Simulation summary and analysis

Simulation

Market Research Simulation

The Jury of Executive Opinion technique of forecasting is extremely popular among managers in several leading companies. What are some reasons for this preference?

The Jury of Executive Opinion is actually a part of a broader series of techniques that are very popular with managers who compete in industries where little previous past sales data exist for comparable or competitive products. As a result of the lack of data in these emerging markets, little causal data exist, making it difficult to define strategies that deliver the intended results. This technique seeks to provide expert-level insights into marketing and sales problems that are unknown at the time of planning. The use of Jury of Executive Opinion is typically completed during three or four meetings with industry experts who are asked to evaluate and forecast one or just a few critical variables. Most commonly used for new product forecasting for products in entirely new markets, the Jury of Executive Opinion gathers executive-level and industry-level insights of a product group. The consolidation of expert opinions is next completed to yield a bottoms-up forecast. The shortcomings of this approach are its statistical validity and the fact that it's difficult at times to break out individual product categories using this technique.

Is it a good idea to use various sales forecasting techniques in the context of a company entering a new market? Why or why not?

Yes, it is an excellent idea to use a variety of sales forecasting techniques when defining new market entrance strategies. As the simulation showed, and as exhibited in Figures 1 and 2, the use of multiple techniques in evaluating market sizes can explain variability much more clearly than simply using on forecasting techniques. Multiple forecasting techniques also can deliver a much greater level of insight into specific markets as well. From the simulation, Figures 1 and 2 show the variability define through using the Consultant Survey Forecast for sizing the beer demand in Lamarco and the use of Jury of Executive opinion for defining beer forecasts in Seravo.

Figure 1: Forecasting Techniques Figure 2: Validation of Correct Results

In addition to these benefits, there is also the need for using multiple sales forecasting techniques to quantify the market size of a new market as there are variations in the market itself that just a single technique may not completely capture. Multiple forecasts are needed for capturing all characteristics of a market, which is critical for the launch of a new business in a new market. Ultimately the use of multiple forecasting techniques serves to increase the knowledge of a market and minimize market entry risk.

How would you forecast sales force size in a specialized industry, for example, aircraft?

As the demand for aircraft is defined by a select set of customers who have highly specialized information needs, defining the sales force size for aircraft would be easily accomplished by looking at the average sales cycles in this specific industry (which happen to be quite long) combined with the project management skills necessary to ensure a design win. A design win is the event where the aircraft is designed into the broader program of an airline, or in the case of military aircraft, purchased by a branch of the Department of Defense. Taking the average length of sales cycles and the total population of potential customers for the specific aircraft, calculating the size of the sales force as a result would be possible. As aircraft are highly specialized, it would typically be a much smaller sales force than for other, more broadly sold products.

How would you use market research to estimate sales potential?