Sales forecast is the basis of
corporate planning forecasting is a systematic attempt to Product/ Service the
future on the basis of known facts. It is the result of numerous assumption
made about the external and internal environment of firms.
Sales forecasting is the estimate
level of the company sales based on chosen marketing plan and assumed marketing
environment.
OR
Sales forecasting is the climate of
sales during some specific future period time & under a pre determined
marketing plan of the firm.
Important –
1. it is the foundation of planning.
2. Companies uses the sales forecast
to allocate resource across different functional areas.
3. It is the key factor in all
operational planning throughout the company.
4. It serves as a base for sales
force planning.
5. It plays a major role in the
success of the organization.
6. It is the key to sales
management.
7. It helps in profitability of the
firm
8. It helps in facilitating Product/
Service ion planning
9. It helps in better financial
planning.
10. It is developing sales
strategies and promotional plans
11. It helps in suggesting R &
D.
12. Also helps in better inventory
control & sales quota determination.
Process of sales forecasting :-
Determination of goals – The sales
manager should decide the goals for sales forecasting. The objectives may
include determination of sales publicity program, marketing methods, sales
quota determination, estimation of working capital etc. Determining the factors
affecting sales – The controllable factors are like marketing & advertising
policy, organization structure etc. & the non controllable factors like
political & social systems, seasonal fluctuations etc. must be determined.
Selection of techniques – Suitable methods for sales forecasting must be
selected keeping in view the objective time intervals resources and nature of
the firm. Correction of data – This is the step of collecting various kinds of
information’s & data related with future demands of Product/ Services.
Analysis of market potential –
The next step is to analyze the data
of market potential. Analysis requires two steps>>
a) Select the market associated with
Product/ Service demand.
b) Eliminate those market segments
that do not contain prospective business.
Forecasting of future sales:-
Sales projection should be made for
an entire Product/ Service line or for an individual Product/ Service or for
companies total market or individual market segment.
Making operational program & the budget:-
The firm determines the requirements
for various operational activities such as Product/ Service ion purchasing
marketing capital assets. On the basis of forecast the related plans such as
sales budget sales quotes sales publicity and material acquirement are
formulated Derivation of a sales volume objectives:-
A sales volume objectives for the
coming operative period is hoped for the outcome of a company’s short range
sales forecasting procedure, The sales volume should be consistent with
managements profit aspirations and the companies market capabilities.
Evaluation & revision of
forecasts:-
The sales executives should evaluate
the forecasts carefully. The company should examine all the assumption on which
it is based. The company should the forecasting process periodically. The first
step in the review is to determine the accuracy of past forecasts to learn if
changes are needed in the way forecasts are made if the company finds that
sales forecasts are significantly different from actual sales in the period it
should undertake a review of the sales forecasting process.
Techniques of sales forecasting:-
I. Survey methods:-
a) Executive opinion
b) Prudent manager forecasting
c) Delphi method
d) Sales force composite
e) Detecting differences in figures
f) Survey of buyer intention
g) Product/ Service testing and test
marketing.
a) Executive opinion – It consists
of obtaining the views of top executives regarding future sales. The forecasts
made by executives are arranged to yield one forecast for all executives or the
differences are reconciled through discussion.
b) Product/ Service manager
forecasting – In this method the company personnel are asked to assume the
position of purchasers in customer companies. They must then look at company
sales from a customer’s view point & prudently evaluate sales.
c) Delphi method – This method
begins with a group of knowledgeable individuals estimating future sales. Each
person makes a prediction without knowing others in the group have responded.
these estimates are summarized. Now knowing how the group responded. They are
asked to make another Product/ Service ion on the same issue. This process of
estimates & feedback is continued for several rounds. In final round involves
face to face discussions among the participants.
d) Sales force composite – This
method is based on collecting an estimates from each salesperson of the
Product/ Services they expect to sell in the sale forecast period. The estimate
may be made in consultation with sales executives and customer BDT
e) Detecting differences in figures
method – In this method the sales person produces figures broken down by
Product/ Service & customers and the area manager produces figures for the
sales persons territory. They then meet & must reconcile any differences in
figures. the process proceeds with the area manager producing territory by
figures.
f) Surveys of buyer’s intentions –
This method consist of contacting potential customers & questioning them
about whether or not they would purchase the Product/ Service at the price
asked.
g) Product/ Service testing &
test marketing – This technique is of value for new or modified Product/
Services for which no previous sales figures exists & where it is difficult
to estimate. Likely demand. It involves placing the pre Product/ Serviceion
model with a sample of potential users beforehand & noting their reactions
to the Product/ Service. Test marketing involves the limited launch of a
Product/ Service in a closely defined geographical test area.
II. Mathematical methods :-
a) Moving average technique –
Simplest way to forecast sales is to predict that sales in the coming period
will be equal to sales in the best period. This forecasts assumes that
conditions in the last period will be same as the conditions in the coming
period.
SALES t+1 salest + salest-1 + sales
+ s………………… salest-n
SALESt+1 = Forecasted sales
SALESt = Sales in the present
period.SALESt+1 = Sales in the period immediately past.
b) Exponential smoothing models – It
is a type of moving average that represents a weighted some of all past numbers
in a time series. with the heaviest weight placed on the most recent data.
c) Regression analysis – This
technique is used to project sales trends in the future. The sales plotted are
for each past time period. It determines and measures the associations between
the sales & other variables.
d) Projection of past sales – It
takes a variety of forms. · To set the sales forecasts for the coming year at
the same figure. May be moving average of the sales figures for several past yea
BDT
e) Time series analysis – It is a
statistical procedure for studying historical sales data this process involves
measuring 4 types of sales variations – long term trends, cyclical changes,
seasonal variations & regular fluctuations. Then a mathematical model about
the past behavior of the series is selected assumed values for each types of
sale variation are insisted and sale forecast is made.
f) Market factor analysis – Market
factor analysis determines market factors & measures their relationships to
sales activity.
g) Correlation analysis – This
method takes in to account the association between potential sales of the
Product/ Service and market factor affecting its sales.
h) E-charts – this technique is
furtherance of moving average technique. It also shows the monthly sales &
cumulative sales.