Marketing forecasting — definition, components, and best methods

A marketing professional creating forecasts

Marketing uses a significant portion of company budgets. According to a Gartner report, it represents an average of 9.5% of company spending. So before you invest all that money, you need to know which campaigns are most likely to be successful.

Marketing forecasting helps predict which campaigns will yield the highest ROI. This post will guide you through the basics.

What is a marketing forecast?

A marketing forecast is a comprehensive data analysis to predict the potential success of specific marketing efforts. The purpose is to ensure that a company focuses on the proper marketing and advertising activities across channels and spends its time and money wisely.

Benefits of marketing forecasting

Stakeholders and executives need to know that marketing resources are well-spent. That's why, according to The CMO Survey, 8.9% of the average marketing budget is spent on marketing analytics — and will likely keep growing. Marketing forecasting, as an analytical tool, has several advantages.

Components of a marketing forecast

There are three considerations that make a marketing forecast effective — the data, the market size under consideration, and your target audience.

1. Accurate data

Accurate forecasts matter. Overestimating success leads to wasted time and effort and a warehouse full of overstock. Underestimating leaves you unprepared to meet demand. To get a helpful outlook on your marketing campaigns, start with accurate data.

First, know your marketing goals and the time and money you can devote to them. If you can only afford a six-month email campaign, then center your marketing projections around that. Keep your options open but be sure to measure what you can realistically achieve.

Next, gather any general statistics and reports you already have available. Consider:

2. Market size

Market size is the number of customers to whom you can potentially sell your product. The total addressable market (TAM) is the total potential revenue for a specific product. To get the TAM, multiply the total number of potential customers by your price.

The key is identifying your real customers and what they’re genuinely willing to spend. Don’t take a top-down approach — looking at the total market size and assuming you can easily capture a small percentage. Instead, take a bottom-up approach by showing how your product can reach a specific audience.

Marketing forecasts also help reveal market potential, which is your room for growth. Larger economic trends can drive people to buy — or not. For example, rising gas prices might make it more likely for people to buy your new mopeds. Before committing to a new opportunity, consider natural volatility and sales cycles so you don’t lean too far into a momentary trend.

3. Target audience

Position your product within your market by segmenting the target audience. Building buyer personas is the best way to do this.

Example of a user profile

A buyer persona is a general sketch of a specific type of customer. It allows you to synthesize audience data and put a face to it. You also can craft a view of your ideal customer. Drafting fictional buyers for different demographics and verticals is an art form, but once you dial it in, you’ll dramatically improve your marketing projections.

Remember that buyer personas should not be static. They are dynamic profiles you hone in over time. Your target audience is apt to change, so factor in what would make them buy at various times. Look for triggers that prompt customers to act.

Marketing forecast data sources

In addition to the hard data you source from your customer data platform (CDP) or other relationship management software, you can collect key insights to inform your marketing forecast from the people with the most experience with your products.

Executive opinion

Asking leadership what they think about a product’s viability and the possible success of specific strategies is a simple place to start. Chief officers often have the most at stake and are intimately acquainted with past performance and challenges. Executives regularly meet with regional marketing managers and share perspectives on what’s working and what strategies they think might create the greatest impact.

Customer or channel surveys

Create customer surveys to test how the market will react to specific products or messaging. Marketers can survey a particular distribution channel, like customers at a retail or online store, or they might target a particular market segment, like middle-aged American males.

Use those surveys to inform your marketing forecast. But remember, while these surveys accurately depict market interest, they don’t necessarily predict sales.

Sales force composite

Because sales reps pitch and sell the product daily, they can offer helpful estimates about future growth. A sales force composite is a survey of the entire sales team to project sales or marketing results.

Salespeople can sometimes be overly optimistic but their opinion is valuable — especially for short-term forecasts. A sales force composite can show how a product or a marketing strategy will succeed in different regions.

Expert opinions

Expert third-party opinions can provide helpful insights as well. But simply soliciting the opinion of a group of experts doesn’t necessarily lead to accurate or helpful conclusions. It’s best to use this method in tandem with quantitative research.

Methods for marketing forecasts

There are several techniques marketers can use to make projections, including qualitative surveys, historical research and projection, and cause-and-effect analysis. The best approach is to use as many methods as possible and then weigh the results against each other.

Delphi technique

The Delphi technique questions anonymous expert panelists over a series of rounds and averages the final round results. It’s more controllable and more accurate than a traditional expert group interview.

Correlation technique

Studying the correlation between different variables is a more sophisticated marketing forecast method. At its simplest, it traces a market factor against marketing performance, usually with a scatter plot graph. You can draw a correlation where trends move in the same direction.

Forecasting with correlation analysis

For example, you might study whether CTA clicks go up over time in relation to an email campaign or how many views your product video gets with the support of a Facebook ad.

The correlation technique gets challenging when you factor in multiple trends simultaneously. And remember that correlation does not equal causation — trends can be helpful, but consider other factors and techniques as well.

Time series technique

The time series forecasting method uses various techniques to look at historical patterns in marketing and apply them to upcoming periods. For example, if the company saw a steady 4% increase in website traffic in the past year, marketing can expect the trend to continue. If you notice rates decelerating or accelerating steadily over time, you can factor that in too.

The challenge is that markets are not always stable. Seasonal and cyclical trends affect numbers, but so do unpredictable fluctuations. Use adjustments to account for volatility. For example, a moving average works with the rate of change for several past periods. Exponential smoothing is a moving average that weighs the last period more heavily.

Response model technique

Response models take advantage of direct customer input. Noting customers’ responses to past marketing campaigns can help predict how they’ll react to future efforts. For example, it can gauge what customers are willing to pay for a product.

You can segment customers into categories — demographics, social networks, or how long they’ve been a customer — and then split test or test multiple strategies on different segments at once.

For example, you might split a target audience into three groups and offer a discount to one segment, a buy-one-get-one-free offer to the second, and nothing to the third. Analyzing the results will help you see which offer makes the most sense for your audience in general.

Remember to keep the variables simple. The more options you add, the more complicated and less accurate your analysis becomes.

Access all your marketing forecasting data in one place

Marketing forecasting can better predict which campaigns meet your audience’s needs and your company’s financial goals to yield the most significant ROI.

Once you’ve identified which metrics and data meet your needs, you will need a platform to collect and analyze them. With all your customer data in one easy-to-use platform, you can use any marketing forecasting method to predict which campaigns will be the most efficient.

Adobe Campaign connects big databases and your broader marketing ecosystem, including point-of-sale systems, ecommerce platforms, and offline programs. It helps you understand your market and who your customers are. You can analyze all that data in one place and make better marketing forecasts that lead to stronger sales.

Watch the demo video to learn more about how Adobe Campaign can help you create accurate marketing forecasts that prove your strategies, win budget, and set your team up for success.