Q&A - Describe the main qualitative methods of sales forecasting

Qualitative methods of sales forecasting rely less on data, and much more on the opinions and experiences of the people involved in the forecasting process.

If qualitative forecasting is about obtaining opinions about the future, what are the main methods of getting those opinions?

There are three common approaches:

Delphi method

Perhaps the best-known method for generating a forecast using “experts”.  Rather than getting experts to meet face-to-face, the chosen experts are sent a survey or questionnaire (by post or email).  Each expert completes the survey without reference to any other contributor.

The replies to the survey are analysed, summarised and then returned back to the experts so that they can reconsider their responses and views after learning about the views of the other experts.

This survey process may be repeated several times until a consensus is reached (or perhaps a narrower range of sales forecasts is arrived at).

The obvious disadvantages of this approach are:

- The time-consuming nature of the survey process (potentially costly as well)
- The way in which the “experts” are chosen (who choses and why?)
- Whether some experts are more expert than others!  I.e. whose opinions should be given most weight (if anyone)

Panel method

This method of sales forecasting is a specialised form of focus group (remember that from consumer market research?)

The panel’s members meet face-to-face and discuss openly their views on the forecasts required, with the aim of reaching a consensus.

The disadvantages?

- Some experts will shout louder than others, or be more forceful in expressing their opinions
- The panel approach encourages a quick resolution, rather than a more reflective approach (which might lead to a better quality sales forecast)

Scenario planning

This method is popular where the sales forecast is subject to a lot of uncertainty.  This is often true when a sales forecast is intended to cover a long time period (e.g 3+ years) or where there are inherent risks in the demand for the product or market being forecasted.

Scenarios are not intended to produce a consensus.  Rather, it is about identifying the likely or possible scenarios for different sales outcomes, and then coming up with a plan for how the business would respond for the least desirable scenarios.  Scenario planning is linked, therefore, to contingency planning.

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