Q&A - What factors influence the choice of a sales forecasting method?

The choice of forecasting method is influenced by key issues such as:

- How accurate the forecast needs to be. What are the risks (e.g. additional costs) if the forecast proves inaccurate? The higher the risk, the more accurate the revenue forecast needs to be

- The availability of data and information. A forecast is only as good as the inputs (e.g. data, expertise) into the forecasting process

- The future time period over which the forecast is made. For example, a forecast of sales for the next 3 months is likely to make extensive use of recent sales data (a quantititative approach), whereas a forecast of the market for the next 10 years would be best done using qualitative approaches

- Where the product is in its life-cycle. For example, a product in the maturity stage of the life-cycle is likely to have substantial historical sales data to support a short-term forecast. By contrast, a product that is still in development or which has only just been launched does not have such a quantitative track record. It may also be in a new market which is not yet well researched.