How To Build and Manage a Demand Model Forecast
Today’s episode is on Demand Models: we’ll be learning how to understand where you’re currently at from a demand perspective, and how to take all the information you have to forecast what demand needs to be in order to meet company goals. This is the third installment from me on Demand Models. First, I wrote about how I use my anxiety as a superpower – the demand model being a part of what I use to lower my anxiety! The second post focused on releasing a template of the Demand Model itself. This one walks through that Demand Model and helps you understand how to get started.
What is it? Marketing today is all about revenue, and demand models help us understand ARR and MRR, and other revenue goals. They give us an idea of what needs to be done in order to meet specific marketing goals. In a way, it turns marketing into a math problem and gives a sense of control over a goal given your resources.
One benefit of a demand generation model is that you can prove how many resources you need to meet a specific goal. Most demand models are unique based on a specific company’s unique products.
Demand Model Elements
Understand where you’re trying to go
- Where is the quarter beginning? When will the quarter-end? How much do we want it to grow within this time?
- Keep in mind churn—you might have customers coming up for renewal
- Try to understand where you’ll be at from Net Revenue Retention perspective
How likely is it that the pipeline will close within this time period?
- Look at what’s qualified—this will involve working with Sales
Now turn revenue into a number of deals
- For x customers in a segment, you know you average a certain amount
- Break it down to discover how many customers you need to meet the goal
Then you need to know your conversion rate from early-stage to late-stage
- Take into consideration both win rate on revenue as well as count
Finally, what’s the percent likelihood that a lead coming in today will close by the end of your quarter?
