Demand Forecasting for Valentine’s Day

Seeing all the hearts, red colour and Valentine’s Day sale ads in the papers got me and my marketing mind thinking. One of the first thoughts that struck me was that Archies was the pioneer in India in popularizing the concept of Valentine’s Day. All others took the bait and followed suit a few years later and today everyone has jumped onto the bandwagon as it is a commercial opportunity that cannot be missed. So be it a florist or jeweler or a retail chain or a pub/lounge, everyone is out there to make a kill and rightly so….after all if you don’t take that opportunity, someone else would.

While for most others, there is not too much of a need to change their merchandise mix too much other than packaging the entire concept in a different way, but when it comes to the pioneer itself – Archies, the game changes a bit.

For Archies, planning for this activity would be a mammoth task, starting months in advance, deciding on what all gift items to procure, in what quantities and from which vendor/country.

This is where the big challenge comes in – Demand Forecasting. This is also the core idea behind my blog as I got intrigued by just thinking about it.

I mean how does one forecast for such an event?

One cannot apply a simple formula like other companies, where you assume a certain growth percentage. It does not work like that in such a scenario. Following questions are hovering in my mind:

• How does one know how many people would be in a relationship next year and how many would not? How many people who are in a relationship this year may not be in one by next year and may not be celebrating?
• How does one know how many people would have found that special someone, with whom they would want to celebrate Valentine’s Day?
• What is the number of married people who would want to celebrate this one day of love?
• Even if people are in a relationship/or have got into one, how do we know whether they would be keen to celebrate this concept or idea or not?
• How does one figure out that what is the amount that those people who are celebrating this day would be willing to spend?
• What is the number of gifts/cards that they would pick up?
• How many soft toys with love messages should be ordered? Similarly how many love or Valentine cards should be ordered?
• How do you further plan this for each of the store for each of the city? How do you know which city or which area will have more people flocking to that Archies store to pick up something for their Valentine?

The counter response to some of the questions that I have raised above could be that, the same is true for any other category or occasion. To some extent, that is right, but in most cases, the merchandise can be used even later or after the occasion is over, but unfortunately that does not work mostly in such a case.

I don’t have answers to the questions raised above, so if some of you know it, please do let me know and I would be glad to figure this out. And if you guys are also intrigued and are looking for answers to these, then maybe this is an interesting material for a case study to decipher how Demand Forecasting is done for Valentine’s Day.

Are you the fourth in line?

Imagine this situation happening on the road in Bengaluru: 

Girl on road at Koramangala: Will you go to Old Airport Road?

Auto 1: Yes, but I will charge Rs. 90/-

Girl: But the fare till that place is only Rs. 50/-

Auto 1: Your call. I will charge Rs. 90/-

Girl lets go of the auto and stops the next one.

Auto 2: I will charge Rs. 90/-

Girl tries to haggle but with no result, she lets go of the auto and stops the next one.

Auto 3: I will charge Rs. 90/-

Girl tries to haggle but with no result, she lets go of the auto and stops the next one.

Auto 4: I will charge Rs. 90/-

Without any discussion, girl sits in the auto and ends up paying Rs. 90/-

Now you can imagine the situation by assuming any city that you want/where you live. Instead of the girl, you can imagine yourself. And instead of the auto, you can imagine a cab, a street vendor or any other person you can think of.

Chances are that you would have also experienced a similar situation and by the time you reached the fourth guy, you would be so tired and frustrated that you would just give in and end up paying the same amount that the first guy was asking for.

Now sit back and reflect at this situation and you will see a few insightful things emerging out from this:

1) There was no fault of the first guy to ask what he asked for (ignore the overcharging part). He was simply unlucky to be the first in line but he set the context for the amount that you would pay.

2) You obviously knew that you are paying the fourth guy the same amount of money that the first guy was asking for but you are frustrated enough now to go back to the first guy nor is there any need for you to do so.

3) The fourth guy probably does not know that he is the fourth guy that you are encountering and that you have already crossed the limit of your patience and your negotiation skills. Had he known that, he would have probably quoted Rs. 100 instead of Rs. 90 and chances are that you would have even agreed to pay that much. So that is an opportunity loss for him due to lack of information (Though he is still earning/charging more than what he should).

4)  Had you known that you would still end up paying the same amount of money that the first guy was asking for, chances are that you would not have wasted so much time and energy and negotiating and waiting for a better/reasonable deal.

5) If you had the energy and time to negotiate one more time, who knows, the auto guy would have reduced the price by Rs. 10 or 20

So what emerges from the points mentioned above is a classic case of economics where other than two critical factors – demand and supply, there are two more dimensions that come into play. These two dimensions are: Time and Energy

Often we tend to ignore these two critical dimensions when it comes to striking a deal – small or big, but they play a critical role in the sub-conscious minds of ours.

It is not the question of an auto guy or a question of Rs. 50 vs. Rs. 90. These two dimensions play an important role across all deals and the best negotiators will tell you this that one of the tricks to get the deal in your favour is to stall it till the end, knowing fully well that the other party will give in when either he is short on time or short on energy.

So if you are the auto guy (to be read as the guy wanting to strike the deal), try and be the fourth in line and chances of getting a good price and the deal will increase significantly. If you are the victim (to be read as the guy who has already negotiated earlier and is in a hurry to close the deal now), then either try and increase the energy and time you have to negotiate the deal or just close the deal with the first guy and move on as it will give you lesser heart burn.