis that projects the future trends, characteristics and numbers in your target market. It provides anticipated numbers that a company expects based upon market research.
Marketing forecasts help you understand how many leads your company will generate within a specific period of time and how the leads will move through the different stages of your lead nurturing process before they are ready to make a purchase. It helps you understand which marketing channels will generate the most leads and how sales likely will perform. By understanding how many prospective customers are in each stage of the revenue cycle and how they move through each stage, you can estimate how many new opportunities and customers you will generate in the future.
Marketing forecasting gives markets the ability to explore the long-term impact of their efforts. For example, they may anticipate that if they perform a specific marketing activity, they can expect a particular number of leads within a certain amount of time and a specific amount of revenue that will result from those leads.
Why is forecasting important?
Businesses need to create marketing plans to determine their strategic directions. A marketing forecast is at the core of the marketing plan since it predicts the results and revenue the business will achieve.
Related: Guide To Business Forecasts
Components of a marketing forecast
There are a few components that markets require to produce accurate forecasts, including:
The first component marketers need is good data. If the data they're using varies significantly, then the forecasting methods won't produce accurate results. If the different channels they're using have errors, the forecasts will ultimately be inaccurate and markers may miss their goals. By starting with accurate data, marketers can minimize forecasting errors and use more advanced forecasting methods.
Market size is another component of a marketing forecast. The market size refers to the number of people in a particular market segment who are potential buyers. Companies need to examine market size to accurately complete a marketing forecast.
A marketing analysis should allow you to develop a strategic focus within the market. This is also referred to as segmentation and positioning. As you choose the market segments that are best for your product or service, consider your own strengths and weaknesses, the competitive advantage that your company has and the inherent differences between the market segments.
Processes for completing a marketing forecast
A marketing forecast is ultimately an educated guess about what could happen based on an elaborate process. However, there are several different processes you could use to complete your marketing forecast:
This is essentially when company executives make educated guesses based on their knowledge of the company, market, sales and other factors. It is often a starting point for many marketing forecasts. That said, executive opinions should always be supported by research and qualitative techniques.
Customer or channel surveys
Using this approach, companies employ research organizations that can survey potential customers about how much they likely would spend on specific types of products within a set period of time. Those companies then use the answers to make marketing forecasts. Companies also sometimes conduct their own surveys to create marketing forecasts. The downside is that while surveys are effective at determining market potential, they are less so at determining sales potential, as the potential consumer could buy products from competitors.
Sales force composite
Another method of completing a marketing forecast is to gather information from a company's sales force. Sales representatives often have a strong intuition about how much product they can sell within a specific amount of time, although this typically only works well with existing products. This method of forecasting isn't well-suited for new products.
This method of forecasting is similar to using executive opinions. The primary difference between the two is that you rely on the opinions of experts from outside the company. These opinions should always be supported by qualitative methods and research.
A correlational analysis is a sophisticated method of completing a marketing forecast. Using this method, you base your sales forecasts on the patterns of other related variables.
Time series techniques
These techniques are useful for observing patterns in sales. Trend analysis, for example, allows you to measure the increase in sales over time and apply it to the future to predict company growth. If your company saw an increase in sales of 3% in the past year, as an example, it's reasonable to assume that the 3% increase will continue in the future.
Using this method, a company bases its forecasts on the past responses of customers to specific marketing techniques. Using this information, the company can make educated guesses about how customers will respond to changes in pricing or different offers.
How to use a marketing forecast
While the specific steps that a company uses to create an accurate marketing forecast can be quite sophisticated, the basic methodology is simple in concept. Here are the basic steps companies need to take to complete a marketing forecast:
Identify the stages of your revenue cycle
Determine the types of leads that you want to track
Measure how the different types of leads move through the different stages of the revenue cycle
Use accurate data to determine how many new leads will go into the system within a set amount of time
Model the flow of new and current leads
Review your results and finalize your marketing forecast
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