Qualitative forecasting uses human opinions instead of statistics. Techniques include compiling opinions and using the lifecycle method. The Delphi method and selecting the right people are important. The lifecycle approach studies similar products to predict growth, maturity, and decline.
Qualitative forecasting relies on the opinions and judgments of human beings to make business predictions rather than the hard data and statistics used in quantitative forecasting. There are several qualitative forecasting techniques available if a company chooses to go in this direction. Compiling opinions – from experts in the field or knowledgeable employees – and forming a consensus on those opinions is one of the most common qualitative forecasting techniques. Also, the lifecycle method, useful for new products, is used to compare a product with similar products on the market to see how those products have progressed over time.
Many people believe that statistics are the best way to make predictions about the future in business. Others feel that while statistics are useful, they can often be used as a crutch for managers who don’t want to follow their own beliefs. For those who wish to have some form of human input into their decision-making process, there are many qualitative forecasting techniques available to help them make accurate predictions about the future of all aspects of a business.
One of the most integral parts of all qualitative forecasting techniques is deciding which people to choose to voice their opinions on the issue at hand. Some companies may want to stick with their own employees who have extensive experience and will be directly involved with the situation being discussed. Other companies may choose to hire an external panel of experts for the task. While this approach can be costly, it can ultimately produce the most accurate and unbiased results.
The delphi method is often used in certain qualitative forecasting techniques. In this method, panelists are selected and each is asked to answer a series of questions about the relevant business forecast. Each individual receives responses from all panel members, triggering further discussion. From these discussions, the panel reaches consensus on the issues at hand and presents them to company management.
If a company needs qualitative forecasting techniques for new product development, it may choose to follow the lifecycle approach. This approach studies the life cycle of similar products launched in the past by the company or similar products from competitors that already exist in the market. The idea is that products mirror each other in terms of their respective life cycles. Periods of growth, maturity, and decline in previous products will serve as examples of what the company can expect from the new product.
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