Question

Describe the 6 different forecasting techniques and discuss the pros/cons of each

Answer 1

Answer : Forecasting means to determine about the future demand of the product or it is related to forecast about the future related to sales, demand etc.

There are six different forecasting techinques such as :

1. Survey of buyers intention or market survey studies
2. Sale force pooling or collective information
3. Analysis of time series and trend projection
4. Use of economic indicators- Regression analysis
5. Control experiment- Test marketing
6. Judgemental approach

1 . Survey of Buyers intention : It is the most basic and the least sophisticated method . It is applicable where the customers are industrial producer and not for domestic consumers or products

Advantages :

• Customer play an utmost important and make direct contact and information is real
• It is simple to understand and easy to applicable
• Information provided by them are real

Disadvantages :

• It is not reliable for long run to know the buyer interest, willingness and intentions.
• Passive approach
• In this model some buyers are unwilling respond

Sale force polling :

It is the method applicable in which efforts to arrived at uncertian area of questioning from a group of experts. Sale force forecasting help in the analysis about the collective information about how much sale has been occured

Advantages :

• Proper information should be provided
• Lesser maniuplation
• Action are taken according to sale level

Disadvantages:

• Historical data
• Actual figure cannot be forecasted
• Complicated to applied

3 Analysis of time series : The main objective is that to study the past behaviour into the future . It can be done through random walks, moving averages, linear and quadratic etc.

Advantages :

• Smooth and the erratic factor
• Adjust for seasonal variation
• It is based on mathematical calculation

Disadvantages :

• It is suitable only to certian type of data
• Moving average has been taken into an account
• Diffcult to applied

4 Use of Economic Indicators : Regression analysis is to estimate to forecast the consumer demand with available data.

Advantage :

• Accurate information
• Confidence interval has been determined
• Finally, casual effect of price increase to the customer demand

Disadvantage :

• Complicated method
• Diffcult to apply
• Required higher skills to apply this method

5. Control experiment : Test marketing : New product is developed and introduced with one or more test in the actual market rather than in research department

Advantages:

• It is applicable for new or modified product
• Good Accuracy
• Minimises the risk
• Controlled experiment

Disadvantages :

• Time consuming
• Mediun to higher cost
• Competitors may distrub the test

6. Judgemental Approach : It means that to the reason for selling your product. It is judgement taken from experts or leaders.

Advantages:

• Based on facts and figures
• Accurate
• Estimate from actual customer
• Considered soft information

Disadvantages :

• Bias
• Based on values and not number