Sales Forecasting Qualitative Sales Forecasting

Sales Forecasting

Qualitative Sales Forecasting Methods

Seven of the most commonly used qualitative sales forecasting methods are: educated guess, executive committee consensus, Delphi method, survey of sales forces, survey of customers, historical analogy, and market research. Each of these methods are best suited to certain sorts of businesses. The following paper will describe what type of business is suited to each method and why.

The educated guess method involves using current information and past experience to guess future sales. The main problem with this method is that it will not provide an accurate estimate of future sales and that it has a significant risk of being incorrect. This makes the method most useful for organizations where an incorrect sales forecast will not have dire effects and one where sales forecasts only need to be made for the near future.

The executive committee consensus method involves a jury of executives predicting future sales based on past experience. This usually involves executives from various backgrounds adding their opinion based on their area of expertise. The end result is that a reasonable assumption is made about future sales and that this is completed quickly and at low cost. The major problem with the method is that the results may not be accurate and that they may not take into account future changes in the market. These disadvantages to the method make it most useful for organizations where an accurate sales forecast is not required and for organizations in stable industries.

The Delphi method is a structured survey method that makes use of various expert opinions. As Baker (1999, p. 278) explains, "Experts provide forecasts for a problem, receive anonymous feedback on the forecasts made by other experts, and then make another forecast." This method allows experts to gain new perspectives and improve their forecasts, but with each expert also allowed to make their decisions independently. This method is best used when forecasting future sales is difficult, such as in markets that are rapidly changing or markets where consumers are unpredictable.

A survey of the sales force involves asking salespeople for their estimate of future sales. The benefit of this method is that salespeople are in contact with the customer and are aware of current demand, of the needs of customers, of factors impacting customers, and of what the competition is doing. As Perreault and McCarthy (2000, p. 468) note, this method is most useful in "markets where the few customers may be well-known to the salespeople." In these types of organizations where only a few large customers are served, predicting sales based on first-hand knowledge of the customers can be an effective forecasting method.

A survey of customers involves asking customers about their future intentions. One of the benefits of this method is that it allows for an overview of all customers, rather than focusing on several select customers. The second benefit is that it gains information by going directly to the buyer. This method is best used in markets where consumer behavior and consumer perceptions drive the market (Neal, Quester, & Hawkins 1999, p. 1.5). This includes the fashion industry, the entertainment industry, as well as many service industries.

The historical analogy method is based on recognizing that similar products will often follow similar growth patterns. This method is used to predict the future sales of new products. This method is best used in industries that are introducing completely new products. The two main examples are the electronics and computer industries. This method is best used for completely new products because the other methods often cannot produce accurate predictions for a product that has no past sales history. In these cases, considering how a similar product sold gives a reasonable estimate.