Subjective Forecasting Methods:

These are the most simple yet widely used methods of forecasting. Basically, these consist of collecting the opinions and judgements of people inside or outside the organization who are expected to have the best knowledge of current activities or future plans. These are generally employed when

• there is not sufficient time, or
• available data is not sufficient to cover possible development in the more distant future, or
• no relevant data is available, e.g. while introducing a new product for which no historical data may be available.

Subjective Estimates

For developing a demand forecast several organizations use the knowledge, experience and "sixth sense" of their own staff. In one typical case, a company asked its salesmen to submit estimates of anticipated demand in their allocated areas for a future period. These figures were then pooled at the regional level. A correction factor was then applied to take care of regional economic, demographic and other factors which were not previously considered. The adjusted regional estimates were pooled at headquarters and further adjustments were made to account for competitors, developments in international trade, and the possible government policies. The final estimate for total demand was the sum of subjective inputs from different sources.

A forecast thus developed has the advantages of

• Quick delivery
• Low cost
• No requirement of any special expertise
• Can incorporate intangible factors and subjective experience as inputs along with objective data, if that is also available

However it has the following drawbacks

• Recent experiences can play more dominant influence than they should,
• Influential persons may influence the forecast estimate so that it is "different" than the more general consensus, and
• Lack of any measure of error in the estimate makes it difficult to prepare contingency plan to cope with large errors.

Subjective forecasts can be supplemented with the results of customer surveys, distributor surveys, or more carefully planned studies such as marketing research and market trials. Such procedures cost money and time, and should be used only when absolutely necessary.