The contribution of product and industry knowledge to the accuracy of sales forecasting was investigated by examining the company forecasts of a leading manufacturer and marketer of consumable products. The company forecasts of I8 products produced by a meeting of marketing, sales, and production personnel were compared with those generated by the same company personnel when denied specific product knowledge and with the forecasts of selected judgemental and statistical time series methods. Results indicated that product knowledge contributed significantly to forecast accuracy and that the forecast accuracy of company personnel who possessed industry forecasting knowledge (but not product knowledge) was not significantly different from the time series based methods. Furthermore, the company forecasts were more accurate than averages of the judgemental and statistical time series forecasts. These results point to the importance of specific product information to forecast accuracy and accordingly call into question the continuing strong emphasis on improving extrapolation techniques without consideration of the inclusion of non-time series knowledge.
KEY WORDS Sales forecasting
Forecasting accuracy Judgemental forecasting Sales forecasting has long been recognized as important to the planning function in the organization (Dalrymple, 1987). As the growth in the formalization of the budgeting process continues, the strategic role of sales forecasting as the 'budget cornerstone' (Welsch, 1971) will contine to be emphasized.
Considerable interest in forecasting has centred on the accuracy of extrapolation. This has mainly been manifest in comparisons of the accuracy of forecasting methods, including statistical methods (for example, M-competition, Makridakis et af., 1982) and judgemental approaches (Lawrence et a/., 1985). However, it should be emphasized that the process of forecasting for commercial purposes must also include the recognition of the value of O277-6693/88/030201-1 1$05 3 0 g) 1988 by John Wiley & Sons, Ltd.