Forecasting Demand: How to Know When Your Category Is Coming Back

By Greg Silverman, Sep 21, 2020

Demand drives business decisions. However, the traditional approach to demand planning lacks knowledge of the consumer state to accurately predict sales - especially in times of uncertainty. We have already discussed at length how planning has evolved to forecasting to help businesses determine how their actions and other environmental factors influence demand, but what if consumers are simply not purchasing from their product categories?

As we know by now, in uncertain times demand is not a given as it is when market conditions are stable. While many industries are grappling with a contracting customer base, some are facing a new challenge as well: little to no demand. In this circumstance, businesses don’t only need to know how to increase demand, they need to know when their category is coming back. 

Ultimately, the market is not going to rebound back to normal after a globally significant emotional event, so businesses must be poised to adapt their strategies to meet consumer conditions to safely welcome them back to make a purchase. 

What drives consumers to buy?

Every consumer has a unique blend of criteria that businesses must meet before that shopper purchases their product over an alternative. These are called consumer drivers, and understanding them is the first step for businesses to reestablish their category. HubSpot outlined three broad categories of factors that go into what drives a consumer to make a purchase: 

1. Psychological: What is their need state? This also includes their current attitude and perception of a business’s brand as well as their awareness of alternatives in the market. Targeted marketing campaigns typically help businesses improve their brand consideration with their target audience.

2. Personal: In a broad sense, this encompasses the demographics of your buyer. On a deeper level, it also takes into account their cultural and financial background, all of which contribute to their final decisions based on their purchase drivers.

3. Social: Consumers are heavily influenced by their social networks. Whether it be seeking the opinions of their friends and family or reading anonymous reviews online, consumers also rely on others to help them with their decision making. 

When businesses understand these influences, they are better able to market to suit them. However, unexpected events drastically shift what consumers deem important. For instance, travel and hospitality have faced a sharp decline in customers due to social distancing recommendations and consumers avoiding these shared spaces. Now, buyers' top priorities when purchasing a vacation are to be safe and remain healthy. The Washington Post highlighted how amusement parks are limiting guests and using virtual lines and airlines are requiring flyers wear masks to meet these needs for the near future.

It’s not practical for businesses to look at how their categories returned in prior periods of unrest (like the 2008 market crash) because the circumstances and subsequent consumer drivers are entirely different. Understanding how consumer drivers change in the face of COVID-19 is the first step in determining which actions your business must undertake for your category to come back.

How to approach “do nothing” behavior

Understanding consumer drivers is also important for combating “do nothing” behavior that is common even after an unexpected shock to the system has settled down. Consider this: Healthline estimates that it takes 21 days to break a habit. In the nearly three months consumers have been working from home and businesses have been closed, their shopping habits have been broken. Their routines of buying a morning coffee on the way to work, eating out for lunch and going out for drinks on a Friday night have all been disrupted, and consumers may not return to these patterns post-COVID.

Too often, demand planning relies on the fact that consumers will make a purchase in the end. But what about these scenarios when consumer habits have been broken and they consciously choose to do nothing? This alternative has never been included in traditional demand planning before, but it is considered in forecasting models. 

Demand forecasting at its finest 

In times of uncertainty, demand forecasting is essential not only for gaining share in a contracting market, but also to help businesses identify when their category is coming back. This agile approach to modeling takes into account current market conditions and consumer behavior to provide businesses with a strategic plan to welcome customers back, even if they are currently not making purchases.

Demand forecasting of this caliber starts by considering the alternatives to buying - in this case, not making a purchase. Models are also able to capture complex alternatives, like eCommerce channels, to give businesses insight into how many sales are achieved through each channel. This helps them determine where to spend their marketing dollars for the best results. Identifying consumers who aren’t purchasing also gives organizations the opportunity to determine the new size of their market and what attributes these customers hold.

Speaking of attributes, forecasting models typically identify four: personal risk, societal risk, price and need. These factors represent the general perceptions consumers have toward the current state of uncertainty and affect their ultimate purchasing decisions. A straightforward way to understand these attributes is by conducting surveys and internal market research.

While businesses often follow in the footsteps of competitors, forecasting (made possible with this insight into the consumer) allows them to be the first mover in the industry. In times of uncertainty, this is the difference between surviving within your category or never coming back. This information helps organizations identify different market segments, their unique purchasing journeys and touchpoint categories (including their source, level and type). Determining how each segment receives information and interacts with a brand further helps marketers identify where and how to spend their budget.

Finally, forecasting takes into account different distribution channels. What is the availability of a product or service, and how will consumers find it? Now, more than ever, it’s important to reach consumers where they feel safe and maintain sanitation standards to help meet their drivers. Not only does this determine demand, but it also helps businesses manage their supply chains accordingly. 

With all of this information, businesses create an accurate forecasting model that will show them when their category is likely to return and how to bring customers back with it. Concentric is the platform to make this happen. With prescriptive analytics at its core, Concentric helps businesses across a variety of industries take strategic action to meet their revenue goals. Contact us today to find out more.


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