- What is the ATAR forecasting model?
- What do the letters ATAR stand for in the new products forecast?
- How does the ATAR model work?
What is the ATAR forecasting model?
The ATAR forecasting model is primarily designed to forecast sales and profit contribution of new products following its initial years of release/launch.
Because of the significant time and financial commitment of new products, it is usually necessary to determine whether the initial investment costs will be recouped by future sales and profits.
Therefore, the ATAR forecasting model is used in marketing to help assess the potential profitability of new products – and this financial evaluation will be used (in most cases) in the final decision on whether or not to develop and launch the proposed new product.
Get the free ATAR forecasting model: Free Download: ATAR Model Excel Template
What do the letters ATAR stand for in the new products forecast?
In this forecasting model, the letters represent:
- A = Awareness = what proportion of the target market will become aware of the new product
- T = Trial = what proportion of target market are likely to trial (either purchase or sample) the new product
- A= Availability = what proportion of consumers will be able to find/access the product via retailers or by direct marketing channels
- R = Rebuy (or repeat) = what proportion of customers, who trial the product at least once, will repeat purchase (rebuy) the product on a regular or occasional basis
How does the ATAR model work?
In simple terms, each of the above four components are expressed as a percentage which is then multiplied together – for an example please see this article on the ATAR formula.
The multiplication of these four factors then derives a smaller percentage, which is the percentage of the overall target market (expressed in numbers of consumers or buying units) that will become part of the new product’s ongoing customer base.
For example, if the four ATAR components multiplied out to be 5%, then 5% of the target market would become regular or occasional customers of the new product.
What other information do I need to forecast sales and profits?
As the four ATAR components only work out the percentage of the target market to become customers, then you will need the following information:
- size of the target market = number of consumers or buying units
- the average purchase quantity per consumer during a period
- the average price/cost or margin for each unit (product)
- likely customer loyalty over time
These factors, in conjunction with the original ATAR forecasting factors, will help you determine:
- size of the ongoing customer base over time
- sales revenues over time
- gross profit contribution over time (before and/or after promotional expenses)
Assessing financial viability using an ATAR forecast
If you are also interested in the marketing ROI of the new product, then you would also need to have information on the likely promotional spend over time, as well as the initial upfront research and development investment.
By combining these factors into the overall ATAR forecast and financial calculation, then you can determine financial viability, and likely profitability returns, and various other financial metrics.
It sounds complicated
If you are unfamiliar with financial forecasting, then any sales projection can be a little tricky at first. However, on this website there is a free Excel spreadsheet that allows you to run the ATAR forecast and its associated financial metrics easily and simply.
The hardest part is to come up with the initial estimates and assumptions for some of the factors. Provided that they are based on some logical experience or benchmark, then your ATAR sales and profit forecasts should be quite easy to utilize and incorporated into your analysis and reporting.
Is the ATAR suitable for all industries and firms?
Yes and no. The standard (all four components) ATAR forecasting model is primarily designed for firms/industries where each of these factors plays a role in marketing. However, this is not always the case.
The good news is that the ATAR model can be easily modified, as discussed and demonstrated in this article on ATAR business variations.
Quick FAQs on the ATAR Model
What is the purpose of the ATAR forecasting model?
The ATAR forecasting model is used to forecast the sales and profit contribution of new products after their initial release.
How does the ATAR model work?
The ATAR model multiplies the four components (Awareness, Trial, Availability, and Rebuy) expressed as percentages to determine the percentage of the target market that will become ongoing customers of the new product.
What additional information is needed to forecast sales and profits?
In addition to the ATAR components, you need information about the size of the target market, average purchase quantity per consumer, average price/cost per unit, and likely customer loyalty over time.
Is the ATAR forecasting model complicated to use?
While financial forecasting can be tricky, there is free Excel template available that simplify the ATAR forecast and associated financial metrics. The initial estimates and assumptions for the factors may require data and/or experience.
Example Forecast Using the ATAR Model
Let’s consider an example of a company launching a new energy drink and utilizing the ATAR model to forecast its potential success.
Through market research, promotional activities, advertising campaigns, and word-of-mouth efforts, the company expects the product’s awareness to reach 30% of the target market, which consists of 1 million potential consumers.
- Estimated awareness: 300,000 consumers
To encourage consumers to try the product, the company plans to distribute free samples at various events and locations. Based on research and industry benchmarks, they estimate a trial rate of 20%.
- Estimated trials: 60,000 consumers
The company aims to make the product readily available in convenience stores, supermarkets, and online platforms. They anticipate achieving a distribution rate of 80%.
- Estimated availability: 48,000 units
Among those who have tried the product, the company expects a repeat purchase rate of 30%, indicating that 30% of customers will continue to purchase the product.
- Estimated repeat purchases: 18,000 consumers
- Price per unit: $2.00
- Cost per unit: $1.20
- Estimated repeat purchases: 18,000 customers
- Frequency of purchase: 3 times per month
- Profit per unit: $2.00 – $1.20 = $0.80
- Estimated total repeat purchases per month: 18,000 * 3 = 54,000 units
- Estimated total profit per month: $0.80 * 54,000 = $43,200
Based on these calculations, the ATAR profit forecast for this product, after the initial launch period, would be approximately $43,200 per month.
Find Out More About ATAR Forecasts
- Most ATAR factors are interrelated
- Benefits of the ATAR forecast model
- Limitations of ATAR forecasting
- Availability in ATAR Forecasts
- Trial in the ATAR Forecast
- Awareness in the ATAR Model
- Rebuy/repeat in the ATAR forecast model
- ATAR Examples for Two Small Businesses
- How the ATAR Forecasting Model Works
- ATAR Model: Guide to Prices, Costs, Margins, Quantity
- ATAR Theory
- ATAR Formula
- Buying Units in the ATAR Forecast Model