Forecasting Customer Demand During Uncertain Times
Even the most experienced entrepreneurs have trouble forecasting demand when everything else is constant. Even without a global pandemic, recovering from an economic downturn would be enough to make anyone's head spin.
In demand forecasting, all of your data, including sales pipelines and historical data, is looked at. The purpose of this is to predict when you will see fluctuations in sales. In theory, it might seem straightforward, but in practice, it can be quite challenging to gather the relevant data. Especially now that the global economy has not yet recovered uniformly from the COVID-19 pandemic.
Demand forecasting, though it can be challenging, is a vital part of any online business, and it can have a significant impact on your bottom line. As well as this, predicting future customer demand accurately is a key aspect of inventory management. This provides a direct correlation to the expectations of customers, such as order times.
Why is demand forecasting so significant?
This is one of the main reasons why demand forecasts are so important: They help you plan, budget, and set goals for your business. Depending on factors such as seasonality, you can predict future demand based on historical sales data. Forecasting demand can help you set realistic and attainable goals at various times of the year based on your budget.
Demand forecasting achieves this goal by optimizing your inventory and turnover rate. A warehouse that is filled with too many inventory items wastes valuable resources that could be put to better use elsewhere in the business. The longer it takes to deliver your product to a customer because of a lack of inventory in your warehouse. In the end, demand forecasting helps you keep your business running smoothly and optimize your sales cycle. If you have difficulty gathering data for your demand forecasting, use inventory management software like Inventooly to ease your work and gather useful data for you in no time.
Review and establish your sales and marketing funnels
Insights into your sales and marketing funnel provide insight into potential demand at any given moment, but many companies pay little attention to their funnel. According to traditional sales funnels, there are four major stages: awareness, interest, desire, and action. Making sure each of these stages is covered in your marketing efforts is imperative. As well, your sales team accurately reports exactly where each lead is in the funnel.
Check out the five stages of a typical B2C sales funnel.
You create awareness of your brand during the awareness stage, as suggested by its name. Providing helpful information to your potential customers in this stage is the best way to introduce your product to the market. Awareness campaigns and outreach strategies are key to the awareness stage.
Your marketing efforts are likely already at the awareness stage if you are advertising at all. In order to make your company more visible, you must choose platforms to use and those organizations to partner with. PR campaigns and sponsorships of events are examples of strategies that can be employed at this stage of the sales funnel.
At the interest stage, the customer already knows your brand or offering. There has even been a suggestion that they take action, like signing up to receive your email. Your content strategy will become more and more important at this stage. What is your strategy for reaching out to interested leads? Where do you display information about your products? Who is gathering information about your products from your potential customers?
In the interest stage of the funnel, you will want to offer product information as well as social proof, such as reviews, ratings, and testimonials. You may use email marketing or social media posting or event tactics. The desire stage of the sales funnel can be reached when this happens.
The desire stage of the sales funnel occurs when a lead is already aware of the brand and service offering, and they are about to buy. Your initial focus might be to make sure that your social media response times are quick. You might even add a chat feature to your website. At this point, offering perks to your leads is also helpful. If you subscribe to emails and receive a discount for your first purchase, the balance might tilt your way in your favor. In addition, it is vital to feed your product and business leads and obtain social proof at this point. As you did at the interest stage, capitalize on your ratings and reviews.
As soon as a lead takes a specific action from your website, like making a purchase, it enters the action stage. The conclusion that further marketing is not required at this time might seem obvious, but it isn't entirely true. In this stage, buttons are called CTAs (calls to action) and are an integral part of the website. If your website does not have CTAs, how will your leads convert? The call-to-action on your website should be prominent, eye-catching, and prominently displayed. You can also use techniques like having a CTA scroll down the page, or grow larger when the customer reaches the bottom of the page.
When you examine your historical sales data, you can accurately forecast demand. Several companies were already selling their products online well before the COVID-19 pandemic, but the pandemic has accelerated that trend.
The unpredictability of the past year and a half may mean your sales data isn't the most reliable if your company recently transitioned to selling online. You can certainly rely on your historical sales data when planning forecasts if you've always been an e-commerce company.
It might have been mentioned that the pandemic accelerated the shift to e-commerce by five years, which implies two things. Thus, more people now shop online, and your competitors offer online sales as well. Due to this, the 2020 sales figures may not be as accurate as they ought to be. Taking it lightly doesn't mean that you should ignore it completely.
If you want to see how open your existing customers are to making another purchase, look at their previous purchases. Perhaps it seems awkward to ask your clients to buy another t-shirt outright, depending on your industry. There are several other ways you can approach your customers, besides simply sending an email asking when they will make another purchase.
Utilize email marketing by asking the customer when it is likely that they will be making another purchase in your post-purchase email or NPS email. Additionally, it could be incorporated into a regular email or social media survey sent out to your customers. A discount code can be added at the end of a survey if the responses aren't great.
You can also track individual customers through your analytics platform. Select a random sample of customers and note when they've made purchases. Did they usually wait two weeks to make a purchase or many months? By understanding your customers' sales cycle better, you will be able to predict when the next purchase is about to happen.
Demand forecasting can reduce inventory costs and heartache, and can be a key component of inventory planning and supply chain management. In short, it keeps you one step ahead of your competition when done right. When planning your marketing strategy, it's important to keep forecasting in mind regardless of the method you use.
If you are in the middle of a crisis and have no idea how to do demand forecasting, you can reach out to us on Inventooly. We provide inventory management services along with expert guidance on E-commerce stores.