Sales Forecasting Endterm

8/3/2019 Sales Forecasting Endterm

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SALES

FORECASTING

Presented By:

AnantSheopuri

1008014


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INTRODUCTION

It is an estimate of sales (value/units)

that a firm expects to achieve during a

specified forthcoming time period, in a

stated market and under a proposed

marketing plan

A sales forecast can be for an entire

range of products or an individualproduct within a product line.


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GUIDING PRINCIPLES FOR

FOR

ECAS

TING


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FACTORS AFFECTING SALES

FOR

ECAS

T

Marketing plans

Conditions within the industry

Market Conditions

General Business Conditions


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SALES FORECASTING

METHOD

S Survey Methods

y Executive Opinion (Delphi technique)

y Sales Force Composite

y Buyers Intention Mathematical Methods

y Moving Average Method

y Exponential Smoothing Method

y Regression

Model

Operational Methods

y Test Markets

y Must Do Calculations

y Capacity Based Calculations


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EXECUTIVE OPINION

Oldest & simplest of methods used in forecasting.

Obtaining views of top executives regarding future

sales.

Estimates made largely by observation,experience and intuition.

Used in companies that do not use forecasting

software.

Advantages- Quick & easy to do. Popular amongsmall & medium sized companies.

Disadvantages- Highly unscientific, just educated

guesses, time consuming, influential decisions.


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DELPHITECHNIQUE

Highly Publicized technique by RandCorporation.

Select panel of experts.

Each expert makes predictions on somematter.

Resulting feedbacks are then given back

to experts for brainstorming session. Process repeated till experts arrive at

some consensus.


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SALES FORCE COMPOSITE

Based on collecting an estimate from eachsales person of the product/services to sellin forecast period.

Estimate is made by consultation withsales executive & customer.

Individual forecasts are aggregated to formcompanys overall sales forecast.

Advantages: Made by person closest to the

market. Disadvantages: Time consuming for

managers, complicated process.


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BUYERS INTENTIONS

Contacting potential customers and

questioning them.

Advantages: Direct contact with buyer.

Disadvantage: Time consuming, Costly,

no reliability of customers.


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MOVING AVERAGE

TECHNI

QU

E Simplest way to forecast sales. Assumes that same conditions will prevail in the

future.

However factors affecting sales are never constant.

Therefore we take average of sales from severalperiods.

Salest+1 = 1/n (Salest + Salest-1 + Salest-2 +.+ Salest-n ).

Where;y t = current sales

y t+1 = Sales of next year (Forecasted Sales)

y n = no. of years taken into consideration.

y t-1 = Sales of immediate previous year.


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EXPONENTIAL SMOOTHING

MODEL

Influence of past sales on future

predictions.

Sales t+1 = (L) * Actual Sales t + (1-L) *

Forecasted sales t

Value of L is derived by forecaster onbasis of experience and observation.


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REGRESSION ANALYSIS

Used to project sales trends.

Sales totals are plotted on a graph foreach past time period.

Too complex a method hence used inlimited companies.

Requires highly skilled personnel in

regression analysis model.Availability of software programs has

increased use of this method.


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TESTMARKETS

Involves introducing and marketing a newproduct in a market that is similar tocompanys other markets.

The demand for the product in the testmarket will be used to forecast sales ofproduct in the other markets.

Although it is time consuming and costly

yet it is the most accurate method ofestimating sales potential for products.

It eliminates the idea of guessing.


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MUSTDO FORECASTS

Based on sales volume to generate

sufficient cash to cover fixed costs and

variable costs.

Others may allow the company to earn

some profits.

No historical data present.

Used by companies launching a newbrand/product in the market.


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CAPACITY BASED

FOR

ECAS

TS

Sales according to capacity.

The company can sell at maximumcapacity.

Used by small businesses, restaurants

etc.


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DIFFICULTYIN SALES

FOR

ECAS

TING

Accurate sales forecasting varies fromsituation to situation.

If sales of a product are stable in a yearthen forecasting is easier.

Difficult to make accurate forecasts fornew products, since historical data islacking.


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REVIEW THE FORECASTING

PROC

ESS Periodic review of forecasting processes.

Determine accuracy of past forecasts.

Review data used in sales forecasting.

Changes in marketing expenditure must be

incorporated into preparation of sales

forecasts.


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Documents

Sales Forecasting Endterm