Measuring Demand in a Time of Uncertainty

 

What do you do if you are in the business of market sizing and predicting consumer behavior and the markets get shut and consumers forced inside?

The COVID-19 pandemic is the biggest disruptor to hit the global economy, and our everyday lives.

When this is all over, what will people want? Other than shaking hands, what else will change?

As one of our analysts put it: “Next month, if we are set free, you may schedule that business trip that you should have taken last month. But you will run out to get that long overdue haircut. The trouble is, you won’t get two haircuts. That money is gone.”

Most recent crises were financially driven: The dot com bust, the financial crisis of 2008.  So while deliberately shutting down many sectors of the world economy is a moment without history, our experience from other sudden changes give us guidance about how sudden shocks to these industries are resolved.

We believe consumer response to this crisis will be faster and more robust because of the strength of the underlying economy when this began, which differentiates it from the most recent economic declines. There will be pent up demand. The market for various products will change, but how much and for how long?

How do we frame this moment?

We look to past events to learn how product demand is affected by market variables and then use projections of those market variables to anticipate how demand will evolve in the future. But it’s not just the mechanics, the process, the numbers, it’s how and why those relationships held in the past and why they might change in the future.

This is not BIG DATA. It’s deliberately small data with big analysis. We take topics where there is limited information like copper piping or flat glass and we create market data and insights.

We are like the archeologists who find a handful of dinosaur bones, but can create the entire dinosaur skeleton from them.  We take a small amount of information, and through associated data, research, and expertise, build it out into the entire picture of an industry.

But it starts with data.  Take the healthcare market for sanitizers and disinfectants. There is no published data on this market at the industrial and institutional level. So we look at the number of healthcare facilities in a certain region, the square footage of these places, and the facility type to estimate how much they are using. Then we might look at hospital expenditures, healthcare acquired infections, and how that is driving demand.

And then of course, there’s the human factor.  After various historical events we have feared flying, feared trains, feared crowds. Now we fear people, closeness, nose scratching and running out of toilet paper.

Market researchers are modern day fortune tellers.

But we don’t read palms.  Beyond the data it’s all about relationships and the factors that make them change.  Predicting the future is all about understanding the past, even in a time without precedent.