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R. L. Polk & Co.’s Ask the Industry Asks: How Do You Make Future Business Projections?

In an industry subject to ever changing market conditions, it’s important to have as many tools as possible to help project an accurate business forecast for the year ahead. For this week’s “Ask the Industry,” we asked a number of aftermarket firms what methods they use to make future business projections. Their responses conveyed the high-level of creativity and analysis that goes into predicting future supply and demand.

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By Amy Antenora
Editor, aftermarketNews

In an industry subject to ever changing market conditions, it’s important to have as many tools as possible to help project an accurate business forecast for the year ahead. For this week’s “Ask the Industry,” we asked a number of aftermarket firms what methods they use to make future business projections. Their responses conveyed the high-level of creativity and analysis that goes into predicting future supply and demand.

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Aftermarket manufacturers like DENSO say they rely on numerous tools to make future business projections, including industry information from Polk, Ward’s, Technologue and Frost & Sullivan, in addition to conducting research to help accurately forecast and service its customers. Much like DENSO, H3R Performance, which makes automotive fire extinguishers, relies on external data to develop future projections. According to Chris Dieter, vice president of marketing and distribution for H3R, external data is gathered through third party research, customers, prospects and trade publications. Tapping into the resources of industry associations is helpful as well, said Dieter.

“Trade organizations such as SEMA, PWA and NHRA provide invaluable information on marketplace trends that help us identify opportunities and influence projections,” said Dieter. “We also regularly solicit feedback from our customers concerning sales trends, consumer feedback and potential new product opportunities. And, despite the hustle and bustle, trade shows are a surprisingly good venue to gather this type of frank feedback from customers and prospects. This external information, coupled with regular analysis of internal data concerning sales, inventory, profitability and cash flow enables us to make business projections with confidence.”

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For a company like The Marx Group, a California-based strategic marketing and communications firm, keeping an eye on the market is one of the ways the company helps its clients maintain a solid grasp on their standing in the marketplace. The company also utilizes information from industry associations to help its clients map out future business projections.

"While we encourage our clients to use primary and secondary research in order to help determine product trends and buyer preferences, we find that our clients expect The Marx Group team to be watching industry direction as a 365-day, every year endeavor,” said Tom Marx, president and chief executive officer. “Those areas of greatest interest are the number of turns, buyer perception of product quality, brand awareness and the likelihood of recommending the product to other buyers or users. We are voracious readers of data provided by AAIA, SEMA and MEMA, as well as independent research companies, which helps us plot today’s realities with tomorrow’s possibilities. Along with our own research, we are able to provide a well-rounded approach to planning."

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SPAL USA, an automotive components manufacturer based in Ankeny, Iowa, said the key to making future business projections is keeping a close eye on its customers.

“To accurately forecast future sales we look at the current business and direction of that business. We try to look at all customers to get and idea of what is going on,” said Bob Folkestad, director of electronics and innovations, SPAL USA. “This information would include market trends, technology, competitors, past sales history and current sales. We rely on firsthand knowledge of our customers’ sales and trends in their industries, payment histories and future sales forecasts from these customers.

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Folkestad added that the fluid nature of the aftermarket today makes it hard to rely on typical forecasting methods. He said it’s not uncommon for SPAL USA’s forecasts to be updated on a quarterly basis because of the constant changes in the marketplace.

“To accurately manage these forecasts you need to look at the whole picture and get the pulse of what is going on,” Folkestad said. “This is ongoing and not done once per year. The aftermarket changes too quickly to use some typical methods for forecasting. The last detail is the common sense approach to what is happening, sometimes you can listen to the customer too much, you need to step back and see if it meets the common sense test, this really applies to new product development as well as forecasting.”

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Whether your business is a major corporation or smaller start-up, one of the easiest places to start conducting research online. Let’s Go Aero (LGA), a Colorado Springs-based manufacturer of hitch-based carriers for a recreational equipment transport, general travel and commercial trade uses, said that it relies on public data available through Google and Yahoo as a means to evaluating market size relative to product opportunities. Once that is done, the next step is to talk to customers, dealers and others in the marketplace to find out what else they are competing against.

One of LGA’s best resources for feedback is from one type of customer in particular, the OEM.
“We start by doing online research to ferret out any available public data in the Google/Yahoo universe. In the online area, both the Wall Street Journal archives and the SEMA archives stand out as among the best sources,” said Marty Williams, president, Let’s Go Aero. “Once we’ve identified a discontinuity in the market between what the market wants and what is being sold, LGA attempts to bridge this discontinuity with a novel design that has patentable attributes. Then we talk to customers, friends, resellers, dealers and OEM’s regarding the product function and value propositions relative to competing designs. LGA gets a lot of information from OEMs due to our history of working with them. … This is one of the best sources we have used for identifying market ‘needs.’”

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Predicting future business levels can seem like a mysterious process, but the tools to better forecasting are available. It’s just a matter of finding and using the tools that make the most sense for your business. Perhaps one of the best is also free: listening to your customers.

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