Four Steps To Create Stronger Sales Projections
When you're launching a new product, the number of variables involved makes it difficult to accurately predict the inventory you need. One unforeseen twist and you could sell out within hours. That's why it's a good idea to use any potential historical data to guide you. If that's not available, you can use a combination of educated guesswork and market research.
Heidi Zak, co-founder and co-CEO of ThirdLove, says you can't expect to make a perfect prediction, but you can still find a sweet spot. We discuss Zak's strategies for creating stronger sales projections in this issue of Promotional Consultant Today.
1. Set a target sales volume. How you estimate your sales volume depends on the data you have at your disposal. If you're without data, Zak suggests finding research on market figures and trends in your space. Many companies specialize in collecting data on certain product categories and industries. Just remember that you'll also need to combine the research with your customer demographics data to fully understand how your product may fare within the market.
2. Choose a route for your expectations. Zak says you can approach your sales expectations in one of two ways: underestimate or overestimate. If you opt for the conservative approach, you'll purchase the minimum amount of inventory for your product launch. This saves you money on inventory that you can use in other areas of your business. You also don't take on the risk of having excessive quantities of inventory. If you choose to order more inventory than you predict needing, you can sell more and make more money before you have to put in another order.
3. Don't overreact once the product launches. See how the first few weeks go and remember that the patterns your product develops early on won't hold true forever. If you see that sales aren't going according to plan, don't take any drastic measures right away. Zak says you may also need to do customer research about your marketing messages and ensure they're clear and resonate with your audience. If your offering isn't selling as well as you had projected, consider how you could better communicate its value. Avoid making any major inventory decisions until a few months have passed and your sales have settled into a regular cadence.
4. Constantly analyze and adjust your expectations. Zak says her planning and inventory team is constantly analyzing and adjusting their outlook as the data filters in. It's a never-ending process. If you're not adjusting to the data as it rolls in, you'll have a difficult time with your projections. You may end up over-ordering and missing an opportunity to invest that money somewhere else. Or you'll regularly under-order and your customers may feel as though they're receiving a poor experience.
While there's no magic formula for creating a smart sales projection, there are some ways you can use the data you have to make realistic expectations. Use Zak's tips above to put yourself in the best position for hitting your next sales target.
Source: Heidi Zak is the co-founder and co-CEO of ThirdLove and has been named among Fortune's 40 Under 40. Prior to launching ThirdLove, Zak was at Google, Aeropostale, McKinsey and Bank of America.