2.2.1 Sales forecasting Flashcards
Sales forecasting
is about predicting future sales volume and sales revenue based on past data sales and market research
How will a business predict Future Sales
Market Research e.g market reports, customer surveys
Backdata e.g Time series analysis
Time Series Analysis
Is predicting future sales based on past sales figures
Takes into the account the trend & seasonal fluctuations
Sales Volume
the number of units sold
Sales Revenue
The amount of money generated made from sales
What will Sales forecasting directly effect in a business?
The efficiency and success of a business
4 purposes of sales forecasting
To know :
- how much stock to buy and hold
- how much staff are required
-businesses cash position at that time
- what marketing strategies to use
3 Benefits of sales forecasting
Finance - Helps to generate accurate cash forecasts as you know what your cash inflow will be. Useful to know so you don’t run out of cash
Marketing - helps to decide marketing methods e.g launching a promotional campaign if sales forecasts are in a decline. helps increase sales + cash inflow
Resources (Staff & Stock ) - ensures that a business has the correct amount of staff/stock available to meet demand
e.g higher sales forecasts - need more staff
Lower sales forecasts - less staff
Higher sales forecasts - More raw materials/resource
Lower sales forecasts - less raw materials/resources
What are the 3 factors that affect sales forecasting?
1) Consumers
2) Economic variables
3) Competitors
How can consumers impact sales forecasts - 3
Consume tastes & preferences can change over time. 3 main points :
1) Seasonal variations : Customers purchase some products/services in smaller/larger quantities at different times of the year.
2) Fashion - Consumers tastes + trends in fashion are always changing
3) Long term trends - most consumer trends change over a longer period of time. e.g trend towards netflix rather buying CDS from
Economic variables that can affect sales forecasting ?
1) Economic growth- when the economy is growing then consumer income also increases.This means they have more money to spend on your products/services. As a result the figures on your sales forecast will increase
2) Interest rates - When interest rates are high , the costs of loans increase and then the demand for loans fall (E.g when a household buys a new car most likely to be purchased using a bank loan)
When interest rates are rising business sales forecasts may be adjusted downwards as demands for the product will also fall due it being to costly
Higher interest = lower figures in sales forecasts, Lower interest = higher figures in sales forecasts
3) Inflation - when inflation is rising it indicates prices in the economy are also rising. As a result consumers + businesses tend to spend less. - This reduces sales forecasts
4) Unemployment - This leads to consumer incomes being reduced which will then decrease the sales of products/services of a business. As a result sales forecasts are reduced.
5) Exchange rates( reflects the value currency in terms of another) ?
How does competitors affect sales forecasting?
The action of your competitors can affect your sales forecast
- E.G Lower prices from competitors can result in a decline for your sales
forecast
3 difficulties of sales forecasting
- Volatile consumer tastes + preferences. These are always changing so the time series data & extrapolation a business uses is not always correct.Difficult to predict
- Range of data - Are they reliable? Is it quality data
- Fluctuations in economic variables e.g unemployment
- Subjective expert opinions(ppl that make forecasts) - will base sales forecasts on their own opinion and knowledge of the market. Isn’t always right and can be incorrect.
