The Value of Long-Term Market Forecasting in a Short-Term World

Business graph with arrow showing profits and gains-1In today's era of real-time data and knee-jerk reactions, it's become all too easy for businesses to get caught up in the daily noise and lose sight of the bigger picture. We're inundated with a constant stream of headlines about supply chain disruptions, economic volatility, and paradigm-shifting innovations like AI that have C-suites anxiously wondering — how do we respond? How do we stay ahead of the curve?

The natural temptation is to make hasty, short-term decisions in an attempt to chase after the latest trends or mitigate near-term risks. But that whiplash-inducing reactivity often comes at a massive long-term cost for organizations whose strategic planning becomes dictated by short-term blips rather than durable multi-year trajectories.

At The Freedonia Group, we’ve seen it before. We've witnessed confusion over product roadmaps, brand positioning, facility investments, acquisition and divestiture plans, and more in ways that are often misaligned with where demand trends and market forces are truly heading over the long haul. These overreactions create inefficiencies and wasted resources, and leave businesses perpetually lagging.

Through decades of experience forecasting across countless industries, economic cycles, and disruptive events, one lesson rings truer than ever — the value of long-term market forecasting cannot be overstated, even in today's short-term obsessed world.

Separating Signals from Noise with Industry Forecasting

Any data scientist will tell you that projecting singular data points into the future is a fruitless exercise prone to compounding errors. That's precisely why our approach focuses on identifying and isolating the real durable multi-year growth trajectories amidst the distracting noise of short-term volatility.

Think about it this way — do you really want to upend your 5-year strategic roadmap based on a few anomalous months of data impacted by a global supply chain crunch or economic shock? Of course not. Now, sometimes those near-term fluctuations can point to long-term challenges. For instance, a supply chain kink can point to the need for change. However, because those changes aren’t quick to implement and involve costly shifts, they are not to be undertaken lightly. Smart businesses cut through that static by leveraging long-term industry forecasting windows that smooth out near-term fluctuations… separating the trendy from the truly durable trends. By analyzing industry data over extended periods, you can better identify trends that will stick.

Our market forecasting models analyze annual and multi-year growth rates across 5+ year periods to separate bona fide shifts in consumer behaviors and market landscapes from mere temporary blips. This balanced perspective equips decision-makers with the long-term vision required to make prudent investments that pay dividends — not expensive course corrections that create value destruction.

Annual Market Data vs. Five-Year Windows

Both annual data and five-year windows have their merits. Instead of an “either/or” situation, where one is considered more valuable than the other, it is better to think “both/and” as the two types of data presentation are complementary.

  • Annual data reveals market volatility. It captures year-to-year fluctuations, which can be essential for short-term adjustments. However, it may mask critical near-term changes.

  • Five-year windows smooth out irregularities. By looking at five-year trends, businesses gain a better understanding of durable growth patterns. It helps them see beyond short-term noise.

You don’t invest in new facilities or capital equipment with the expectation that you will change them again next year. Facilities construction, for instance, is often a multiyear process from design and financing to completion. Additionally, some types of capital equipment have a waitlist or a long lead time for custom-made versions, and most are designed to last for a decade or more. In the same way, you wouldn’t make M&A decisions or develop new products expecting to change it all again next year.

Stress-Testing the Future

Of course, we'd be negligent not to account for real paradigm shifts that do substantively alter long-term trajectories in certain sectors. From the impacts of historic inflation and supply chain reshuffling to disruptive forces like automation and AI, our long-term models rigorously stress-test a range of potential future scenarios.

This isn't some academic exercise, but a robust framework built on decades of analyzing how industries historically responded to previous economic shocks, energy crises, technological disruptions, and other massive change events. We model multiple potential paths forward, their degrees of probability, and counsel clients on critical signposts to monitor what could trigger certain projection adjustments.

The old adage of "plan for the worst, hope for the best" has its merits, but we prefer a more calculated approach — "plan for the most probable, monitor leading indicators, and course-correct ahead of the curve when signposts indicate a new trajectory." It's this adaptive, data-driven long-term mindset that separates successful future-proofed businesses from those caught flat-footed when inevitable disruptions occur.

What Underpins Our Long-Term Market Analysis?

  • Product-Level and Market-Specific Analysis: We consider each aspect of an industry individually since they typically respond differently to trends such as innovations, regulatory changes, consumer demand, and pandemic pressures. Then we cross analyze, examining trends in similar or related industries, even at different places along the supply chain.

  • Macroeconomic Indicators: Our in-house developed economic composites form the basis for our analysis and they are frequently updated as new information becomes available. Periodically, we release economic outlook slide decks for the US and global markets based on this data with insights from our economics team to help you make any needed adjustment.

  • Primary Research & Competitive Analysis: Contacts with industry participants as well as end-users and suppliers of key elements help us see how various firms are adapting, looking for market-moving innovations and business pivots.

  • Proprietary Consumer Surveys: We conduct quarterly national online consumer surveys to gauge sentiment in industries where consumer-facing trends are enlightening.

  • Historical Perspectives: We’ve been at this for more than 35 years and have built established historical series that enable comparisons to how industries responded to past crises and market-moving trends and how this era is the same and different.

But What About Market Volatility?

We have a well-established methodology for considering and adjusting to challenges. Here’s just a bit of how we do it:

  • Expected Normal: We start by assessing recent activity and trends. What’s the baseline?

  • Challenge Impact: Next, we consider the challenge (e.g., crisis, pandemic, inflation). How does it affect business activity?

  • Duration Estimation: We estimate how long the changed conditions will persist.

  • Bounce-Back Analysis: What does recovery look like? Not just the level of activity but also the nature of change.

  • Comparisons: We use comparisons to past downturn responses and periods of innovation/disruption. Past performance doesn’t guarantee future results, but it can point you in the right direction.

  • Alternatives: We analyze alternatives—what customers might choose instead.

  • Pricing: We consider pricing impacts from input materials to energy to packaging to shipping.

  • Consumer Insights: We analyze consumer priorities, level of concern, changed habits, and more.

The Next Normal Is Already Here

At the end of the day, our mission is to pierce through the pandemonium of an increasingly turbulent world and shed light on the larger, longer-lasting human truths that transcend short-term chaos and headline reactions. Whether it's evolving consumer priorities, brand affinity shifts, or sectoral adaptation to macro forces, the "next normal" future states are already being forged by undercurrents percolating beneath today's distracting volatility.

By training a long-term forecasting lens on these deeper currents, we equip clients with the foresight required to not just survive disruption, but optimally position themselves to thrive amidst it. Short-term shocks come and go, but the competitive advantages gained from long-term vision, planning, and preparedness compound over time into durable market leadership.

In a world obsessed with chasing short-term trends, the true visionaries will be those who stay focused on the bigger picture and longer horizon.

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About the author: Jennifer Mapes Christ is a long-time analyst and research manager at The Freedonia Group and Packaged Facts. With 25 years of experience sizing markets, forecasting demand, and tracking trends, she has authored more than 90 studies, and her analysis has appeared in The Wall Street Journal, The Washington Post, The New York Times, and many other industry publications and media outlets.

Topics: Market Research Strategy How To's