Market Forecasting: Expert Overview and Best Practices

A variety of organizations can gain significant advantages from market forecasts, including manufacturers, investment banks, consulting firms, and industry groups. 

“Market forecasts help businesses anticipate trends in sales, customer behavior, and other key indicators,” according to long-time Industry Analyst Gleb Mytko of The Freedonia Group. “In addition, these forecasts guide companies in making informed decisions about factory locations, potential acquisitions, and new geographic markets to target.” 

While this data is highly actionable, comprehensive market forecasts are not widely available to the public and can be challenging to do. This post provides an expert overview of market forecasting and shares several best practices to keep in mind, based on methodologies developed by The Freedonia Group, a trusted source of market intelligence since 1985. 

What Is Market Forecasting? 

“The most basic definition for forecasting is the process of using past and present data to make predictions,” Mytko explained. “Approaches to forecasting range from those that are fairly straightforward to extremely complex models that are updated in real-time.” 

Market forecasting is an analytical technique that uses historical and current data, along with a variety of other information, to create informed forecasts. To be truly accurate, market forecasting should include analyzing demand, production, trade, pricing, existing stock, and various product and market segments. 

Forecasts are often calculated on an annual, five-year, or ten-year basis. However, they are all developed at the same time as each informs the other. For instance, long-term forecasts reflect cyclical patterns such as replacement cycles or equipment lifespans, but short-term forecasts help us understand more immediate trends, which in turn lay the groundwork for long-term predictions.  

Both short-term and long-term forecasts offer valuable insights. Short-term forecasts capture year-to-year fluctuations, while long-term forecasts reveal durable growth patterns. 

Benefits and Challenges  

Forecasting serves a variety of purposes, from budgeting to strategic planning. Market forecasts can help companies with setting priorities, focusing resources, and strengthening operations. 

However, making a market forecast is not a simple and easy process. Making a good projection requires you to consider many different factors, which can be time consuming. You may have access to very limited data for a specific country, product, or market. 

You may need to account for trends that are difficult to quantify, make sense of conflicting information, and factor in cyclical business patterns unique to different industries.  

Market Forecast Information Sources 

You can find information that can be helpful for developing a market forecast from a variety of sources (some paid and some free), including: 

• Published market research reports 

• Government data 

• International organizations such as NGOs or IGOs 

• Industry trade groups 

• Newspapers, magazines, and journal articles 

• Company annual and quarterly reports and presentations 

• Primary research such as interviews with industry participants along the supply chain 

Market Forecasting Best Practices 

Market forecasting methods range from manual to automated, with hybrid approaches in between. The approach you choose will depend on the time and information you have available and the primary goals of your research.  

It is important to understand any shortcomings or weaknesses of your approach, and to keep in mind key growth factors and constraining factors as well. Mytko also recommends several other best practices for global forecasting: 

• Understand the current situation: Before creating a market forecast, make sure you understand the current conditions in the country or market. Consider factors such as new and pending regulations, financial sector turmoil, government policies, currency fluctuations, competitive elements, and political issues. 

• Use comparisons: Evaluate your forecasts by comparing trends, purchasing rates, and other factors across different countries. Does what you see in one country make sense when compared to similar nations? What explains the differences or similarities? Are there any unique cases? 

• Show cyclicality: Ensure your forecasts reflect cyclicality, which varies by country, product, and market. This is crucial, especially for durable goods industries. 

• Monitor pricing trends: Keep an eye on pricing trends and the product mix to analyze value/volume correctly. 

• Be prepared to explain your forecast: Understand the story your forecast is telling, so you can justify your conclusions to other stakeholders. 

• Cross-check with other sources: If your numbers differ from other opinions, understand why. Reasons could include differences in definition and scope, underlying macroeconomic assumptions, or industry outlook. 

Using Forecast Data from Market Research Firms 

Because global forecasting is inherently complex and often challenging to complete, many organizations choose to work directly with a reputable market research firm (such as The Freedonia Group) by purchasing data tables, full studies, or commissioning a custom market research project. These options save time and effort and provide access to quality market data that has been vetted by an experienced team of economists, analysts, and editors.  

A firm like The Freedonia Group has extensive historical data, established methodologies, and other internal resources that help ensure consistent reliable forecasts. For example, analysts at The Freedonia Group use composites and indicators developed by an in-house team of economists, and they also collect data through primary research, such as surveys and in-depth interviews with industry participants. In addition, Freedonia analysts rely on a field office in Beijing to help gather regional data that can be difficult to obtain in the U.S.  

Expert Assistance with Market Forecasting 

If you need specific market data and forecasts, The Freedonia Group can help you obtain accurate, reliable data and forecasts that align with your business goals. Search our website to explore our reports and analysis. 

Interested in additional resources? Sign up to download our latest short-run US economic forecast.

About The Freedonia Group  

The Freedonia Group is a premier international business research company, providing clients with product analyses, market forecasts, industry trends, and market share information. From one-person consulting firms to global conglomerates, a range of companies rely on Freedonia for unbiased, reliable market research and analysis to help them make important business decisions. The Freedonia Group's renowned research divisions include Freedonia Industry Studies, Packaged Facts, Simba Information, Freedonia Focus Reports, and Freedonia Custom Research.  

About the blogger: Sarah Schmidt is a Managing Editor at The Freedonia Group, a premier international business research company.