Demand forecasting

examples
All types of businesses can benefit from demand
forecasting. Here are three examples of how demand
forecasting might work for an eCommerce company.
Passive/Trend Projection
A husband and wife team sells costumes, party favors, and decorations for kids. They have been in business for
more than 10 years. They have built their business to a comfortable level of revenue and profitability. While they
don’t plan to retire soon, they also don’t plan to expand.

They average the last three years of sales data and use that to project trends for the coming year. Historical data
tells them that their best months are May and October, and the worst are December and August. They use this
information to create a trend projection that tells them when they need to place their wholesale orders. This also
tells them when they need to add temporary staff at their fulfillment warehouse. They factor in a plan for a summer
promotion in the coming year that should increase sales.
Active/Market Research

A startup has developed revolutionary wireless headphones. The company initially launched through Kickstarter. The
crowdfunding platform gave them some information about customer demand. Now, however, they need to expand their
customer base. They need more customers to grow their enterprise into a sustainable eCommerce business.

The marketing team sends surveys to all customers. From the responses, they develop a profile of the company’s
current customers. The profile includes age, income, employment, and where they live. They discover that people who
commute by public transit are enthusiastic about their noise-canceling headphones.

From the survey responses, the company develops a marketing plan that includes ads on trains and buses. They bring
in econometric principles to project the impact of their marketing campaign on future sales. From data gathered on
demographics and consumer behavior, they are able to develop a demand forecast.
Short-Term/Sales Force Composite

A company sells high-end office chairs, both B2C and B2B. The sales team works primarily with B2B customers to
generate large orders for corporate offices. However, the salespeople have had a hard time closing sales for the past
quarter.

The CFO convenes the sales group to brainstorm. When the salespeople compare the feedback they have gotten, they
uncover a market trend. More people are working from home. Companies are reducing the amount of office space they
need to furnish. In addition, their corporate clients no longer view office amenities as a way to lure new hires.

The company created a short-term demand forecast with greatly reduced sales over the following six-month period. It
scaled back its production accordingly. This would give the company a period of time to revamp its marketing approach to
meet changing customer demand. In the meantime, it could use other demand forecasting techniques to develop
projections for its new markets.
Predictive Analysis (Historical Data)

Dr. Bob G. Wood, Professor of Finance at University of South Alabama sites a couple of examples of using predictive
analysis of historical data to determine demand:

1. “I’ve worked a with local HVAC/plumbing/electrical firm using predictive analysis (historical data) and customer
service experiences gleaned from company service technician’s customer interactions to estimate future service
needs. Their experience has shown that using both of these methods has provided valuable service staffing level
estimations and customer appointment time preferences.”
2. “Another client has both traditional and online retailing operations. The online presence is relatively new so we
were unable to use historical data. As an alternative, we used in-store and website customer surveys to rank
order online purchasing preferences (free shipping and free returns dominated other preferences) to estimate
online purchasing demand.”
Conclusion

Demand forecasting helps businesses make informed

decisions that affect everything from inventory planning to
supply chain optimization. With customer expectations
changing faster than ever, businesses need a method to
forecast demand accurately.