Qualitative Methods :Measuring Forecast Accuracy : A Tutorial
Published on: Jan, 25, 2011
Common Qualitative Forecasting Methods
EXAMPLE: Life Cycle analogy
Analyzing the Life Cycle Data for the Previous Version
Questions to Consider When Using the Life Cycle Analogy to Forecast for a New Product
- Executive and outsider opinions
- Sales force composite
- This involves having product managers or sales reps developing individual forecasts, and then adding them up
- Panel consensus & Delphi method
- Both methods have experts work together to develop forecasts
- The Delphi method has experts develop forecasts individually, then share their findings. The process is repeated until a consensus emerges.
- Life cycle analogy
- Used when the product is new. The technique is based on the fact that many products have well-defined life cycle stages (Growth, Maturity, and Decline)
- A consumer products company is coming out with a new version of smoking cessation gum
- Sales history for the previous version is shown below
Due to competitive pressures and innovations, the product has a definite life cycle.
h2. Questions to Consider When Using the Life Cycle Analogy to Forecast for a New Product
- How long will each life cycle stage last? What are we basing this on? (opinion, survey, etc.)
- In general, will demand levels be higher or lower? What are we basing this on? (opinion, survey, etc.)
- Key point: Using life cycle data from a similar product provides a starting point and helps us focus on the right questions
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