2.2.1 Sales Forcasting Flashcards
1
Q
Define sales forecasting
A
Is the prediction of future sales and volume tends
2
Q
The purpose of sales forecasts
finance
A
- Inform cash-flow forecasts i.e. how much money can the business expect to flow in from sales
- Predict sales volume and sales revenue (2.2.2)
- Assess ability to break-even (2.2.3)
- Help set budgets (2.2.4)
3
Q
The purpose of sales forecasts
Marketing
A
- Identify when promotional activity is needed e.g. before a potential peak or to avoid a dip
- Plan distribution
4
Q
The purpose of sales forecasting
people
A
Sales team
Seasonal staff
Peak times
Operative to ensure supply meets demand
5
Q
The purpose of sales forecasting
Resource management
A
- required levels of output
- stock management
- can supply match demand
6
Q
Factors affecting sales forecasts include
consumer trends
A
- Goods come in and out of fashion
- Difficult to predict what the next trend will be
- Follow experts e.g. London fashion week as an indicator of short term fashion trends
- Shopping habits
- Online sales – how will this affect who buys what, where and when?
- Demographics
- UK has an ageing population with high net migration
7
Q
What factors affect sales forecast
A
Customer trends
Economic variables
Actions of competitors
8
Q
Factors affecting sales forecasting
economic variables
A
- Interest rates
- If interest rates are low this encourages consumers to spend as the reward for saving is low
- Employment
- The amount of people employed in an economy directly influences spending power, those in employment will have an income to purchase goods and services with
- Consumer confidence
- If consumers are confident in the future of the economy they are more likely to spend, however if the economy is in decline they are more cautious
- Stage in economic cycle
- If the economy is recovering then consumer confidence will be higher and employment rising which will impact on sales as identified above
9
Q
Factors affecting sales forecasting
actions of competitors
A
- Competitors entering or exiting the market
- This will impact on market share and therefore sales
- Changes in price and promotion
- e.g. what if a competitor lowers price or increases promotional activities?
- Competitor is better able to respond to consumer trends
- Greater flexibility and speed of response to changes in consumer wants
10
Q
Difficulties in sales forecasting
A
- By definition the future is unknown and therefore uncertain
- Changing external environment
- Unpredictable events
- Time frame
- Past is not a clear indication of the future
- Lack of perfect information