Various Methods of Sale forecasting

Various methods of sales forecasting, their merits and demerits have been analyzed below.

Survey of consumer’s opinion method

In this direct method of sales forecasting, the marketing manager takes the opinion of the users of a product. In it, buyers are asked about their future buying intentions of the product, their brand preferences, increase in the prices of products, change in the product’s features, quantities of purchases, etc. Thus, the total sales forecasts of the products are estimated by combining the responses of consumers.

Merits:

• Useful when the number of buyers is very limited.
• Suitable for short-term decisions regarding product and promotion.
• The results obtained are realistic, as they are based on direct opinions of buyers.
• Simple to administer and comprehend.

Demerits:

• The necessity of consumers like tastes, preferences, fashion, etc, may change in long run. Hence this method is unsuitable for long-term forecasting.
• Some of the consumers do not want to give their exact requirements and thus, these forecasts may be wrong.
• Often, surveying is an expensive method both in terms of resources and time.
• Not suitable when buyers group is large.

Executive’s judgment or jury of executives opinion method

In this method, experts in the particular field are requested to give their views on the likely demand for the product in future. Here, a seminar is organized and all the executives of the enterprise participate in this seminar. The opinions of all the executives regarding demand of the product of the enterprise are collected and forecasts are determined on the basis of such opinion. This method is also called the hunch method since the experts give their opinion after weighing pros & cons of all factors affecting the product demand and arrive at an estimate. Thus, on the basis of knowledge and experience of marketing executives, the sales forecasting of the enterprise takes place.

Merits:

• As this method is based on the knowledge and experience of top executives of the enterprise, the forecasts made under this method are expected to be very close to the reality.
• This method is very economical because the firm need not spend time and resources in collection of data by survey.
• No need of buyers’ investigation.
• Very useful when the product is absolutely new to all markets.

Demerits:

• Such forecasts are based upon opinions and experiences and not upon facts.
• As the liability of making sales forecasts may be on many executives, it may be lack of responsibility determination.
• It is not always necessary that the executives of the enterprise are expert in forecasting the sales.

Experts Opinion Method

In this method, the opinions of experts in the field of marketing are collected and forecasts for the sales of the enterprise are made on the basis of such opinion. The opinions to be collected under this method may be from wholesaler, retailers, distributors, newspapers, journals and professional experts. This method is also known as the Delphi technique, in it the experts who offer their opinions do not have face-to-face interactions and they are free to express their opinions.

Merits:

• Very useful when the product is absolutely new to all markets.
• The enterprise is not required to spare its time on sales forecasts.
• This method is also economical because collection of opinions of experts is cheaper than actual survey.
• As sales forecasts are based upon the knowledge and experiences of sales experts, its is considered to be reliable.

Demerits:

• Not suitable to forecast the sales for different market segments and territories.
• Not suitable for sales forecasts on the basis of different goods & services, different areas and different customers (or consumers).
• Under this method, the payments are to be made to the experts. Thus, it is very expensive method.

Market Test method

This method is best suitable for the sales forecasting of a new product or potential of existing products in new geographical areas. Under this method, some certain segments of the market are selected and the particular product is introduced on trial basis in these segments only. The results of sales in these segments are collected and analyzed and on the basis of these results, the sales forecasts are made for the whole market.

Merits:

• Suitable for new products.
• Less risky, as the launch of new product is limited for certain segments of the market.
• It provides an opportunity for the market and product development.
• It helps the enterprise not only up forecasting the sales but also in evaluating the merits· and demerits of its product.

Demerits:

• Time consuming process, as it observes the actual buying pattern of consumers.
• The results of the method are not necessary to be reliable because all the segments of a market have different characteristics and consumers of all the segments have different tastes and preferences.
• Test of marketing is very costly as it requires actual production of the product and in the event of failure of product the total cost of administrating the product goes waste.

Trend analysis method

The trend method is based on analysis of past sales patterns. It is used when the available sales data are of different time periods. This method is based on the assumption that future events are a continuation of the past. Thus, historical data can be used to predict the future.

Merits:

• Very simple and economical.
• If the factors affecting sales remain constant, the results are most reliable.

Demerits:

• The accuracy of trend projection method depends on the availability of time series data; the longer the series, the better the results.
• This method is based on the assumption that all the factors affecting sales remains constant during the period of forecasting, but this assumption is not real. The reality is that the factors affecting the demand of a product always keep on changing. Thus, the results drawn under this method are not expected to be true or reliable.
• It may not necessarily be true that past pattern would be continued in the future.

Composites of sale force opinion method

Under this technique of sales forecasting, the views and opinions of all the salesmen and sales executives of the enterprise are collected. Sales forecasts of the enterprise are made on the basis of analysis and interpretation of these opinion and views.

Merits:

• This method is based upon the opinions and views of the persons who are in the real touch of real consumers.
• The results drawn under this method are expected to be most reliable.
• This method provides direct incentives to the Sales Force of the enterprise because they feel themselves an integral part of the enterprise.
• This method is very easy, simple and economical.
• This method is very useful in determining the individual responsibility of sales personnel.

Demerits:

• Salesmen are not in touch with the changes in the factors affecting the sales of the enterprise.
• Not suitable appropriate for making sales forecasts for new products.
• Salesmen are not very reliable estimators of the sales of the enterprise.