SMART Demand Forecast: How a Demand Forecasting Solution Turns Sales Plans into Reality

Sales planning is comparable to a program code for supporting a complex system, where an accurate algorithm must take into account all possible scenarios. Demand forecasting in this comparison plays the role of a compiler – a program that analyzes and checks the code for errors and blockers and optimizes it so that it functions correctly. Forecasting considers market data, sales history, information about competitors, seasonal factors, product costs, advertising campaigns, demographic indicators, prices of related products, as well as external factors. Special solutions analyze these factors and help build forecasts that can be used to understand how exactly this data will affect future sales. That is, the process consists of turning raw, disparate data into a clear and working strategy. For example, for promotional sales, SMART Demand Forecast solutions use scenario forecasting, which allows you to calculate how demand changes under different conditions: price changes, promotions, etc. This is a tool that helps businesses build optimal plans. The system provides forecasts and the ability to analyze different scenarios, and marketers, analysts, and managers use this data to make strategic decisions. Without this “compiler,” a company risks working blindly. This approach can lead to errors – when planned actions do not meet expectations, for example, the occurrence of overstocks or, conversely, poor customer service due to underestimation of demand. Just as every line of code is important, so in business every aspect – from marketing to logistics – must be considered in the sales plan. In this analogy, SMART Demand Forecast is a kind of “intelligent compiler” that transforms chaotic factors into understandable data for business decision-making and the creation of effective sales strategies.

How do AI algorithms analyze data, forecast demand, and help build effective sales strategies?

Scaling, globalization of markets, the trend of hyper-personalization – all this leads to an increase in the volume of data that companies must analyze to forecast demand and satisfy their consumers.

Today, companies not only compete for customer loyalty but also try to anticipate their needs before they even realize them. But in conventional forecasting methods, data processing is done manually, which increases the risk of errors and reduces the effectiveness of analysis.

This is where AI technologies come to the rescue. They can quickly and efficiently process large amounts of data and provide analytical insights that help build flexible strategies. Thanks to these technologies, companies can identify patterns, trends and correlations that could go unnoticed with manual forecasting methods. In addition, they allow you to forecast demand for new products based on the analysis of analog products, as well as clean out anomalies in the data, which contributes to more accurate forecasting, where information is the key to success!

Forecasting underlies all key business processes: production planning, raw material procurement, logistics and the entire supply chain. Forecasting influences marketing strategies, helping to develop successful promotional campaigns. And the implementation of modern tools and solutions based on AI algorithms allows companies to quickly respond to changes in demand, predict future trends, optimize their processes and effectively manage resources.

SMART Demand Forecast can become exactly the necessary solution that will provide more accurate forecasts, minimize costs and increase business profitability due to high-quality forecasting of regular and promotional sales.

How to Fulfill a Sales Plan with the “Sales Plan = Demand * Strategy” formula?

Steve Morlidge, a practitioner with thirty years of experience in implementing performance management systems, notes that to build high-quality sales forecasts, it is extremely important to correctly interpret the concepts of “forecast”, “budget” and “plan”:

Each of these parts has its place and role in business management. Forecasts help to assess potential opportunities, the budget sets financial boundaries, and plans define specific steps to achieve the company’s goals. Understanding these relationships allows you to better plan strategic decisions when implementing your Sales Plan. With this in mind, the golden formula for sales forecasting is Sales Plan = Demand * Strategy.

Let’s imagine a company producing organic cosmetics and aiming to increase sales by 20% next year:

Step 1: Demand

The company observes a trend that the organic cosmetics market is growing by 10-15% annually. Therefore, given global trends, it can be said that this trend will continue. Based on these observations, a forecast is made, including data on sales increases in previous years.

The company estimates demand as follows:

• The total volume of the organic cosmetics market in the region is 10 million units of goods.
• The company occupies 10% of the market, therefore, their share is 1 million units of goods.
• Demand is predicted to increase by 15%, which gives 1.15 million units of potential demand.

Step 2: Strategy

• Range Expansion: it is planned to add a new line of hair care products that meet market demands.
• Marketing Investments: it is planned to increase the budget for marketing campaigns by 30%, including the use of social networks, involving influencers, developing partnership programs, etc.
• Distribution Expansion: the company plans to enter new online platforms and physical stores to increase the number of points of sale by 25%.
• Promotions and Discounts: it is planned to stimulate demand during seasonal promotions and attract new customers through great deals.

Step 3: Sales Plan

Considering the projected demand and the chosen strategy, the Company forms its sales plan:

• Projected demand: 1.15 million units.
• Strategic activities (range expansion, marketing, distribution): through these activities, the company plans to increase its market share by 20%.
• Expected Result: Sales Plan = 1.15 million (projected demand) * 1.2 (market share increase strategy) = 1.38 million units of goods.

At the same time, SMART Demand Forecast can significantly improve this plan:

1. Accurate demand forecasting: unlike manual estimates and assumptions, the solution will provide data based on real scenarios. Therefore, instead of simply forecasting a 15% increase in demand, SMART Demand Forecast can consider more granular factors, such as economic fluctuations, competitors’ behavior, seasonality (but not just an increase in demand in the summer for skin care products, but also weather conditions, tourist seasons and vacations, etc.). The system will allow you to get a more accurate forecast of regular and promotional sales.
2. Assortment and new product planning: thanks to the use of AI algorithms, the system can detect hidden patterns. The solution analyzes not only the company’s internal data, but also external factors, quickly processing large amounts of data. Therefore, the system can suggest that the demand for natural shampoos with certain ingredients is growing, while conditioners with other components are losing popularity. Thanks to this, the Company will be able to direct resources to products with the greatest sales potential.
3. Inventory and distribution management: one of the key aspects of effective demand forecasting is inventory management. Thanks to an accurate forecast that can be transferred to inventory management systems, the company minimizes the risk of product shortages (out-of-stock).
4. Performance analysis and strategy adjustment: SMART Demand Forecast provides tools for forecasting regular and promotional sales compared to the plan, which will help the company adjust its strategy in real time. For example, if the demand for certain products does not match the forecasts, the solution will help adjust management decisions to achieve goals or change the marketing strategy according to one of the scenarios.

Why do promotions not work and how to solve this with the help of scenario sales forecasting?

Perhaps every company has faced a situation when planned promotions do not produce the expected effect: marketing costs increase, but the results do not meet expectations. Moreover, sometimes a promotion can harm overall sales. This phenomenon i

promotional offer takes demand away from other products. For example, discounts on one popular product can significantly reduce sales of similar items, which are also important for overall profit.

Another problem is the difficulty of considering all the factors that influence the success of a promotion: consumer behavior changes quickly, competitors also react to the market, and external circumstances – from seasonal trends to economic fluctuations – add even more uncertainty. In addition, retailers and manufacturers especially often face problems with coordination between teams working on promotions. For example, marketers plan one strategy, and purchasing or logistics departments may not have time to ensure the availability of the desired product in the right volume and location.

In such conditions, to achieve the desired results from promotions, you need a tool that will allow you to evaluate possible scenarios in advance and predict how the demand for your products will change. Scenario sales forecasting, built into the functionality of SMART Demand Forecast, helps to overcome these challenges.

Scenario forecasting is a planning approach that allows you to evaluate possible outcomes based on several alternative scenarios. Unlike the traditional approach, which assumes a single outcome, scenario forecasting analyzes different options: from the optimistic to the worst one.

Scenario forecasting offers the following benefits:

1. Flexibility and adaptability: manual forecasting methods are often based on linear models or fixed assumptions that do not consider dynamic market changes. Scenario forecasting allows you to model different developments.
2. Accounting for uncertainties: scenario forecasting allows you to work with several scenarios – from optimistic to pessimistic. This ability allows you to be prepared for different challenges and think through backup plans.
3. Proactive planning: scenario forecasting allows businesses to act ahead of the curve, responding to possible risks and challenges before they affect results. Thanks to this, companies can better prepare for possible changes, developing appropriate strategies in advance.
4. Integration of modern technologies: scenario forecasting effectively uses modern tools with AI technologies. This allows you to create more accurate and deeper forecasts based on huge amounts of data that traditional methods cannot process with the same efficiency.

This is especially useful for cross-functional teams (marketing, sales, finance, logistics, etc.). This approach allows for coordinating decisions and considering different points of view to achieve a common sales goal. With scenario forecasting, companies can take risks into account, adapt to unpredictable changes, and reduce losses due to irrelevant promotions.

Thus, SMART Demand Forecast allows you to plan promotions based on various possible scenarios and thus ensures forecast accuracy, which maximizes the results of marketing campaigns.