A market forecast is a core component of a market analysis. It projects the future numbers, characteristics, and trends in your target market. The most standard analysis shows numbers of potential customers divided into segments and projected into future years. The illustration below shows a simple market forecast associated with the AMT computer store sample Web plan. The plan defines two target market segments and the forecast projects how many potential customers in each of those, by years, for five years.
Market Size Forecast
Taken from Web Strategy Pro
The AMT sample plan numbers indicate that there are 25,000 home offices included in the market, and that number is growing at an estimated 5% per year. There are also 10,000 small businesses in the area, and that number is growing at 5% per year.
These numbers are estimates. Nobody really knows, but we all make educated guesses. The developers of the AMT plan researched the market as well as they could and then estimated populations of target users in their area, and the annual growth rates for each.
You can use your market forecast numbers to draw a chart of projected market growth, like the one shown here below. It offers a visual view of the market forecast.
Taken from Web Strategy Pro
Reality Checks
A market forecast should always be subject to a reality check. When you think you have a forecast, you need to find a way to check it for reality. In AMT's case, if the total market is worth some estimate you could estimate sales of all the competitors and see if the two numbers relate to each other. In an international market, you might check production and import and export figures to see whether your estimates for annual shipments appear to be in the same general range as the published figures. You might check with vendors who sold products to this market in a given year to see whether their results check with your forecast. You might look for macroeconomic data to confirm the relative size of this market compared to other markets with similar characteristics.
Review Target Focus
The market analysis should lead to developing strategic market focus. That means selecting the key target markets. This is the critical foundation of strategy. We talk about it as segmentation and positioning.
Remember, strategy is focus. Under normal circumstances, no company will attempt to address all the segments in a market. As you select target segments, think about the inherent market differences, keys to success, competitive advantages, and strengths and weaknesses of your company. You want to focus on the best market, but the best one is not necessarily the largest one, or the one with the highest growth. It might be the one that matches your own company profile.
