3.3.1 Quantitative sales forecasting

Question 1

what is a time series analysis

Answer 1

A method that analyses past sales data to identify patterns and predict future sales

a statistical method used in market research to analyse and forecast sales data. It involves studying the pattern of trend or sales date over time to make predictions about future sales.

used to examine data points collected or recorded at regular intervals over time, helping to identify trends, patterns, or seasonal variations to make forecasts or informed decisions.

Question 2

why might a business want to predict the future

Answer 2

• plan ahead
• make informed decisions
• anticipate market changes
• manage risks
• identify opportunities to stay competitive and achieve long term success
• manage stock
• meet customer needs
• manage cash flow

Question 2

What is quantitative sales forecasting?

Answer 2

The use of numerical data and statistical techniques to predict future sales.

Question 3

what are the 4 components of QSF that a business will consider

Answer 3

Trend: The long-term movement or direction in data over time, showing growth or decline.

Seasonal fluctuations: Regular, predictable fluctuations within a year, like holidays or weather patterns.

Cyclical fluctuations: Irregular fluctuations caused by economic or business cycles, lasting longer than seasonality.

Random fluctuations: Unpredictable, irregular variations due to unforeseen factors.

Question 4

what does a trend show

Answer 4

A trend shows the overall direction or movement of data over a long period, indicating whether values are generally increasing, decreasing, or remaining stable, helping businesses understand long-term growth or decline

Question 5

what is QSF

Answer 5

stands for quantitative sales forecasting

QSF is a prediction of sales for a period of time using past data

Question 6

whats a moving average

Answer 6

A method used to smooth out short-term sales fluctuations and highlight the underlying trend.

takes a three-year period or four-period time span and finds the average of the three/four periods.

the first period sales then drop out and the next period is included in the average

Question 7

Name two common methods used in quantitative sales forecasting.

Answer 7

Moving averages and trend analysis.

Question 8

How does a moving average help in sales forecasting?

Answer 8

It smooths out short-term fluctuations in sales data to reveal underlying trends, making future sales predictions more reliable.

Question 9

What does trend analysis do in sales forecasting?

Answer 9

It examines long-term sales data to identify patterns or directions (upward, downward, or stable), which can be used to forecast future sales

Question 10

Why do businesses rely on quantitative sales forecasting?

Answer 10

• provides data driven predictions
• helps plan production
• manage inventory
• setting sale targets

Question 11

what are the pros of QSF

Answer 11

Data-driven: Uses actual historical data, making predictions more objective.

Accurate for stable markets: Works well when sales patterns are consistent over time.

Helps in planning: Assists in production, inventory management, and financial planning.

Identifies trends: Reveals long-term patterns that inform strategic decisions.

Question 12

what are the cons of QSF

Answer 12

Dependent on past data: Assumes future will mirror past trends, which may not always be true.

Ignores external factors: Does not account for sudden changes like new competitors or economic shifts.

Limited in volatile markets: Less reliable when sales are unpredictable or affected by external shocks.

Requires accurate data: Poor or incomplete data can lead to inaccurate forecasts.

Question 13

what are the pros of using moving averages

Answer 13

Smooths out short-term fluctuations, making underlying trends clearer.

Simple to calculate and understand.

Useful for identifying short-term trends in sales data.

Question 14

what are the cons of using moving averages

Answer 14

Can lag behind actual changes, delaying response to new trends.

Less effective if sales data has irregular or sudden changes.

Requires selecting an appropriate period, which can be subjective.

Question 15

what are the pros of using trend analysis

Answer 15

Identifies long-term directions in sales data, aiding strategic planning.

Helps forecast future sales based on historical patterns.

Can incorporate various data points over time.

Question 16

what are the cons of using trend analysis

Answer 16

Assumes past trends will continue, which may not always be true.

Can be affected by anomalies or irregular data points.

Less effective if external factors significantly change the market environment.

Question 17

how would you work out how accurate the forecast was

Answer 17

actual sales - trend

Question 18

what do scatter graphs show with regards to QSF

Answer 18

Scatter graphs display the relationship between two variables, such as advertising spend and sales, helping to identify correlations or patterns that can be used to predict future sales based on changes in one variable

Question 19

what is meant by casual modelling

Answer 19

a method used to identify and analyse the cause-and-effect relationships between variables, helping businesses understand how changes in one factor (like advertising) can impact another (like sales).

graphs - the correlation depends on the angle of the data points and how close together they are

Question 20

what can make sales forecasting more reliable

Answer 20

Use accurate and recent data

Apply multiple forecasting methods for cross-checking
Consider external factors (market trends, economic conditions)

Regularly review and update forecasts

Incorporate expert judgment and insights

Analyse historical data trends and patterns

Question 21

when the points are in a line to the left, what correlation is it

Answer 21

negative correlation- no budget increase

Question 22

when the points are in a line to the right, what correlation is it

Answer 22

strong positive correlation- raise the marketing budget

Question 23

what correlation is it when the points are randomly scattered

Answer 23

no correlation- more research is needed

Question 24

what is a line of best fit used to show

Answer 24

the general trends over time

Question 25

what does it mean when we stretch the lines of best fit out

Answer 25

it enables us to see what will happen in the future

Question 26

what ways can you improve the QSF

Answer 26

- regularly review and update forecasts - have high quality market research data - use experts to produce the forecast

Question 27

what is qualitative sales forecasting

Answer 27

uses peoples opinions or judgements rather than numerical data genuinly decisions are based on the options or experts or experienced managers

Question 28

when is qualitative sales forecasting used

Answer 28

when there is insufficient data available when the market is changing rapidly

Question 29

What does the trend show in sales forecasting?

Answer 29

The general direction of sales over time — upward, downward, or constant

Question 30

What are seasonal variations?

Answer 30

Regular sales fluctuations that occur at the same time each year, e.g. ice cream sales rising in summer.

Question 31

What are cyclical variations?

Answer 31

Long-term sales changes linked to the economic or business cycle, such as booms and recessions.

Question 32

What are random variations?

Answer 32

Unpredictable events that affect sales, such as strikes or extreme weather.

Question 33

How is a moving average calculated?

Answer 33

By taking the average sales over a set number of time periods and moving forward one period at a time.

Question 34

What is extrapolation?

Answer 34

Using past data to extend a trend line and predict future sales.

Question 35

Why might a business combine quantitative and qualitative forecasting?

Answer 35

Why might a business combine quantitative and qualitative forecasting?