a product whose absolute level or trend is fairly constant and where competition is
nonexistent (public utilities) or stable (pure oligopolies). In most markets, total de-
mand and company demand are not stable. Good forecasting becomes a key factor
in company success. The more unstable the demand, the more critical is forecast ac-
curacy, and the more elaborate is forecasting procedure.
Companies commonly use a three-stage procedure to prepare a sales forecast. They
prepare a macroeconomic forecast first, followed by an industry forecast, followed by
a company sales forecast. The macroeconomic forecast calls for projecting inflation,
unemployment, interest rates, consumer spending, business investment, government
expenditures, net exports, and other variables. The end result is a forecast of gross na-
tional product, which is then used, along with other environmental indicators, to
forecast industry sales. The company derives its sales forecast by assuming that it will
win a certain market share.
How do firms develop their forecasts? Firms may do it internally or buy forecasts
from outside sources such as:
■ Marketing research firms, which develop a forecast by interviewing customers, dis-
tributors, and other knowledgeable parties.
■ Specialized forecasting firms, which produce long-range forecasts of particular
macroenvironmental components, such as population, natural resources, and
technology. Some examples are Data Resources, Wharton Econometric, and
Chase Econometric.
■ Futurist research firms, which produce speculative scenarios. Some examples are
the Hudson Institute, the Futures Group, and the Institute for the Future.
All forecasts are built on one of three information bases: what people say, what
people do, or what people have done. The first basis—what people say—involves sur-
veying the opinions of buyers or those close to them, such as salespeople or outside
experts. It encompasses three methods: surveys of buyer’s intentions, composites of
sales force opinions, and expert opinion. Building a forecast on what people do in-
volves another method, putting the product into a test market to measure buyer re-
sponse. The final basis—what people have done—involves analyzing records of past
buying behavior or using time-series analysis or statistical demand analysis.
Survey of Buyers’ Intentions
Forecasting is the art of anticipating what buyers are likely to do under a given set of
conditions. Because buyer behavior is so important, buyers should be surveyed.
In regard to major consumer durables (for example, major appliances), several re-
search organizations conduct periodic surveys of consumer buying intentions. These
organizations ask questions like the following:
Do you intend to buy an automobile within the next six months?