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Transcript of SALES FORECASTING
design by Dóri Sirály for Prezi
it is used by companies to determine how to allocate their budget for an upcoming
period of time.
It is a prediction of the future market potential for a specific product. It sets the sales expectations for a given time period.
• Standardized Classification System – the most widely used approach to estimating industrial demand.
Estimating Industrial Demand
It is an organized process that uses sales inputs to forecast business for upcoming periods of varying length.
SALES and OPERATIONAL PLANNING: S & OP
•Forecasting is important to all practically all marketing organizations
It is the individual sales target
figure assigned to each sales
Analyze sales records
Develop a Preliminary
Have managers review forecast and adjust
Build a Sales
plan around the
to Operating Plans
Five Characteristics of
Successful S & OP programs:
“Top-down” steps in developing sales forecast using the breakdown approach:
1. Forecast general economic conditions
2. Estimate the industry’s total market potential for a product category
3. Determine the share of this market the company currently holds and is likely to retain in view of competitive efforts
4. Forecasts sales of the product
5. Use the sales forecast for operational planning and budgeting
Factors to consider:
• Economic influences
• Demographic changes
• Social changes
• Competitive developments
• Legal developments
• Political developments
• Internal company factors
Model of Breakdown Approach
Build-up Approach is based on primary research, which is new data collected for the specific purpose at hand.
Non quantitative Forecasting Techniques
often called subjective forecast.
Two types of Nonquantitative forecasts:
1. Judgments Methods
2. Counting Methods
- it assumes, naively, that the next period's sales will be the same as they were in the previous period.
•Jury of executive opinion method
•Sales force composite
Advantages of Sales Force Composite:
•Assigns forecasting responsibility to those held responsible for making the sales
•Uses specialized knowledge of salespeople in the field
•Helps salespeople accept sales quotas assigned to them because they participate in developing forecasts
•Yields results that are often more reliable and accurate
•allows estimates to be prepared by products, customers and territories so a final detailed forecast is readily available
•Relies on input from salespeople who are not trained in forecasting
•Allows salespeople to deliberately underestimate their forecast so they can reach their quotas more easily
•Yields forecast based on present rather than future conditions
• Requires considerable amount of sales force time that otherwise could be spent in the field attracting new customers
•Relieson salespeople who may not interested in forecasting
- forecasting approach that tabulate responses to questions on surveys or count the numbers of buyers or purchaser.
1. Surveys of Buying Intentions
2. Test Marketing
Advantages of using surveys of buying
•The actual product users determine the forecast
•forecast are relatively fast and inexpensive when only small number of customers are surveyed.
•Research gives the sales forecast a good prediction of customers buying intentions
• Research gives the forecaster a viable forecasting basiswhen others may be inadequate such as when there is no historical data.
• Surveys can be expensive and time consuming
•Buyer intentions can be inaccurate
•Forecasts depend on the judgment and cooperation of the product users, some of whom may be uncooperative and uninformed.
• Buying intentions,especially for industrial products, often are subject to multiple effect
Quantitative Forecasting Techniques
-it uses historical data to predict future sales.
Four factors using time series methods:
2. Periodic Movements
3. Cyclical Movements
4. Erratic Movements
-it attempts to identify the factors affecting sales and to determine the nature of the relationship between them.
Includes the following..
•Correlation Regression Analysis
Correlation Analysis - is a statistical approach analkysing the way variables are realted to one another or move together in some way.
Correlation Coefficient - is a measure of how much two variables are realted to one another.
Regression Analysis - is a statistical approach to predicting a dependent variables such as sales, using one or more independent variables such as advertising expenditures.
Scatter Diagram - plots one variable againts anoherto see whether there is a relationship.
Breakdown Approach starts with a forecast of general economic conditions, typically, projected group national product (GNP).
Simple Regression - the relationship between two variables is shown by fitting a straight line to plotted points.
Multiple Regression - is a tool for forecasting a dependent variables like sales using several independent variables simultaneously.
Trend Analysis can provide a quantitative forecast. In a trend analysis forecasting sales, the dependent variables is sales, and the independent variables is time.
Standard Error of the Estimate- is a measure of the accuracy of the prediction.
Input-output Models - are complex systems showing the amount of input requested from each industry for a specified outut of another industry.
EVALUATING FORECASTING APPROACHES
Sales managers should consider several criteria:
•Quality and Quantity of Information
SALES BUDGET PLANNING
•Sales Budget - is a financial sales plan outlining how to allocate resources and selling efforts to achieve the sales forecast.
•Budgeting - is an operational planning process expressed in financial terms.
The Controlling Function
The control function of a sales budget is to evaluate actual results against sales budget expectations.
Preparing the Annual Sales Budget
• Ensure a systematic approach to allocation resources.
• Develop the sales manager’s knowledge of profitable resource utilization.
• Creat awarenessof the necessity of coordinating selling efforts with other divisions of the company.
• Establish standards for measuring the performance of the sales organization
• Obtain input from all areas of the company in the profit planning process.
STEP 1: Review and Analyze the Situatin
Common line items in sales budgets:
• Direct selling expenses
• Commissions and bonuses
• Benefit package
• Office expenses
• Promotional materials
STEP 2: Communicate Sales Goals and Objectives
STEP 3: Identify Specific Market Opportunities and Problems
STEP 4: Develop a Preliminary Allocation of Resources
STEP 5: Prepare a Budget Presentation
STEP 6: Implement the Budget and Provide Periodic Feedback
Thankyou for listening! :)
- is in fact, a type of moving average that represents the weighted sum of all parts numbers i a time series, with the heaviest weight place on the most recent data.
ARIMA (Autoregressive integrated moving average)
- is a sophisticated forecasting approach based on the moving average concept. The model incorporates information about trends by spotting patterns in the fluctations in data.
Buyer Intensions – the second approach is more focused and surveys potential industrial customers.