The PDMA Handbook of New Product Development

23.2. Establish the Forecasting Objective

NOTE

The first step towards successful new product forecasting is to establish the forecasting objective.

The first step towards successful new product forecasting is to establish the forecasting objective. This will clarify the purpose and intent of the forecast so that a meaningful forecast can be made—meaningful in the sense that the forecast is presented in a usable and understandable form. Otherwise, an innumerable set of forecasts can be developed, leading to confusion over which forecast should be employed. The forecasting objective helps to clarify the type of forecast to be made, the forecasting level at which the forecast will be applied, the forecasting time horizon, the forecasting interval, and the form in which the forecast should be.

Several types of new product forecasts are possible and can be broken down in terms of potential versus forecast, and market versus sales. Potential represents a maximum attainable estimate, whereas forecast represents a likely attainable estimate. Market represents all companies within a given industry marketplace, whereas sales pertains to only the respective focal company. The following new product forecast definitions are provided:

• Market potential: The maximum estimate of total market volume reasonably attainable under a given set of conditions.

• Sales potential: The maximum estimate of company sales reasonably attainable within a given market under a given set of conditions.

• Market forecast ...