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Sales Forecasting Notes

The document discusses various sales forecasting methods and their potential benefits, including reduced risks and improved planning for production and marketing. It outlines techniques such as sales-force composite, Delphi method, consumer surveys, jury of experts, and quantitative methods like correlation and time-series analysis, each with its advantages and limitations. Overall, it emphasizes the importance of accurate forecasting in a dynamic business environment while acknowledging that qualitative data may yield better long-term accuracy.

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Donell Sithole
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13 views3 pages

Sales Forecasting Notes

The document discusses various sales forecasting methods and their potential benefits, including reduced risks and improved planning for production and marketing. It outlines techniques such as sales-force composite, Delphi method, consumer surveys, jury of experts, and quantitative methods like correlation and time-series analysis, each with its advantages and limitations. Overall, it emphasizes the importance of accurate forecasting in a dynamic business environment while acknowledging that qualitative data may yield better long-term accuracy.

Uploaded by

Donell Sithole
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Sales Forecasting – potential benefits

 Reduced risks
 The production department is aware of the number of units
required
 The marketing department is aware of the number of units to
be distributed
 Accurate workforce planning
 Accurate cash flow forecasts and planning
 Forecasts may not be completely accurate due to the dynamic
business environment.
 Based on market research – primary and secondary
 Existing products – ask expert opinion/use past sales to
forecast future

Sales-force composite
 Add individual predictions of future sales of all sales
representatives in the business
 Sales force representativeness are required to keep close
contact with consumers – retails, wholesalers
 Allows them to understand market trends and estimate future
demand
 Quick
 Cheap
 Ignores macro-economic changes/developments
 Sales maybe overestimated

Delphi method
 Long range of qualitative forecasting which obtains forecasts
from a panel of experts
 They are anonymous
 Facilitator collects and coordinates with experts
 Several questionnaires round maybe done
 Delphi method increases chances of accuracy

Consumer surveys
 Questions maybe quantitative or qualitative
 Better accuracy – sample must be large, represent the target
market
 Time-taking
 Can use an agency, expensive but accurate
Jury of experts
 It uses senior managers who meet and develop forecast based
on their knowledge and experience
 Cheaper
 Quicker
 Lacks external viewpoint

Quantitative sales forecasting methods


Correlation – establishing causal relationships
 Relations between sales and other factors maybe identified
and used to make predictions
 Establishing correlation doesn’t indicate cause or effect
 Doesn’t consider other factors of change
Time-series analysis
 Based on sales data
Extrapolation
 Basing future predictions on past results
 Results plotted on a time-series graph, extending the line to
identify future trends
 Assumes sales patterns are stable
 Not accurate
 Doesn’t consider other factors

Moving averages
 Helps identify the underlying factors which are expected to
influence sales:
o Trend
o Seasonal fluctuations
o Cyclical fluctuations
o Random fluctuations
\n

 Four quarter moving total – add sales revenue of 4 quarters


 Eight quarter moving total – add 2 four quarter totals
 Quarterly moving average – eight quarter total/8
 Seasonal variation – sales revenue – quarterly average
 Average seasonal variation = add seasonal variation of
different years in the same quarter divided by number of years

Moving-average sales forecasting


methods – evaluation
 Useful to identify and apply seasonal variation to predictions
 Reasonably accurate for short-term forecasts in stable
economic conditions
 Assists planning for each quarter in the future
 Complex
 Less accurate, external environment changes
 In the long run, qualitative data is more accurate

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