Qualitative Methods :Measuring Forecast Accuracy : A Tutorial

Qualitative Methods

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

Common Qualitative Forecasting Methods

  • 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)

h2. EXAMPLE: Life Cycle Analogy

  • A consumer products company is coming out with a new version of smoking cessation gum
  • Sales history for the previous version is shown below

Analyzing the Life Cycle Data for the Previous Version

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