Do Not Substitute the Share Intending to Buy for the Purchase Rate
In a survey about a new product, 40% of respondents say they intend to buy. If you have 1,000 potential customers, should you plan production for 400 buyers?
Purchase intentions can inform a sales forecast, but using that percentage directly as a purchase rate requires evidence. An intention is a stated plan to buy in the future. It is related to actual purchasing, with the relationship varying by product and survey method. (Research on purchase intentions and actual purchasing)
To translate responses into sales, it helps to know how many people answering the same question subsequently bought. Include purchases by people who initially had no intention to buy.
The Relationship Varies by Product and Question
Morwitz and colleagues’ 2007 paper examined the relationship through a meta-analysis combining commercial and academic data and a separate set of 60 product tests. It reported differences including the following. (Methods and findings of the 2007 study)
| Comparison | Side with a higher correlation between intentions and purchasing |
|---|
| Existing versus new products | Existing products |
| Time between the question and measurement of purchasing | Shorter horizons |
| Product category versus a specific brand or model | A specific brand or model |
These are differences in associations across products and research methods. They should not be read as an experiment establishing a fixed reduction in forecast error from making your own question more specific.
A higher correlation also differs from numerical agreement between the percentage intending to buy and the purchase rate. People stating an intention may be more likely to buy without every one of them making a purchase.
Plans and the Opportunity to Purchase Can Change
There is a gap in time between answering and buying. Sun and Morwitz’s 2010 study proposed a forecasting model accounting for systematic response biases, changes in intentions over time, and the imperfect correspondence between intentions and purchasing. (A model linking stated intentions and purchase behavior)
For example, someone planning to take a course may find that its dates conflict with work when enrollment opens. Someone with no initial intention may later discover a need to learn and enroll. These are illustrative explanations for differences between responses and purchases.
As a practical application, ask about a specified course with its price and dates, then compare responses with subsequent enrollment. Asking whether someone is interested and asking whether they intend to enroll in that offer measure different things.
A 40% Intention Rate Can Accompany a 15% Purchase Rate
The following figures and purchase outcomes are hypothetical.
Suppose 200 people see the price and dates of the same course, and 80 say they intend to enroll. Assume you can observe paid enrollment for all 200 during the 30 days after enrollment opens. Count each buyer once even if they complete multiple transactions.
| Intention when surveyed | Respondents | Buyers within 30 days | Purchase rate within the response group |
|---|
| Intend to enroll | 80 | 20 | 25% |
| Do not intend to enroll | 120 | 10 | About 8.3% |
| Total | 200 | 30 | 15% |
The share intending to buy was 80 ÷ 200, or 40%. The share actually buying was 30 ÷ 200, or 15%. Respondents intending to buy had a higher purchase rate, so their answers contain a useful distinction for forecasting. Nevertheless, substituting 40% for the purchase rate disagrees with the observed outcome.
The 30 buyers comprise 20 of the 80 initial intenders and 10 of the 120 initial non-intenders. Counting only intenders would omit purchases from the second group.
These 200 responses alone do not establish a 15% purchase rate for the entire market. If only existing customers answered, for example, applying the same rate to people encountering the product for the first time would require further evidence.
Treat Past Response Patterns as an Assumption for the Next Forecast
To forecast from intentions, use purchases following the same question in the past and assess whether that relationship applies to the next offer. In the example, the relevant observations are that 25% of intenders and about 8.3% of non-intenders purchased.
Given the number of respondents in each group next time, you can multiply each group’s size by its past purchase rate and add the expected buyers. Prices, course dates, and customer acquisition channels can change those rates, however. The calculation assumes the past relationship continues. Compare the forecast with actual enrollments and revise it.
Revenue also requires information about spending. The same number of buyers can generate different revenue when plans or purchase frequency differ. Before setting production volumes or a sales budget from favorable survey responses, establish what purchase records show about the offer, amount paid, and purchase date.
A course or service website can state the price and dates used in the survey, providing part of the information needed to understand what buyers were offered.
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