Podcast
Questions and Answers
What is the primary role of a central person in the top-down approach to sales forecasting?
What is the primary role of a central person in the top-down approach to sales forecasting?
- To conduct market tests and surveys.
- To prepare an overall forecast for the entire firm. (correct)
- To aggregate individual sales forecasts from different departments.
- To analyze historical sales data exclusively.
Which of the following is a key characteristic of the bottom-up approach to sales forecasting?
Which of the following is a key characteristic of the bottom-up approach to sales forecasting?
- It relies heavily on external market data only.
- It is generally used in highly centralized firms.
- The forecast is dictated by a single executive.
- Each department creates its own sales forecast. (correct)
What is a significant limitation of using statistical methods for forecasting?
What is a significant limitation of using statistical methods for forecasting?
- They are extremely useful for new products without historical data.
- They assume the future will closely resemble the past. (correct)
- They do not give accurate forecasts under stable market conditions.
- They are not applicable in established firms with established products.
Which forecasting method is best suited for new-to-the-world, high-technology products?
Which forecasting method is best suited for new-to-the-world, high-technology products?
What is a major drawback of using market tests for forecasting?
What is a major drawback of using market tests for forecasting?
Which of the following is an advantage of using observation as a method for estimating market potential?
Which of the following is an advantage of using observation as a method for estimating market potential?
What do the attitudinal changes in the adoption process refer to?
What do the attitudinal changes in the adoption process refer to?
Which factor does NOT heavily influence the speed of the adoption process?
Which factor does NOT heavily influence the speed of the adoption process?
What is a primary advantage of using surveys for estimating market potential?
What is a primary advantage of using surveys for estimating market potential?
How can competitors undermine market tests?
How can competitors undermine market tests?
In the Diffusion of Innovation Curve, which group is typically the LAST to adopt an innovation?
In the Diffusion of Innovation Curve, which group is typically the LAST to adopt an innovation?
When would using someone's judgment be most accurate in market forecasting?
When would using someone's judgment be most accurate in market forecasting?
What is the primary importance of knowing the size of the potential market in forecasting?
What is the primary importance of knowing the size of the potential market in forecasting?
How could 'relative simplicity' in the adoption process be defined in the context of a new tech product?
How could 'relative simplicity' in the adoption process be defined in the context of a new tech product?
Which forecasting method is LEAST reliable when market dynamics are rapidly changing and historical data becomes obsolete?
Which forecasting method is LEAST reliable when market dynamics are rapidly changing and historical data becomes obsolete?
The 'Chain Ratio Method' is used in forecasting. What fundamental mathematical principle underlies this approach?
The 'Chain Ratio Method' is used in forecasting. What fundamental mathematical principle underlies this approach?
What critical consideration should a marketer prioritize when leveraging the 'analogy' method for a completely novel product, to avoid significant forecast errors?
What critical consideration should a marketer prioritize when leveraging the 'analogy' method for a completely novel product, to avoid significant forecast errors?
A firm is preparing to launch a disruptive technology. Which of the following would be the MOST effective strategy to accelerate the adoption process, specifically targeting the 'Early Adopters'?
A firm is preparing to launch a disruptive technology. Which of the following would be the MOST effective strategy to accelerate the adoption process, specifically targeting the 'Early Adopters'?
Which cognitive bias poses the GREATEST threat to the accuracy and reliability of 'judgment' based forecasting, even among seasoned experts?
Which cognitive bias poses the GREATEST threat to the accuracy and reliability of 'judgment' based forecasting, even among seasoned experts?
You're tasked with forecasting the market potential for a niche, artisanal coffee bean. Traditional forecasting methods prove inadequate due to lack of historical data and comparable products. What unorthodox approach might yield valuable insights?
You're tasked with forecasting the market potential for a niche, artisanal coffee bean. Traditional forecasting methods prove inadequate due to lack of historical data and comparable products. What unorthodox approach might yield valuable insights?
Flashcards
Market Potential Estimate
Market Potential Estimate
An estimation of the possible sales for a product or service within a specific market.
Sales Forecast
Sales Forecast
A prediction of future sales, usually for a defined period. Two common approaches are top-down and bottom-up.
Top-Down Approach
Top-Down Approach
A forecasting approach where a central figure creates an overall forecast.
Bottom-Up Approach
Bottom-Up Approach
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Statistical Methods in Sales Forecasting
Statistical Methods in Sales Forecasting
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Observation Method
Observation Method
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Surveys in Forecasting
Surveys in Forecasting
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Analogy Method
Analogy Method
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Judgment Forecasting
Judgment Forecasting
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Market Tests
Market Tests
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Adoption Process
Adoption Process
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Chain Ratio Method
Chain Ratio Method
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Brand or Category Indices
Brand or Category Indices
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Diffusion of Innovation Curve
Diffusion of Innovation Curve
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Study Notes
- Knowing the size of the potential market is important for forecasters
- Market potential estimate serves as a starting point for preparing a sales forecast
Sales Forecasting Approaches
- Two main approaches to prepare a sales forecast: top-down and bottom-up
- A central person is in charge of preparing a top-down sales forecast
- Each part of the firm prepares its own sales forecasts using the bottom-up approach
- Bottom-up sales forecasts are aggregated to create a forecast for the firm as a whole
- Bottom-up sales forecasts are common in decentralized firms
Methods for Estimating Market Potential and Forecasting Sales
- Statistical methods can be used to estimate market potential and forecast sales
- Observation can be used to estimate market potential and forecast sales
- Surveys can be used to estimate market potential and forecast sales
- Analogy can be used to estimate market potential and forecast sales
- Judgement can be used to estimate market potential and forecast sales
- Market tests can be used to estimate market potential and forecast sales
Statistical Methods
- These are useful in established firms for established products
- These are likely to result in a more accurate forecast in stable market conditions
- These assume the future will resemble the past
- These require history to be effective
- These are not useful for new products without a history
Observation
- This is based on what people actually do, rather than what they say they will do
- This is typically not possible for new-to-the-world products
- This requires prior examples to observe
Surveys
- Many different groups of respondents can be surveyed
- These do not require history or prior examples
- What people say is not always what they do (responses can be inaccurate)
- People may not be knowledgeable, but may still provide opinions
- What people imagine about a product concept may not be what is delivered
Analogy
- It does not require history nor prior examples
- It is best for new product forecasting where statistical methods or observations aren't possible
- It is useful for new-to-the-world high-technology products
- The proposed new product is never exactly like that to which the analogy is drawn
- Market and competitive conditions may differ considerably from when the product was launched
Judgement
- Those with sufficient forecasting experience in a market they know well, may be accurate
- It is often difficult to defend forecasts against evidence-based methods when the two are different
Market Tests
- This forecasting method is closest to the true market
- It is expensive to conduct the tests
- Competitors can deliberately distort market conditions to invalidate the test
Forecasting Mathematics
- Chain ratio method can entail forecast mathematics
- Brand or category indices
The Adoption Process
- Involves the attitudinal changes individuals experience from hearing about a new product to adopting it
The Adoption Process - Speed Factors
- Process depends on Risk
- Process depends on Relative advantage
- Process depends on Relative simplicity
- Process depends on Compatibility with current ideas and behavior
- Process depends on Ease of small-scale trial
- Process depends on Ease of communication of benefits
Diffusion of Innovation Curve
- Innovators = 2.5%
- Early Adopters = 13.5%
- Early Majority = 34%
- Late Majority = 34%
- Laggards and Non-adopters = 16%
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