English
Français 
Sales forecasts based on the judgment of sales reps have a bad press. However, behavioral economics and decision theory offer various suggestions to improve this judgment, and thus obtain better forecasts – well accepted by sales reps and directly integrated into your sales process.
This does not apply to companies with large sales volumes, structured and computerized value chains, and stable and significant market shares: traditional quantitative methods of sales forecasting are made for them. Such methods are well documented and supported by a large range of tools, from Excel plugins to specialised software.
But for other companies – read: most companies – sales forecasts are often very lightweight. The reason is clear: lacking the time series required by quantitative techniques, their sales forecasts rely heavily on the judgment of sales reps (hence the name “judgmental forecasting”).
Psychological biases of sales representatives
Sales reps (like everyone else) are susceptible to psychological biases that can affect their judgment: lack or excess of confidence, pessimism or optimism, selective memory… Furthermore, sales reps often produce their sales forecasts in a charged political context, because of the relationship between forecasts, quotas and bonuses.
Few companies know how to correct these biases, with two negative consequences:
- The forecasts produced by sales reps are not trusted and poorly used, even though the information they contain is invaluable.
- The forecasting process is imperfectly integrated with the company’s sales management process and tools (e.g. distinct Excel file vs. CRM software).
Effective solutions exist
All of this is unfortunate, because advances in behavioral economics and decision theory over the past 25 years provide us with an entire library of techniques to improve the judgemental forecasts of sales reps. These methods come in two forms:
- Minor but clever modifications to the forecasting process.
- Quantitative techniques to improve judgmental forecasts.
Many studies underline the effectiveness of these methods of reinforcing judgmental forecasts. These methods have two other notable advantages for your company:
- They can be directly implemented in your CRM software, thus transforming it into a veritable business intelligence tool.
- They put your sales reps’ knowledge and work to good use, thus contributing to the adoption of your CRM software.
Market finance has been quick to leverage the teachings of behavioral economics and decision theory. Has the time come for sales management?
