Question: When forecasting demand for new products, sometimes firms will use demand data from similar existing products to help forecast demand for the new product. What technique is this an example of?
Demand forecasting refers to the employment of predictions of historical data to have a plan regarding consumers' demand for a product or service for the long-run period. Demand forecasting is helpful for the business to form informed supply decisions that may predict the full sales and revenue for the longer term.
Demand forecasting is required when an organization is introducing a brand new line into the market so that the business can anticipate consumers' reactions. Different forecasting techniques are available for businesses to forecast the demand for a replacement product. For forecasting the demand for a replacement product supported by existing demand data, trend projection is employed.
Trend projection is an example of a method that uses demand data from similar products to assist in forecasting demand for the new product. During this method, past demand and sales data are accustomed to projecting the long-run sales and future demand of the newly launched product.
It is the foremost simple technique of demand forecasting for a newly launched product. It is important to regulate future projections to account for historical anomalies. Perhaps you had a boost in demand the previous year. It happened after the merchandise was featured on a preferred TV program, so it is unlikely to repeat. Your e-Commerce site got hacked, causing your sales to plunge. Take care to notice unusual factors in your historical data while using the trend projection method.
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