Sales forecasts based on intuitionSales forecasting is an essential tool for business performance and profitability. With predictive models and numerous sales forecasting methods, companies can accurately anticipate sales volumes and revenue potential and make the right management decisions.
Among the forecasting methods are intuitive forecasts. To achieve a high level of forecasting accuracy, this method must be used in conjunction with other methods. We propose you to discover how intuitive thinking can be integrated in the company strategy as a sales forecasting method.
What is the intuitive sales forecasting method?Sales forecasting is usually expressed as a probability associated with each quantity of product sold. This data is obtained by using qualitative or quantitative forecasting methods. The sum of the sales probabilities gives the total potential sales and an overview of the product inventory that needs to be forecasted to ensure a high service rate and to be able to meet customer demand.
By using this forecasting model based on the probability of sales quantity and measuring uncertainties, the company ensures that each inventory level is calibrated. It avoids unnecessary costs related to the management of overstock and ensures that it maximizes its revenue from product sales by avoiding stock-outs.
There is a forecasting method that differs from other more traditional methods: the intuition-based forecasting method. Intuition refers to a person's ability to capture information in an immediate, sometimes irrational and unreasonable way. In fact, there are two forms of intuition:
- the "reasoned" intuition, linked to a body of knowledge and previous experience;
- the unconscious intuition, a presentiment, similar to a sixth sense.
In the context of sales forecasting, the method based on intuition makes it possible to estimate future sales volumes for a given product, at a given time and in a given place. This method does not take into account variations in probability based on objective internal and external factors. The forecasting team will simply estimate sales based on variables they consider relevant.
The intuition-based forecasting method is particularly interesting for:
- a company starting its activity;
- a company without sufficient historical data;
- the launch of a new product on the market.
The use of this method implies a strong involvement of the sales teams in the sales forecasting process.
The opinion of the sales team is at the heart of the methodBecause intuitive forecasts are based on the intuition of the company's salespeople, they are entirely subjective. In a sales forecasting context, intuition is more likely to be derived from the experiences and knowledge gained during the salesperson's career.
To understand how intuition enables the salesperson to forecast sales, it seems important to consider the work environment. Indeed, the salesperson has to collaborate with all the departments of the company, each of the collaborators having their own intuitions and concerns. For example, when preparing sales:
- the sales team will want to avoid stock-outs and achieve high sales volumes;
- the marketing team will prefer to focus the sales strategy on the product and its value in the market;
- the purchasing team will want to establish an inventory level based on possible negotiations with the supplier (group price, delivery times, etc.);
- the finance team will be more concerned with the costs of managing inventory.
The sales representative also has a good knowledge of the market that the company wishes to conquer, expand or maintain, since they are used to conducting market studies. In this sense, they know:
- the demand (profile and purchasing behavior of consumers and more specifically of its customers);
- the offer (competitors' products and services, the number of competitors, their results, their strategies, etc.);
- the company's environment (technological, cultural, legal and economic).
As a result, salespeople will select the variables that they believe affect sales. These factors may be internal (recruitments, contract terminations, territory changes, etc.) or external (seasonality of the offer, market trends, etc.).
In addition to their ability to analyze the market, sales representatives are regularly called upon to interact with various employees. These may be customers, suppliers or even sales partners such as distributors. They can then give their point of view on the chances of success of a new product on the market, or on the evolution of the sales of a long-standing product.
Based on all this knowledge and experience, sales people will estimate the probability of closing sales based on predefined opportunity processing steps that are common to the entire team. This is known as the sales pipeline, the goal of which is to convert the prospect into a customer and then to retain him or her to increase the sales potential over the longer term. At the request of the managers, the sales representatives will then estimate the amount of sales and therefore the potential turnover, as well as the sales period or the rate of progression of sales.
Combine intuition with other forecasting methodsTo forecast its sales, the company can choose to rely on the intuition of its sales and marketing teams. However, it is strongly recommended to also work with other forecasting methods to prove the assumptions made and to verify that the probabilities of conclusion have not been overestimated.
In its forecasting model, the company can then choose to integrate forecasting methods based on the length of the sales cycle or the phase of the sales cycle, on the analysis of historical data, on the multivariate analysis or on the sales pipeline.
We recommend these other pages: