Chapter 7 - Expected Values

Abstract

The subjective approach to forecasting is composite of individual estimates using expected values. This technique can be used for the evaluation of the probabilities of future sales, where there are a large number of clients who are expected to re-purchase from time to time. Because the data will be the estimates of expected sales, it is important that the sales force maintains close and regular contact with clients and prospects in order that they are in a position to prepare useful estimations. It is also important that the sales director responsible for the forecast model is familiar with both the clients and his or her sales team. The composite of individual estimates using expected values technique is particularly useful in situations where there are a large number of clients and prospects, and when there is a sales force that maintains regular and close contact with the client/ prospect base. In these situations, the large number of clients and prospects ensure that the expected value averages out over the whole range, and that the resulting estimation approximately represents the actual sales. The main problem with this technique is the subjective values involved in setting the probability levels for each client or prospect. If great care is not taken over these figures then the resulting forecast is likely to be of little value.