Opinions of sales force experts and past sales data for forecasting


Involving the sales force in forecasting brings a number of benefits. Sales reps might have better insight into developing trends than any other single group. After participating in the forecasting process, reps might have greater confidence in their sales quotas and more incentive to achieve them. Also, a “grassroots� forecasting procedure provides detailed estimates broken down by product, territory, customer, and sales rep.

Expert Opinion

Companies can also obtain forecasts from experts, including dealers, distributors, suppliers, marketing consultants, and trade associations. Large appliance companies periodically survey dealers for their forecasts of short-term demand, as do car companies. Dealer estimates are subject to the same strengths and weakness as sales force estimates. Many companies buy economic and industry forecasts from well-known economic forecasting firms. These specialists are able to prepare better economic forecasts than the company because they have more data available and more forecasting expertise.

Occasionally, companies will invite a group of experts to prepare a forecast. The experts exchange views, and produce a group estimate (group-discussion method); or the experts supply their estimates individually, and an analysts combines them into a single estimate (pooling of individual estimates). Alternatively, the experts supply individual estimates and assumption that are reviewed by the company then revised. Further rounds of estimating and refining follow (this is the Delphi method).

Past Sales Analysis

Sales forecasts can be developed on the basis of past sales. Time series analysis consists of breaking down past time series into four components (trend cycle, seasonal, and erratic) and projecting these components into the future. Exponential smoothing consists of projecting the next period’s sales by combining an average of past sales and the most recent sales, giving more weight to the latter. Statistical demand analysis consists of measuring the impact level of each of a set of causal factors (e.g. income, marketing expenditures, Price) on the sales level. Finally econometric analysis consists of building sets of equations that describe a system, and proceeding to fit the parameters statistically.

Market-test Method

When buyers do not plan their purchases carefully or experts are not available or reliable, a direct market test is desirable. A direct-market test is especially desirable in forecasting new-product sales or established product sales in a new distribution channel or territory.