In this video, learn how a panel of experts, properly selected, can provide unbiased and diverse estimates.
- For some industries the best way to forecast sales is by using a panel of experts. People who have a broad range of knowledge and insights about your industry. You may be in a market that is highly seasonal or unpredictable because of factors related to the economy or the political climate. This is where expert insight can help reduce your forecasting error. For example, let's imagine you're in the building materials business.
Your company makes products for constructing new homes and you sell products to new home contractors. This is a great example of an industry that is affected by economic factors like consumer confidence, interest rates and demographic trends. Forecasting sales can be difficult and costly if you get it wrong. To create an expert panel, consider finding people who have a diverse and unique view of this industry.
For example, you might include people who are in the home mortgage industry. They certainly track what's going on to make sure they have an accurate picture of their potential loan business. You might also include real estate experts who track the pulse of the home buying market. They bring important insights about home buyers and home builders that can help you with your forecast. Your panel of experts should include someone from the home building industry.
This could be someone from a home building company or a person from a home building association. Now once you've created the panel of experts you have to decide what information you want from them. Do you want an estimate of new home building starts on a national level, a regional level, or just within your market area? Do you want annual, quarterly, or even monthly home starts? Try to gauge what the panel is most qualified to address.
Now any panel will have different levels of expertise and insights and that's why a panel is so useful. The variety of panel members helps neutralize the biases of any one particular panel member. Now when you get their individual forecasts of expected new home starts next year, don't be surprised when you find they're all different, sometimes very different. Now here's a tip, what's most important is not the individual forecast from each panel member but rather it's what assumptions they made to make that forecast.
You want their assumptions more than anything else because that's where you'll find the most important insights about how to set your forecast. With their assumptions you get to decide which ones are most important and which ones should be minimized or perhaps even ignored. Take the important assumptions and find a way to validate them. Like all forecasting methods it's about the accuracy compared to our bench mark, roll-over forecast. You need to track how experts do versus the simple month-to-month approach and decide if experts can beat it.
- Understanding the sales forecasting process
- Defining your market category
- Understanding market dynamics
- Selecting a forecasting technique
- Using quantitative forecasting
- Understand moving averages
- Using qualitative forecasting
- Using estimates from customers, sales reps, and distributors
- Using a panel of experts