How do you forecast the sales volume of a new product?

The most common forecasting method is to compare the new product to sales volumes of existing products. For example, if your "new" product involves only a slight innovation or change, and you make no radical changes in marketing, distribution or other systems, it will likely sell very much like your (or someone else's) old product.

If your new product is different, the process becomes much more complicated. You will have to study sales in ancillary industries of competing products that accomplish similar purposes, and form (conservative) estimates regarding how your new product will stack up against them in buyers' minds.

For example, if your product is aimed at consumers and involves some different method of cleaning floors, you will have to examine three or four competing floor-cleaning products, determine if your product is better and will lure buyers, and then guess how quickly they will move to your product. This means analyzing several factors such as distribution, placement, market positioning and marketing, and then guessing at how much room there is for your products in buyers' minds. This is often called triangulation, because you take three competing products and find the nexus, or areas where they overlap, in terms of sales volumes.

If the product is a breakthrough innovation unlike any other product on the market, your problem becomes even more complicated. There simply will be nothing to compare it to, and there may be some period where you have to "educate the market" regarding the value of the product. This then becomes a marketing strategy and task.

In this case, you estimate very conservatively and prepare for a long period before the market accepts the product.