Making a Market Forecast Estimate

by Tim Berry

Relatively few marketing plans are blessed with budgets for professional market research. When you can’t pass the problem to professionals, then you have to make some intelligent estimates. Get comfortable with the idea of making good educated guesses. Many people think there is something magic about this, some technique they don’t know that the experts learned in universities. Don’t worry about it. Having gone through business school and worked in a senior position in a marketing research firm, I can reassure you: sophisticated data analysis rarely works very well for business forecasts. No matter how elaborate the forecasting model, mathematical forecasts are based on past results. Nobody knows the future.

In most situations, the best way to create a market forecast estimate is to find an expert forecast, estimate from past data, find parallel data or apply a model.

Finding an expert forecast
If you can find an expert forecast already published, or if you have a budget to pay for an expert forecast, that’s a luxury. This probably means you don’t have to do your own.

Many expert forecasts are published where you can obtain their results for free. Some of these are government forecasts intended to be free, some are expert forecasts made during interviews or news media coverage, and some are professional forecasts whose highlights are released to the media as teasers to sell the more expensive research.

You can look for these forecasts in published news reports, on the Internet, in library reference materials, and in trade association publications. Where yours might be found depends on your industry and the exact nature of your business. Unfortunately, nobody but you can pinpoint exactly where to look for your industry and your plan, but at least you can consider some examples.

If, for example, you are working on a marketing plan involving soft drinks you could go to the national soft drink association’s publication Beverage World for a detailed five-year forecast of soft drink consumption.

Several major business magazines publish economic forecasts regularly. You could go into a reference library and use the Reader’s Guide to Periodic Literature to find published data related to your data needs. Business Week magazine has a weekly column on business outlooks, and quarterly surveys of industry outlooks.

Estimating from past data
Although the past doesn’t really predict the future, it can indicate trends. Sometimes you can find past data on a market and use that to project into the future.The principle of using past data as a guideline for the future is one of the fundamentals of forecasting.

It’s particularly important for market forecasting, however, because you’ll frequently find ample data about your market’s recent past even when you can’t find a market forecast. Using the past data will get you a good starting point and a sense of reasonableness for your forecast.