Forecasting With Digital Data
One of the first barriers for many businesses on the way to using data in their decision making is accessibility. Not every business has access to large datasets, and not every business is in an industry where “big data” is worth the time and effort. However, almost any business with an online element to their business - from digital marketing to e-commerce - can find valuable and actionable information from easily available sources. Being able to forecast and act on this information is crucial to either weighing up certain market opportunities, or figuring out how you’re positioned moving forward in your current market.
Online Traffic and Search Interest
For those businesses selling a product or service online, or looking to potentially introduce an online store, an understanding of the expected online traffic to your website is paramount. If you have an established website with relatively consistent traffic outcomes each week or month, then this step is easy. However, if your website is new, or you’re planning to start a new online presence for your business, then finding the search interest for your product or service is the first step to forecasting your traffic.
Tools like Google’s Keyword Planner and SEMRush allow you to find average monthly search volumes for any keyword or topic. Search “electric cars”, and you will find that the general average of monthly searches for “electric cars” in New Zealand is 2,400. This gives you an idea of the ‘search market’ for that product. If you can estimate or plan to attain a certain share of that search market, across all of the relevant keywords to your business, then you can start to forecast traffic attained through Google. For example, if you were an electric car company that believes you could get 10% of the NZ search market for electric cars, you would expect 240 monthly visitors through the “electric cars” search term alone. Stack the other keywords relevant to your business on top of that, and you start to paint a clear picture of the traffic potential for your website.
E-Commerce Conversion Rates
Once you understand the general range of traffic you are expected to see in a given time period, you can then layer e-commerce conversion rates onto the traffic figures, to understand how many sales you are likely to experience in that period.
Even if you don’t know your recent e-commerce conversion rates, or you’re yet to actually start an online sales channel, you can use industry average rates to get a general gauge of your potential market. From the Frankly Insights platform, we know that the global average for online conversion rate was approximately 3% in 2020, but the number shifts up or down depending on category. Gifts were one of the higher categories at 4.9% in 2020, with consumer electronics the lowest category at 1.4%. To clarify, gift businesses averaged about 5 sales per 100 visitors to their website, while consumer electronics averaged between 1 to 2 sales per 100 visitors. For high-traffic websites, that difference can be make-or-break for the business
With an idea of the number of transactions you can expect in the future, you can use metrics like Average Order Value to put a monetary value on the market you’re in currently or the market that you’re interested in entering.
Other Data Sources
Ad Spend - while the Direct and Organic channels are generally higher-traffic and higher-priority for forecasting, the Paid ad channel can also be forecasted ahead as well as used to forecast expected business performance as a whole. This applies both to digital advertising - e.g Google Ads - and any traditional ad spend such as print, TV and radio. Getting a good grasp of how fluctuations in ad spend across all channels can affect your business is crucial - and it can be as simple as making a table comparing multiple metrics, or using regression analysis to find the correlations between various data points.
Public Data - looking to start a new business or start selling in a new location? Public data sources such as census data and national surveys can give you insight into the potential interest for your product and service. For example, if you know the demographic breakdown of your current customer base in one region, finding the demographics of your new region to sell in can help you to size up the opportunity. Overlay the demographics data with any current data you have from search interest, Analytics, and more, to create as good a projection as any for how your business is likely to perform in a new area.
