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Qualitative forecasting relies on the opinions and judgments of human beings to make business predictions, rather than on the hard data and statistics utilized in quantitative forecasting. There are a number of qualitative forecasting techniques available if a firm chooses to go in this direction. Compiling opinions — either from experts in the field or from knowledgeable employees — and forming a consensus from these opinions is one of the most common qualitative forecasting techniques. In addition, the life-cycle method, which is useful for new products, is used to compare a product to similar products on the market to see how those products progressed over time.
Many people believe that statistics are the best way to make forecasts about the future in the business world. Others feel that while statistics are useful, they can be used too often as a crutch for managers unwilling to follow their own beliefs. For those who want to have some form of human input in their decision-making process, there are many qualitative forecasting techniques available to assist them in making accurate predictions about the future for all aspects of a business.
One of the most integral parts of all qualitative forecasting techniques is deciding which people will be chosen to yield their opinions on the subject at hand. Some firms might wish to stay with their own employees who have extensive experience and will be directly involved with the situation being discussed. Other firms may choose to employ an outside panel of experts for the task. Although this approach can be costly, it may ultimately yield the most accurate and unbiased results.
The delphi method is often used in certain qualitative forecasting techniques. In this method, the people who will comprise the panel are selected and are each asked to answer a series of questions about the pertinent business forecast. Each individual is then shown the answers of all of the panel members, triggering further discussion. From these discussions, the panel reaches a consensus on the question or questions at hand and presents it to the firm management.
If a company needs qualitative forecasting techniques for the development of a new product, it might decide to go with the life cycle approach. This approach studies the life cycle of similar products released in the past by the company or similar products from competitors already on the market. The idea is that the products will mirror each other in terms of their respective life cycles. Periods of growth, maturity, and decline in previous products will serve as examples for what the company might expect from the new product.