5.5 Forecasting Demand

Forecasting demand means estimating how many people will want to buy your product or service. It’s a key planning step: you need to know how much to produce, stock, or invest. In simple terms, “demand forecasting is the process of predicting what customers’ appetite will be for existing products or services”. Businesses use different methods: market research (surveys and focus groups), analyzing trends, and looking at similar products. For a new product with no sales history, you might survey potential customers or test an MVP (Minimum Viable Product). For established products, you can look at past sales data and growth rates.

For example, big tech companies use pre-orders to gauge demand. An article on EE Times notes that Apple relies on iPhone pre-orders to predict sales of a new model. Customers choose the model and color in advance, and this real data helps Apple adjust production levels before the product ships. Even small companies can forecast: for instance, a startup might take pre-orders for a gadget or use crowdfunding numbers to estimate interest. The key idea is to gather any available data (surveys, pre-sales, web traffic interest) and use it to predict future sales. Good forecasts help you avoid having too much or too little inventory: too many unsold units waste money, while too few units means lost sales and unhappy customers.