What is Market Forecast?? A market forecast is a core component of a market analysis.

It projects the future numbers, characteristics, and trends in your target market. A standard analysis shows the projected number of potential customers di ided into segments. !his e"ample of a simple market forecast defines two target market segments and projects the potential customers in each of those segments by years, for fi e years. Market size forecast

In the market forecast, the e"ample numbers indicate that there are #$,%%% home offices included in the market, and that number is growing at an estimated ten percent per year. !here are also &%,%%% small businesses in the area, and that number is growing at fi e percent per year. !hese numbers are estimates. 'obody really knows, but we all make educated guesses. !he de elopers of the plan researched the market as well as they could and then estimated populations of target users in their area and the annual growth rates for each. (ou can use your market forecast numbers to draw a chart of projected market growth, like the one shown here below. It offers a isual iew of the market forecast.

Market value 'ormally you would also look at market alue, not just market si)e. For e"ample, although the high*end home segment is #.$ times larger than the small business segment as measured by number of customers, the small business customer spends almost four times as much as

the home office customer. !herefore, the small business market is a more important market in terms of dollar alue.

!he important numbers in this table are the a erage purchase per customer and the market alue.

A erage purchase per customer is an educated guess based on e"perience. +ales managers got together to make the estimate. Although they would ha e liked some e"ternal source of information to use for this, there was none a ailable. 'otice that the home office customer tends to purchase much less o erall than the small business customer. !he market alue is simple mathematics. Multiply the number of potential customers in the market by the a erage purchase per customer. In this case they took the a erage number of customers in each segment o er the fi e*year forecast period, and multiplied that by the a erage purchase per customer, to calculate the market alue.

!he other items in this table are subjecti e ,ualities that help with marketing. !he planners assign these points to people charged with preparing marketing materials. Reality checks A market forecast should always be subject to a reality check. When you think you ha e a forecast, you need to find a way to check it for reality. In this case if the total market is worth some estimate, you could estimate sales of all the competitors and see if the two numbers relate to each other. In an international market, you might check production and import and e"port figures to see whether your estimates for annual shipments appear to be in the same general range as published figures. (ou might check with endors who sold products to this market in some gi en year to see whether their results check with your forecast. (ou might look for macro*economic data to confirm the relati e si)e of this market compared to other markets with similar characteristics. Review target focus !he market analysis should lead to de eloping strategic market focus. !hat means selecting the key target markets. !his is the critical foundation of strategy. We talk about it as segmentation and positioning. -nder normal circumstances, no company will attempt to address all the segments in a market. As you select target segments, think about the inherent market differences, keys to success, competiti e ad antage, and strengths and weaknesses of your company. (ou want to focus on the best market, but the best one is not necessarily the largest one or the one with the highest growth. It will be the one that matches your own company profile.

Market Research Most e ery organi)ation will benefit from e en the most elementary market research. If it does not pro ide new information, it will confirm what is known. Market research is the process of gaining information about your market. .referably, this is specific information about your target market and the key factors that influence their buying decisions. Market research can be casual and limited in scope and, although it may not be /statistically significant0 research, it can still be aluable. !he alue and /degree of fit0 may be based on the ,uality, cost, or the amount of time to ac,uire the information using these practical market research tools. 1etermine what form of market research is going to work best for you. Make that decision based on the alue you will recei e, ersus the time and other resources you need to in est to gain access to that information. Market research is often confused with an elaborate process conducted by a third party that takes a tremendous amount of time and money. It may be important to take a different perspecti e on what market research is and how it is conducted. Primary market research .rimary market research is research that you conduct yourself, rather than information that you find already published. .rimary market research may result from you ha ing direct contact with your customers or the public. !his may be through the following types of information gathering2

Focus groups gather a small group of people together for a discussion with an assigned leader. 3ustomer sur eys
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4"isting customers .otential customers

(our competition
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+olutions !echnologies 'iches

Secondary market research Market research may also come from secondary sources. !his is information others ha e ac,uired and already published which you may find rele ant. Access to this secondary market research data may be yours for the asking and cost you only an email, letter, phone call, or perhaps a nominal fee for copying and postage. Much of it is entirely free. Much of it is a ailable to search on the Internet.

!rade associations 5o ernment information

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Federal, state and local go ernment reports +mall 6usiness Administration * +6A +mall 6usiness 1e elopment 3enter * +613 +er ice 3orp 7f 8etired 4"ecuti es * +3784 -.+. 6ureau of 3ensus

4ducational resources 3hambers of 3ommerce Market research firms

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5eneral market profiles +pecific information

Where to find information on the internet !here are many websites sponsored by a ariety of organi)ations that can pro ide you with the business information you9ll need for your business and marketing plans. !hese pro ide a beginning, a jump*off place for more in*depth research. Market data for the united states :ere are sites that pro ide e"cellent data within the -nited +tates2

-.+. 3ensus 3endata2 !his page has a menu of a ailable reports that include reports on different manufacturing industries, county*specific economic sur eys, business patterns for a specific ;I. code and others. )apdata.com2 !his site offers ery good industry data reports, sorted by +tandard Industrial 3lassification code, with a powerful +I3 code searcher. !he industry* specific <based on +I3 code= reports tell you how many companies there are, a erage sales, and employees. !here are also breakdowns by company si)e and location. 3474"press2 !his site pro ides an e"cellent compilation of additional sites you might want to try.

Information from trade and industry associations Many industries are blessed with an acti e trade association that ser es as a ital source of industry specific information. +uch associations regularly publish directories for their members, and the better ones publish statistical information that track industry sales, profits, ratios, economic trends, and other aluable data. If you don9t know which trade associations apply to your industry, find out. >ook for associations on the Internet2

(ahoo.com9s list of trade associations is an ama)ing list of hundreds of trade and industry associations. !he 4ncyclopedia of Associations published by !he 5ale 5roup is probably the most established, respected source on associations. !hese cost se eral hundred dollars each

and are normally a ailable at reference libraries. !his organi)ation also offers the more updated Associations -nlimited online database of more than ?%%,%%% organi)ations.

!he Internet .ublic >ibrary has a large list of associations on the Web !he !raining Forum has an associations database on the Web listing more than &%,%%% associations. /Action Without 6orders0 initiati e lists thousands of not*for*profit organi)ations.

!he ultimate goal is information. Most of these associations ha e industry statistics, market statistics, guides, annual references, directories of industry participants, and other industry* specific information. Many pro ide business ratios by region or by comparable business si)e. 3ontact possible associations, isit their websites to see what information is a ailable. When in doubt, call or email the industry association offices and communicate with the managers. Information from magazines and publications Industry*specific maga)ines offer a wealth of information on your business and your market. 6usiness maga)ines are an important source of business information. Aside from the major general*interest business publications <Business Week, Wall Street Journal, etc.=, there are many specialty publications that look at specific industries. +peciali)ation is an important trend in the publishing and Internet businesses. 1ingbats and Widgets may be boring to the general public, but they are e"citing to 1ingbat and Widget manufacturers who read about them regularly in their speciali)ed maga)ines. !he maga)ines are an important medium for industry*specific ad ertising, which is important to readers as well as ad ertisers. !he editorial staffs of these maga)ines ha e to fill the space between the ads. !hey do that by publishing as much industry*specific information as they can find, including statistics, forecasts, and industry profiles. .aging through one of these maga)ines or isiting a website can sometimes produce a great deal of business and market forecasting, and economic information. Finding the right publications If you don9t already know what maga)ines focus on your business area, then the best place to start looking is on the Internet2

(ahoo.com listing of maga)ines. -lrich9s International .eriodicals 1irectory located on the 8.8. 6owker website, this is probably the most established and respected source on associations and one of the largest listings of maga)ines. It is also a ailable in hard copy <ask your library reference section, because it9s e"pensi e= as well as online. Audit 6ureau of 3irculation is another source you can look for in library reference. If you ha e any association with an ad ertising agency, ask them to loan it to you for a few hours.

For traditional printed directories, se eral good reference sources list maga)ines, journals, and other publications. !hey also offer inde"es to published articles which you can use to search for the e"act references you need. !hese will be kept in the reference section of most libraries.

8eaders9 5uide to .eriodical >iterature, published by :.W. Wilson of 'ew (ork, this guide inde"es popular maga)ines. It is also a ailable in most library reference sections. 6usiness .eriodicals Inde" also published by :.W. Wilson of 'ew (ork, is an inde" of business maga)ines and journals only.

etting the information 7nce you9 e identified the right maga)ines, contact the editorial departments using their website, fa" or phone number and published contact information. Many industry*specific maga)ines publish statistical editions and market re iews at regular inter als. -se the inde"es to identify published information that might help your marketing plan. When you find an inde" listing for an article that forecasts your industry or talks about industry economics or trends, jot down basic information on the publication and ask the library for a copy of the publication. Making a Market Forecast !stimate 8elati ely few marketing plans are blessed with budgets for professional market research. When you can9t pass the problem to professionals, then you ha e to make some intelligent estimates. 5et comfortable with the idea of making good educated guesses. Many people think there is something magic about this, some techni,ue they don9t know that the e"perts learned in graduate school. 1on9t worry about it. :a ing gone through graduate business school and worked as a ice president in a marketing research firm, I can reassure you2 sophisticated data analysis rarely works ery well for business forecasts. 'o matter how elaborate the forecasting model, mathematical forecasts are based on past results. 'obody knows the future. In most situations, the best way to create a market forecast estimate is to find an e"pert forecast, estimate from past data, find parallel data or apply a model. Finding an e"pert forecast If you can find an e"pert forecast already published, or if you ha e a budget to pay for an e"pert forecast, that9s a lu"ury. !his probably means you don9t ha e to do your own. Many e"pert forecasts are published where you can obtain their results for free. +ome of these are go ernment forecasts intended to be free, some are e"pert forecasts made during inter iews or news media co erage, and some are professional forecasts whose highlights are released to the media as teasers to sell the more e"pensi e research. (ou 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 e"act nature of your business. -nfortunately, nobody but you can pinpoint e"actly where to look for your industry and your plan, but at least you can consider some e"amples. !he -.+. 6ureau of >abor +tatistics regularly publishes job outlooks that include forecasts of the numbers of certain kinds of jobs into the future. If your marketing plan needed to project growth in the number of accountants, or chief e"ecuti es, or hea y machinery operators, you

could find that at the 6>+ site. (ou could also find a projection showing projected growth of computer industry jobs, or growth in specific employee categories. If, for e"ample, you are working on a marketing plan in ol ing soft drinks you could go to the national soft drink association9s publication Beverage World for a detailed fi e*year forecast of soft drink consumption. +e eral major business maga)ines publish economic forecasts regularly. (ou could go into a reference library and use the Readers Guide to Periodic Literature to find published data related to your data needs. Business Week maga)ine has a weekly column on business outlooks, and ,uarterly sur eys of industry outlooks. !stimating from past data Although the past doesn9t really predict the future, it can indicate trends. +ometimes you can find past data on a market and use that to project into the future. !he principle of using past data as a guideline for the future is one of the fundamentals of forecasting. It9s particularly important for market forecasting, howe er, because you9ll fre,uently find ample data about your market9s recent past e en when you can9t find a market forecast. -sing the past data will get you a good starting point and a sense of reasonableness for your forecast. Past data estimate#e"ample For e"ample, say I want to project the market for restaurant e,uipment in >ane 3ounty, 7regon. I can go to the -.+. 3ensus 6ureau +tate and 3ounty @uickFacts to find out that >ane 3ounty had A&& /eating and drinking places0 in &BBA and ACB in &BBB. I don9t particularly like the fact that these numbers are se eral years old, but they are the latest a ailable and they are also better than any other numbers I can find. I could count eating and drinking establishments by using the (ellow .ages in the telephone directories, or some other means, but any alternati e would be impractical and e"pensi e. +o I accept the latest a ailable census data. I calculate the growth rate for &BBA to &BBB and apply that same rate into the future to create a market forecast, as shown in the illustration below.

$dding common sense and educated guessing Is this the best I can do? Maybe not. I can probably take the past data as a base number, and then add my own research and common sense to impro e on it. For e"ample2

I could contact the local 3hamber of 3ommerce or restaurant association and ask for an e"pert opinion about the fate of eating and drinking establishments in the recent past and foreseeable future. If the local e"pert says there has been a boom in restaurants, or a problem with restaurants, then I can use that information to adjust my

growth rate up or down. In my marketing plan te"t I would e"plain what the past growth rate was and why I was e"pecting it to change. I could also check with the 3hamber of 3ommerce or the local go ernments to find economic growth numbers. I could compare general economic health in the &BBA* &BBB period to the #%%%*#%%$ period as well as projections for the foreseeable future. I would then re ise my projected growth rate accordingly, and e"plain in my te"t about the source of the growth rate figure.

!he important point is that I wouldn9t ha e to just take a wild guess about the restaurant population. 6y starting with past numbers I impro e the o erall ,uality of the forecast. !his is mainly just common sense and educated guessing