Question

Forcasting the success of the new product instroductions is notoriously difficult. Describe some of the macroeconomics nd microeconomics factors that a firm might consider in forecasting sales for a new body soap product.

Answer 1

Since the product is new, the amount of sale should be anticipated or forecasted for future specific periods. This is very important for understanding the success and growth of such product.

Some factors influence in this regard. These are as below:

Macroeconomics factors:

No.1) Trend of inflation: this is the behaviour of rising price over the periods. If the inflation trend is high, sales could be adversely affected. It happens because consumers would not be willing to purchase higher-priced goods. Therefore, sales could be dropped in future.

No.2) Economic growth rate: it is measured through change in gross domestic product (GDP). Suppose GDP of the current year is $110 million and $120 million in the coming year; therefore, the growth rate is [{(120 – 110) / 110} × 100 =] 9.09%. An increasing trend of growth favours future sales – sales could be high in future.

Microeconomics factors:

Consumer behaviour: this is the study of consumers’ thinking about the product – how they look the product, what is their expectation, etc. this could be done by conduction survey to a group of small number of people. It helps immensely in developing the new product.

Competitors: the firm has to consider who the competitors of the new product are and what their policies of doing business. Although the product is new there may be similar-kind of product in the market which may not be considered as absolute substitute. Applying the same policy may create competition but reduces the risk of unsold items – suppose a competitor sales product with a discount in summer seasons.