CUSTOM MARKET FORECASTING AND SIZING DURING COVID-19

Determining the target market size and expected growth is the key prerequisite to successful strategy development for any company of size striving to expand within its industry. The task of quantifying and forecasting demand, particularly in more fragmented and faster-evolving markets, has always been complicated by emerging industry-specific trends, competitive shifts and changes in the underlying macroeconomic landscape. Now, with COVID-19 impacting every corner of the global economy, companies are forced to operate in an environment characterized by an unprecedented degree of uncertainty, with near- and medium-term visibility greatly reduced by the pandemic’s spread. How does management make crucial strategic decisions at the time when market assessments keep changing rapidly and growth forecasts undergo constant adjustments?

With so many companies facing a fight for survival, it’s more important than ever to have a well-informed, up-to-date perspective on your market.

Use of Economic Indicators in Market Forecasting – What Has Changed with COVID-19?

Relevant economic indicators play a crucial role in market sizing and forecasting. When assessing growth potential in any given industry or segment, market researchers rely heavily on consensus projections for GDP, consumer spending, manufacturing activity and other relevant metrics to help gauge the demand trajectory going forward. In the absence of large external shocks, these projections typically don’t fluctuate to any significant extent within a short timeframe.

Given the unprecedented global crisis caused by the pandemic and the resultant wide-ranging shifts in economic activity, consumer and business spending, and industrial supply chains, economists have been scrambling to make growth assessments for GDP and other key macroeconomic parameters. The enormous scale and the rapid nature of the damage to the global economy caused by COVID-19, as well as the absence of any clear historical precedent for the current crisis, have made forecasting very challenging. The virus path remains highly unpredictable, and our understanding of its impact on the economy evolves constantly. Reopening of the economies around the world and subsequent virus transmission flare-ups further complicate the task of modeling markets, as governments struggle to find the balance between gradual removal of restrictions on economic activity with the need to preserve gains in COVID-19 containment. This extreme fluidity of the pandemic’s trajectory drives frequent adjustments to macroeconomic forecasts, the transitory nature of which clouds growth assessments in any given industry. It’s difficult to say now with any certainty when the normalcy will return or what the new normal would look like one, two or three years from now.

Key indicator projections for the current year have been continually revised downward in recent months as the magnitude of the pandemic’s impact has become clearer. As capital investments get shelved and consumer spending declines, most industries and companies are seeing large scale deterioration, with services hit particularly hard. Given how unreliable long-term market forecasting is under our current, very unique circumstances, companies are increasingly looking for industry assessments in a shorter timeframe, underscoring the need for much more frequent forecast reevaluations. Strategic recommendations developed by independent market research firms that involve thorough consideration of these fluid growth projections are gaining in importance in the current environment.

Primary Research Becomes Even More Valuable

Interviews with market participants across various constituencies have always been a key component of market research, adding expert, real-world perspectives and insights to any data contained in secondary sources. Now, when the overall economy and many individual industries are undergoing unparalleled shifts, both in terms of their sheer magnitude as well as speed, it becomes imperative to get real-time insights from respondents directly dealing with and adapting to these changes. It may not be possible anymore to get firm perspectives on long- or even medium-term market growth, given how unpredictable the pandemic’s path is at the moment, but shorter-term assessments obtained by interviewing key players in the industry are extremely valuable as well when one is looking to estimate the size of the market and its likely growth trajectory. Many trends emerging now may not be sustainable beyond the next six months to a year, but it’s difficult to identify and analyze these shifts without collecting pertinent information from primary sources.

The shift to working from home complicates primary data collection, as reaching interview targets becomes more challenging and time-consuming. Given the heightened importance of obtaining insights from market participants directly exposed to the unprecedented changes taking place, it’s more vital than ever to allocate sufficient resources to primary research. Only firms with an established history of conducting difficult interviews across market constituencies should be trusted to elicit critical information.

More Judicious Use of Secondary Sources is Required Now

Secondary sources of information tend to form the basis of any market size and growth assessments. The data and insights contained in various databases, financial and industry reports, investor presentations, trade publications and news articles are instrumental in forming initial estimates that are then built upon with information obtained from primary research.

Secondary data is backward-looking for the most part, which complicates market size modeling in normal circumstances. It has become much more of an issue with COVID-19. Secondary sources are still critical to any market forecast, but they need to be very carefully vetted now that there is so much uncertainty about the direction of the economy. Data points and qualitative insights need to be as up-to-date as possible, and triangulation with multiple sources is particularly crucial for confirmation. Tremendous noise in the data requires a new level of diligence to produce a quality market assessment.

Where to Learn More

The analysts at Freedonia Custom Research are highly skilled in analyzing global industrial and business-to-business markets. For more than 15 years, we have been helping clients make the right decisions through hundreds of complex projects completed for many of the largest industrial companies in the world. FCR’s expert capabilities in primary and secondary data collection and analysis are especially relevant now in the environment of great economic uncertainty created by COVID-19. Contact us to discuss your specific research needs and to explore how we can help you achieve your strategic goals.

About the author: Michael Igelnik is a Senior Analyst with Freedonia Custom Research, where he is responsible for building market research activities, analyzing and synthesizing the resulting data, and providing insight and recommendations for clients. Michael holds an MBA from the Weatherhead School of Management at CWRU and has over 15 years of experience in business and market strategy development.