Module 3 • Sales forecasting 5. Methods of sales forecasting
Forecasts help determine the following: • The number of salespeople to employ • The amount that can be spend on samples, travel and entertainment.
5.1 Jury of executive opinion
Experts with years of experience are used with this method. Group of executives meet and offer their individual opinions on the forecast for period in question. Individual opinions may be averaged or consensus is reached on the number. It is a subjective method, seeing that each person gives his opinion based on his own experience. It is very useful in situations where no previous data is available, for example, when a new business is started, a new product line is launched or a business plans to sell in a new area/market; thus, in cases where no previous data is available. Executives support their estimates with facts that they have researched for example from specialised magazines, newspapers, talking to other experts in the industry and from reading research reports. .
Advantages • Experience and observations of talented executives with proven track records are used. • The forecast is developed easily and quickly. • Very useful for new products with little or no sales history.
Disadvantages • It is based on experience that cannot be taught or carried over. • It is not scientific. • Group opinion can be strongly influenced by a dominant person in the group. • Group pressures to "agree" may distort individual judgements. • The responsibility of the forecast is spread amongst the group (who is really responsible for the forecast if something goes wrong?).
• It adds to the workload of executives, requiring them to spend time that they would otherwise devote to their areas of main importance.
5.2 Delphi technique
The Delphi technique utilises the opinions of executives without face-to-face discussions. Opinions are given anonymously. This creates a more accurate forecast than the Jury of Executive Opinion. The forecaster will take the predictions of each executive member and combine it into an anonymous summary. The forecaster will then resend it to everyone. Each member then has a chance to study the summary, revise their forecasts, make adjustments or change their opinions. It is then sent back to the forecaster. The process is repeated several times until consensus of opinion is reached.
This is a more structured method and more objective than Jury of Executive opinion because there is no dominant person and no group pressures that will influence one another.
Advantages • Members stay anonymous. • Independent judgements are reached by all individuals. • The Delphi technique is more scientific and systematic as Jury of Executive opinion, because the executives do not communicate with one another and their opinions are systematically processed to develop a consensus.
• It minimizes the effect of group dynamics.
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