Market research is intended to provide answers to questions that affect forecasts of demand for a new product or service. These questions include:

• What is the size of your target market?
• What is the demand for your product or service?
• What do consumers consider when making their purchase decision?
• What gaps are there in the market?
• What are the appropriate pricing and promotion decisions?

A sales forecast is an estimate of what a business is capable of selling. A demand forecast is an estimate of what the market needs. Typically, a sales forecast will be less than a demand forecast due to limits to the capacity of a firm to produce the product or service.
The NewCast software program develops a demand forecast by considering a number of factors about the target market and your product or service.

The demand forecast is based on your knowledge of the target market, the product or service that you want to sell into that market, and about the past, present, and potential customers for the product or service. Because you have gathered the information about consumers, needs and preferences, you can assume that the forecasts will reasonably reflect demand in the target market and will be consistent with your information about that market.

A target market is a particular group of consumers at which you aim your product or service. Target marketing involves breaking a market into segments and then concentrating your marketing efforts at one or a few key segments which have customers whose needs and preferences most closely match your product or service offerings. Target marketing can be the key to attracting new business.

The length of your forecast should be determined by the use to which you intend to put the forecast. If your interest is in cash flow, then a forecast for a year might be reasonable. If you are preparing a business or marketing plan, then a minimum of three years of monthly forecasts might be necessary.

The product/service life cycle is the pattern of demand that every new product or service goes through – a pattern that goes from introduction to withdrawal or eventual demise. This pattern is illustrated below.

Pricing policy refers to the method companies use to price their products or services. There are several strategies that companies can use when introducing a new product or service. These include :

• Penetration pricing – a pricing strategy where the price of a product is initially set low to rapidly reach a wide fraction of the market and initiate word of mouth.
• Price skimming – a pricing strategy in which a company sets a relatively high initial price for a product or service at first, then lowers the price over time.
• Discount pricing - a temporary decrease in price for a good or service, often for a specific purpose. Companies may develop strategies such as quantity, seasonal, cash or promotional discounts to increase sales revenues.
• Product life cycle pricing – a strategy of adjusting the price that a business charges for a product or service based on its position in the product life cycle.
• Competitive pricing – a pricing strategy that consists of setting the price at the same level as one’s competitors.

Promotion (marketing) policy refers to a company’s strategy that combines all of its marketing goals into one comprehensive plan. A good promotion strategy is drawn from market research and focuses on reaching people and turning them into customers.
For new product development, you will need to determine, on a judgment basis, whether your promotion policies are above average, average, or below average to that of your competitors.

Not every product or service sells at the same rate throughout the year. There are bound to be peaks and valleys with the coming of different seasons and months.
This little fact can create cash flow problems, particularly when introducing a new product or service. This happens because many of your expenses will remain relatively constant, while revenues fluctuate with the season.

Breakeven analysis lets you determine what you need to sell, monthly or annually, to cover your costs of doing business – your breakeven point.
Breakeven analysis measures the point at which the profits from a new product or service balance the investment cost. Any revenue received beyond the breakeven point yields cash above and beyond the initial development expense.