Sales forecasting for new telecommunications products

Telecommunications sales forecasting….can be tricky.

Many executives and entrepreneurs are apprehensive about forecasting for entirely new communications technologies.  (There is just no historical data to rely upon).

Make a wrong decision here and it could cost you your, profit margin, your job or even your entire business.

This article will reveal a forecasting model that has stood the test of time.  To give you the best possible chance of accurately forecasting sales for your new telecommunications products.

Product Lifecycle approach to Telecommunications Sales Forecasting

Given that there is no “historical” sales data to rely upon, how can we scientifically forecast sales?  Well, we can go to established theory – The Product Life-cycle.

• Introduction Phase: Usually characterized by slow growth.  Possibly due to –

1. Smaller advertising budgets
2. Poor distribution channels
3. Poor/no sales training for frontline salespeople
4. Pent up market demand (or lack thereof)

• Growth: The period of fastest uptake by the market.

• Maturity: The point of market saturation i.e.  when everyone who wants your product has bought it…  (The total market for your product).

• Decline: As sales drop-off

The above three phases give rise to the famous squiggly “S-shaped” curve we are familiar with from our first year Marketing.

It is a useful starting framework but how do we get some real numbers out of this “without historical data”?

The Three things you must know about New Tech Telecommunications Sales Forecasting

1. The Maximum Saturation point: The time in the future when you estimate everyone who wants your product has made a purchase.  And the total lifetime number of units to be sold.  (I.E.  Years and Units).
2. The Inflection Point of the Product: The time when the product is selling its fastest.  After this the sales rate begins to taper off and we enter the second part of the characteristic “S-curve”.  The inflection point is the point in time where you expect half the total lifetime sales of your product to be made.
3. The Delay Factor: Or the amount of time you expect your product to languish in the “Introduction Phase”.

The Product Lifecycle Formula

From the above, you simply plug your variables into the following formula, and it will produce for you the estimated units sold for each month of your Product Life Cycle.

New Product  Forecast  =                                 S ————————– 1  +  B e^-aT Where: S =  Long run saturation level of the new product T =  Time Index (1,2,3…..) a =  Delay Factor (0-1) I =  Inflection Point  ( the point where 1/2 of the saturation point is reached) B =  e^Ia

It produces the signature “S-shaped” Curve of the Product Life Cycle.  (As below).

 

So there you have it!

As stressful as sales forecasting for new-tech is, the consequences of doing it in a haphazard fashion are even worse.  When you consider what is at risk, a clear and methodical method of sales forecasting is a must.

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