Expert Opinion

Companies can also obtain forecasts by turning to experts. Experts include dealers, distributors, suppliers, marketing consultants and trade associations. Thus motor vehicle companies survey their dealers periodically for their forecasts of short-term demand. Dealer estimates, however, are subject to the same strengths and weaknesses as sales force estimates.

Many companies buy economic and industry forecasts. These forecasting specialists are in a better position than the company to prepare economic forecasts because they have more data available and more forecasting expertise.

Occasionally companies will invite a special group of experts to prepare a forecast. They may exchange views and come up with a group estimate (group

In 1945, then IBM chairman Thomas Watson forecast a worldwide market for about/toe computers.

discussion method). Or they may supply their estimates individually, with the company analyst combining them into a single estimate (pooling of individual estimates). Or they may supply individual estimates and assumptions reviewed by a company analyst, revised and followed by further rounds of estimation (Delphi method).-14

Experts can provide good insights upon which to base forecasts, but they can also be wrong (see Marketing Highlight 8.3). Where possible, the company should hack up experts' opinions with estimates obtained using other methods.

Test-Market Method

Where buyers do not plan their purchases carefully or where experts are not available or reliable, the company may want to conduct a direct test market. This is especially useful in forecasting new-product sales or established-product sales in anew distribution channel or territory. Test marketing is discussed in (Chapter 13.

Time-Series Analysis

Many firms base their forecasts on past sales. They assume that statistical analysis can uncover the causes of past sales. Then analysts can use the causal relations to predict future sales. Time-scries analysis consists of breaking down the original sales into four components - trend, cycle, season and erratic components - then reeombining these components to produce the sales forecast.

Trend is the long-term, underlying pattern of growth or decline in sales resulting from basic changes in population, capital formation and technology. It is found by fitting a straight or curved line through past sales. Cycle captures the medium-term, wavelike movement of sales resulting from changes in general economic and competitive activity. The cyclical component can be useful for medium-range forecasting. Cyclical swings, however, are difficult to predict because they do not occur on a regular basis. Scasonality refers to a consistent time-series analysis Breaking down past .s rites into its crcnd, cycle, season and erratic components, then recombining these components to produce a sales forecast.

trend

The long-term, underlying pattern of sales growth or decline resulting from baxiv changes in population, capital formation and technology.

cycle

Tlie medium-term 'watoelike movement of sales resulting from changes in general economic and competitive activity.

seasonality

The recurrent consistent pattern of sales movements -within the year.

Marketing Hi ohli oht

Sometimes 'Expert Opinion' Isn't All It Should Be time in 1859). Two years later the Great Eastern crossed the Atlantic.

Before you rely too heavily on expert opinion, you might be interested in learning how some past "experts' did with their predictions:

Technology

• 'Everything that can be invented has been invented' (Director of the US Patent Office, 1899)

• 'Rail travel at high speed is not possible, because passengers, unable to breathe would die of asphyxia' (Or Dioysy Larder in 1828 -the year Stephenson's Rocket commenced service).

• 'No large steamship will ever cross the Atlantic, since it would require more coal than it could carry' (Dr Larder again, this

1GM D-flta Uf B* US PdHMflfh* vynt "• '"•" MWO'

Everything that can be invented has been invented.

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Salehoo Secrets and Tips

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