Any business owners from various industries will eventually need to make a prediction about market trends and demand to develop better strategies for their businesses. An accurate prediction helps to effectively improve operational performance and meet future challenges, thus, they will need to create market forecasting.
Market forecasting involves different techniques to collect data from different sources. This article will talk more about market forecasting and what methods are used when creating market forecasting.
What is Market Forecasting?
Market forecasting is a core element of market analysis. It projects the future size and the growth of demand from your target market. When making a market forecasting, it requires techniques and assumptions to create the data. When defining the market, it is segmented into geography, demography, psychography, and purchasing and behavioral characteristics.
In creating market forecasting, a researcher will need resources or data from government and industry sources, depending on the methods you use. Generally, market forecasting falls into two categories, quantitative and qualitative. Quantitative forecasting is usually based on the history of a company’s figures while qualitative is based on expert judgment and opinion which does not rely on history.
Five Methods in Market Forecasting
As what’s mentioned before, market forecasting has two main methods, qualitative and quantitative. In qualitative market forecasting, there are five methods used, including:
- A jury of executive opinions
This method takes opinions from a group of high-level managers and usually also combined with statistical models to make the data richer. All of them are gathered and assessed to get a group estimate of demand.
- Market research
This method takes input from (potential) customers about their future purchasing plans. Not only does it help to prepare a market forecast, but also to improve the design of the product as well as plan for new products.
- Salesforce composite
This method requires each of salespersons to estimate what sales in their regions. It will then be gathered and reviewed to see whether it is realistic or not and then combined at the district and national levels to have an overall forecast.
- Delphi method
In the Delphi method, the objective is to achieve a consensus forecast that requires three types of participants, including decision-makers/experts, staff personal/coordinator, and respondents.
Usually, decision-makers/experts consist of five to ten people to make an actual forecast. Staff personal/coordinator helps experts in preparing, distributing, collecting, and summarizing questionnaires and survey results. Meanwhile, respondents consist of a group of people who are usually in different locations. They will make a judgment which later will be valued.
- Panel Consensus
Panel consensus involves seven to ten experts to have a discussion. First of all, each of them needs to list their ideas about the area of the forecast. All of the ideas are discussed and ranked to reach a consensus.
Meanwhile, the quantitative market forecasting’s methods are based on time series and regression model. Time series method uses a series of past data to create forecasting while regression model is a casual forecasting method output hat links variables—independent and more independent ones.
