QuestionRead the given article and discuss important aspects to consider when selecting a forecasting method in marketing applications.
characteristics are distinct enough to be discussed here. The advent of microcomputers, software packages and data- Criteria for Marketing Applications The patterns of data - that is, irregularity, seasonality, The selection of the appropriate forecasting method or random occurrence and cyclicality - vary extensively. processing models have provided for better applications and technique is a function of several criteria. One group of Different forecasting techniques are applicable when a fresher look at the problems of management. Instead instabilities appear on the horizon and more frequent of looking for immediate solutions to partial problems, the criteria deals with the particular requirements of the manager nowadays is developing a broader perspective. For decision-making situation; the other group relates to the adjustments are required. The type of model used in example, when estimating optimal allocations of sales- characteristics of the forecasting technique itself. forecasting also bears underlying assumptions. While the persons, finding the market share of the company or entrepreneur need not be aware of all complexities or the restructuring a distribution system, the marketer cannot In a decision-making situation, several considerations are mathematical analyses of the model, the model's workings overlook the overall impact on sales and profits. important; these are: are important. The cost-benefit consideration comes next. Costs can range from minimal, as in the case of the Forecasting models still tend to be complex. The (a) time horizon; calculation of moving averages, to hundreds of thousands marketer-forecaster needs to make inroads to gain support (b) level of detail; of dollars in sophisticated input-output models. The value from the entrepreneur, especially in specifying the (c) number of items, and of each method should supercede its cost under parameters and variables. A specific, multi-functional application concerning reallocation of the sales force (d) control versus planning. circumstances of time. toward maximisation of profits and sales is cited next. When considering the time horizon, qualitative methods Finally, the ease of application is another management of forecasting are used for longer time horizons, whereas consideration. Entrepreneurs should be wary of utilising quantitative methods are used for the more intermediate models with which they are not completely familiar and and short-term ones. Managers within the organisation in which they lack confidence for explaining the results may require different levels of detail with respect to forecasts. The sales manager may need data on a weekly to their partners. basis, whereas the shipping manager every day. The Product/market measurements, consumer analysis and monber of items can also determine the type of forecasting method to be used. For example, Dr. Pepper, with only competitive espionage are directly related to marketing a handful of products, may need different techniques from forecasting. Research is a systematic study of two 3M, which has over 50,000 product items. Forecasting categories of information obtained: techniques, when used for planning purposes, recognise patterns which need to be extrapolated to the future. (a) results data, i.e. current situations which show what However, for control purposes, it is important that has taken place, and managers recognise patterns as quickly as possible, (b) happening data, i.e. reports and developments especially when those patterns indicate a reverse situation which foreshadow significant future changes. forthcoming. Numbers arrived at via marketing research, when The characteristics of forecasting methods are also extended into the future or smoothed over time to show important for small business at application time. These a trend, direction or shift, become forecasts
