Survey methods of demand forecasting

Survey evidence can improve a demand forecast when respondents possess relevant knowledge and the questions reflect the decision. This article covers customer intentions, salesforce estimates, Delphi panels and pilot test marketing.

When to use it

Use one or more methods when informed external or frontline judgement would strengthen the The HOOF approach to demand forecasting.

Origins

The methods come from different research traditions. Customer-intention and salesforce surveys developed through market research and sales planning. The Delphi method was created at RAND as a structured way to elicit and refine independent expert judgement. Pilot test marketing grew from product and advertising research. Together they provide complementary evidence rather than one unified forecasting model.

What it is

David Letterman joked that three out of every four people make up 75 per cent of the population. The joke captures the central warning: a numerical survey result can be perfectly calculated and still offer little insight.

The four methods are:

• Survey of customers’ intentions
• Salesforce estimation
• Delphi
• Pilot test marketing

How to use it

Survey of customers’ intentions

Select a representative group from each major product/market segment and ask about intended total purchases from all suppliers over the next 12 and 24 months. The questions can accompany a broader interview about purchasing criteria and comparative supplier performance, as shown in Figure B.1.

Purchasing contacts may not know their organisation’s future sales or production plans and may refer the interviewer to sales colleagues. The firm may have a weaker relationship with those people, limiting the evidence. A separate survey of customer sales teams can therefore cost more than it contributes.

Set modest expectations and, where possible, add the intention questions to strategically necessary customer interviews. Treat stated intention as one input: budget authority, uncertainty, optimism and the gap between what people say and do all affect accuracy.

Bring together knowledgeable salespeople in a workshop or structured online discussion. Ask them independently where market demand is heading, then facilitate a debate and consolidate the reasons behind their estimates.

Salespeople are close to customers and may anticipate purchasing changes. They can also mistake their accounts for the whole market, overlooking customers served by competitors or segments outside their territory. Separate account-level pipeline evidence from market-level judgement, look for shared assumptions and adjust for incentives that encourage optimism or conservatism.

The method is inexpensive and worth testing when the organisation understands the strengths and limits of its salesforce.