Importance of accurate forecasts - Marketing Management

Should actual sales fall short of, or exceed, forecasted sales, management must investigate the reasons for the difference, and from their inquiries determine whether or not it is necessary to adjust the sales forecasting technique. Thus sales forecasting is a continuous process. The changing nature of the economic and physical environment means that forecasts should be under continuous scrutiny and revision. Every projection can be improved, and in competitive situations even fractional increases in accuracy can be translated into higher profits.

It has already been said that all sales forecasts are wrong; they only differ in the extent of their wrongness. Perfection is unattainable, and the organization must decide what level of accuracy is required within pre-determined time and cost constraints. Management must fix the level of inaccuracy that can be tolerated, and this will allow it to compare cost with value when selecting the appropriate technique.

An illustration of how this notion of comparing the costs of different techniques of forecasting can be traded off against their degree of accuracy in order to arrive at the best-value techniques.

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