Forecasting Models – Forecasting models are one of the many tools businesses use to predict outcomes regarding sales, supply and demand, consumer behavior and more.
Four common types of forecasting models
- Time series model
- Econometric model
- Judgmental forecasting model
- The Delphi method
Time series model
This type of model uses historical data as the key to reliable forecasting.
Those employed in the field of economics often use an econometric model to forecast changes in supply and demand, as well as prices. This type of statistical model proves valuable when predicting future developments in the economy.
Judgmental forecasting model
Various forecasting models of the judgmental kind utilize subjective and intuitive information to make predictions. For instance, there are times when there is no data available for reference. Launching a new product or facing unpredictable market conditions also creates situations in which judgmental forecasting models prove beneficial.
This type of forecasting model is especially helpful in the field of research and development. Focus groups and expert panels can provide insight that no computerized model would have.
The Delphi method
This method is commonly used to forecast trends based on the information given by a panel of experts. This series of steps is based on the Delphi method, which is about the Oracle of Delphi. It assumes that a group’s answers are more useful and unbiased than answers provided by one individual. The total number of rounds involved may differ depending on the goal of the company or group’s researchers.
These experts answer a series of questions in continuous rounds that ultimately lead to the “correct answer” a company is looking for.
Artificial intelligence methods
Companies in the field of technology use methods of artificial intelligence (AI) to forecast a specific area of growth. This forecasting method provides extremely accurate results using mathematical algorithms.
Here are some examples of popular forecasting methods using artificial intelligence:
- Recommendations for products and content
- Search engine accuracy
- Predictive analytics