A good marketing strategy consists of successfully forecasting future trends related to the sales of a product through what is known as the market forecast. Typical questions asked when conducting a market forecast analysis include: how many products do you think will be sold? and when will these products be sold? Accurate and reliable forecasting techniques puts companies in a better position to sell their products to customers and creates expectations that push these companies to meet their goals. Unfortunately, it’s nearly impossible to determine whether forecasted values are reliable or close to actual values until a certain sales deadline arrives. What are some key factors or steps that need to be taken to ensure reliable forecasted values? Do you know of any forecasting techniques that are commonly used?
For keeping reliable values in sales forecasting, better data gathering and analysis techniques are required. The first step is understanding the market, its strength, and its vulnerabilities. Next is to understand the product and potential against competitors. A few standard methods to forecast the trends are customer and channel surveys, expert opinions, executive judgments, Salesforce composite, and time series forecasting.
Time series forecasting is commonly used to predict future trends based on the company's past performance in a certain period. The most common example is of profits of the company. If a company has shown around 10% profit for the past 3 quarters, it is a good chance it offers at least 10% or a slight increase in profit for this quarter. Although this never works that simple since the markets are not predictable.
Market forecasting methods can be categorized as three general types which consist of qualitative techniques, time series analysis and projection, and causal models. As time series analysis was discussed in the previous post I will shine some light on a different type of market forecasting technique. Qualitative market forecasting techniques are most valuable when there is very little to no historical data available about the current market the product is looking to target. Some of those qualitative techniques are the Delphi method, market research, panel consensus, visionary forecast, and historical analogy. Of the qualitative methods the Delphi method and market research seems to be the most accurate of the listed methods. The Delphi method utilizes a panel of experts that respond to a questionnaire to try and conform to a group opinion. After each round the responses are shared with the group in order to allow the experts to alter their answer based on the group response. The goal of this method is to result in a true consensus of what a group of experts think. As it was stated earlier, qualitative forecast techniques are mainly used in situation where a market has not yet been established, therefore, the accuracy of these methods are variable.
Like Atharva said, time series forecasting is a popular method which has a substantial academic presence (it was the principal method used in my Supply Chain classes). Like kaf43 said, the quantitative methods are anchored by qualitative methods to make critical assumptions for the sales models. The Delphi method was one of the methods suggested, but something that was suggested by the National Science Foundation's class was to interview your customers directly. I think this can be combined with Dr. Simon's advice to incorporate Sales in the development process, as they can give key insights into the customer need and the degree to which it is being addressed by the current market.
From my resources, I found the two distinctions between forecasting techniques: you have surveys and judgment forecasting techniques and time series forecasting techniques. In order to not sound like a broken record, I'll point out the surveys and judgement forecasting techniques, where customer surveys can be taken. It should be said that this method is better at gauging the market potential of a product rather than a sales potential. Second method would be to do directly to the sales force, as they can realistically understand what the customer/consumer want in a product. The other remaining methods is to get an opinion from either an executive or an expert.
https://smallbusiness.chron.com/methods-market-forecasting-62491.html
