Last Updated: February 25, 2022
Identifying the most relevant indicators for forecasting consumer demand is imperative to business health. For some consumer packaged good companies, the rise of e-commerce and changing consumer preferences has meant slower growth than preferred. That means CPG companies must adapt their planning models to account for these changes in shopper behavior. For example, shoppers are more cost conscious and highly likely to do research online before shopping in stores. They read product reviews, increasingly make purchases on their mobile devices and are not as brand loyal. Trends that started a few years ago have become forces that CPG brands must grapple with to meet their annual goals. With a booming economy, evidenced by low unemployment and high consumer confidence, it is more important than ever that companies nail their demand forecasts. Those that miss their forecasts run the risk of production delays, product shortages and revenue hits. Conversely, forecasts that are off could lead to companies overshooting their demand and having to markdown products — to list just a few possible outcomes. So, the question needs to be asked, what external data should CPG companies factor into their forecasting consumer demand planning next year?Most Companies Miss Their Sales Forecasts
The sad reality is that most companies miss their forecasts. Without factoring key leading indicators, companies are more likely to misjudge their demand estimates. In fact, the Institute of Business Forecasting and Planning says that sales forecasts are off by a staggering 37% on average.
Forecasting Consumer Demand Using Relevant Indicators
While leading indicators vary for every business, certain data sets can provide insights to every CPG company. Here are three important indicators CPG companies should be monitoring:- Real Disposable Personal Income
- Cass Freight Index: Shipments
- Institute for Supply Management New Orders Index
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