what is sales forecasting
the process of predicting future sales levels by volume or value and future trends
quantitative sales forecasting can be based on historic or result of quantitative research
what is sales forecasting used for
inform cash flow and budgets
aid workforce planning
inform resource management about inventory levels production output and logistics
what business activities can sales forecasting help with
stock levels
workforce planning
product portfolio
budget and cash flow
target setting for employees
how can reliability of sales forecasting be affected
expertise of forecaster
research and sampling method used
how far into the future the forecasts are looking
dynamic nature of the market
time series analysis
shows past sales figure in date order
marketers used this historical data after fluctuations
allows for better identification of an overall trend
identifies influencing factors on future sales
quantitative techniques- what is a correlation
it’s compares 2 variables and how one affects the other
can be positive negative or no correlation
quantitative techniques-what is extrapolation
involves the use of trends established by historical data to make predictions about future sales
the basis assumption is that the pattern will continue into the future unless evidence suggests otherwise
how is extrapolation shown on a graph
the line of best fit is carried on in the same pattern its previously shown
what’s an issue with extrapolation
it doesn’t take into account anything else like trends, seasonal changes and competition
advantages of extrapolation
very quick to do
cheap
relatively accurate, it’s based on past figures therefore can assume there’s an element of accuracy
disadvantages of extrapolation
anomalies happen, can’t account for the unexpected
industry changes, new laws or competition may affect sales
hard to do if based on a new product
it assumes trends continue and likely that at some pint will change
disadvantages of extrapolation
anomalies happen, can’t account for the unexpected
industry changes, new laws or competition may affect sales
hard to do if based on a new product
it assumes trends continue and likely that at some pint will change
limitations of quantitative techniques
the further into the future the greater the uncertainty
sales will be influenced by external influences which are difficult to predict
past is not always a fair indication of the future
may be manipulated or biased
advantages of time series analysis for the business
can be reliable for predicting future trends if collected over a long period of time
seasonal fluctuations can be measured and compared over time to reveal patterns which act as a good basis for future predictions
disadvantages of time series analysis for the business
can be unreliable if there are significant fluctuations in the historical data
the process assumes that past trends will continue into the future but this is unlikely in a competitive environment
the process ignores qualitative factors such ad changes in tastes and fashions or external shocks like a recession
advantages of time series analysis for stakeholders
customers- more consistent product availability
suppliers- stable, predictable orders
employees- more job security if the business can anticipate demand and avoid sudden lay offs
shareholders- gain confidence if forecast shows growth
qualitative techniques- what is intuition
when forecasts are made based on a gut instinct rather than by historical data
benefits of intuition
allows for quick decision making
encourages innovation and creativity
drawbacks of intuition
difficult to justify
reliant on expertise and experience
benefits of intuition
allows for quick decision making
encourages innovation and creativity
qualitative techniques -what is brainstorming
it’s the process of asking a range of people to contribute ideas to a discussion
benefits of brainstorming
large number of ideas are welcome
encourages creativity
can build on group ideas
drawbacks of brainstorming
can cause conflicts
may have too many ideas
reliant on some expertise
focuses on quantity of contribution rather than quality
qualitative techniques- what is the delphi technique
the process of obtaining the opinions of a range of external experts who are not known to each other and who contribute their opinions independently
