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Chapter 5

BUSI 4220U Chapter 5: BUSI4220U - Chapter 5

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BUSI 4220U
Salma Karray

Every forecast is wrong! Given the stakes and the risks entailed in being very wrong with a forecast, some effort to prepare an evidencebased forecast, instead of a wild guess, is almost always called for, even if time and money are scarce A forecasters tool kit: a tool for every forecasting setting An estimate of market potential often serves as a starting point for preparing a sales forecast There was also the size of the currently penetrated market, those who were actually using pay phones in Tanzania at the time of the forecast Investors would also want to know these figures the size of the potential and penetrated markets for the market segments Maddy and Lague intend to serve, their target market They would also need a sales forecast, in which they predicted sales revenues for ACG for five years or so Established organizations employ two broad approaches for preparing a sales forecast: topdown and bottomup Statistical methods o Statistical methods use past history and various statistical techniques, such as multiple regression or time series analysis, to forecast the future based on an extrapolation of the past Observation o Like statistical methods, observationbased forecasting is attractive because it is based on what people actually do Surveys or focus groups o Consumers, after being shown a statement of the product concept (a concept test) or a prototype or sample of the product, can be asked how likely they are to buy, creating a survey of buyers intentions o Salespeople can be asked how much they are likely to sell, completing a survey of salesforce opinion o What people say is not always what people do Analogy o An approach often used for new product forecasting where neither statistical methods nor observations are possible is to forecast the sales or market potential for a new product or product class by analogy o Under this method, the product is compared with similar historical data that are available Judgement o While we hesitate to call this a forecasting method of its own, since capable and informed judgement is required for all methods, sometimes
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