In the last years, the range of products in a company assortment has been increasing, led by niche targeted launchings, R&D investments, and label positioning. At the same time, companies are investing in customization, which allows the consumer or the retailer to demand the same product with specific features, such as packaging and branding, or even unique product specifications.
Disruptive products and marketing strategies are penetrating previously stable segments across several industries. However, forecasting the impact of new products is a challenging task.
Most efforts are based on previous product launches and fail by not considering the correct variables for correct extrapolation or by using wrong assumptions from the start.
A common mistake is to feed outdated forecasting models with new data, which will surely not be reliable for long when predicting dynamic consumer behavior.
Furthermore, while new product development efforts are often concentrated on estimating sales potential, the impact of new product introduction in supply and sales operations must not be neglected. Understanding synergies and disruptions in the current operations are of utmost importance to ensure profitable introductions.
To fuel efficient data-driven innovation processes, estimating the potential impact of new products is critical for strategic decisions.
Here is our three-step approach:
Gathering data on new and disruptive products is demanding. While many companies already regularly collect survey data, have frequent consumer tracking research, and rely on some form of analytical sales forecasting, only the most advanced are combining all these methods efficiently to truly compile accurate forecasts across multiple product launching scenarios.
Start by modeling the previous impact of each feature in product sales behavior and by gathering external information regarding competitors’ prices, product features, and overall performance is a much-needed first step towards understanding the potential consumer product impact.
Model the effects of a new product introduction by understanding category penetration and sales cannibalization of existing items.
Advanced analytical planning methods excel by incorporating these detailed forecasts with managerial expertise to provide the most accurate data-driven insights while simultaneously accounting for strategic business considerations.
Once you have an accurate forecast of the new product, estimate which additional costs or savings it will have in your operations and plan for full product lifecycle management.
Based on the validated forecast, the estimation of the workload allows for a calculation of the necessary effort and impact across different functional areas. The workload calculation can be driven by mathematical parameters so that the entire company works with a standard set of assumptions and knows what is expected.
Do not forget that sales & operations plans should also be validated by commercial and marketing teams.
Properly planned operations contribute to increasing service levels to clients while maintaining inventory levels and thus managing cash flow efficiently, which can lead to sustainable long-term competitive advantages.
In the end, combining business expertise with concrete data will lead you to more accurate and holistic sales and investment forecasts. This allows companies to correctly evaluate which products are worthwhile investments, thus providing a larger chance of product launch success and also saving capital and resources throughout the planning process.
By: Ana Coelho , André Morim
