2.2.1 Sales Forecasting

Question 1

What do sales forecasts do?

Answer 1

Predict future revenues based on past sales figures

Question 2

Sales forecasts will usually focus on what happens in the future to what?

Answer 2

• The volume and value of sales
• The size of the market
• Sales as a result of promotional activity

Question 3

What factors (consumer trends) can affect sales forecasts?

Answer 3

Seasonal variations- demand for certain goods is essential e.g. major religous festivals, holiday periods & annual events- impact demand for wide range of products

Fashion- Often led by celebs & their influence can have a relitavely short impact on sales

Long term trends- Consumer behaviour, attitudes and spending habits can have a relitavely short-term impact on sales

Question 4

What factors (economic variables) can affect sales forecast?

Answer 4

Economic growth- During periods of economic growth increased consumer incomes will lead to higher than forecast sales

Inflation- The general increase in prices overtime reduces consumers’ spending power

Unemployment- Increased levels of unemployment are often experienced during periods of recession & tend to be a key cause of reduced spending in economy

Question 5

What are some difficulties of sales forecasting?

Answer 5

• The future does not always mirror the past- Fads &fashion/ tastes change/economic factors/competitor actions/ the unexpected
• Too much data- Media coverage/Past sales data/governnment data
• Interpretation- experience bias/specialist opinion/ budget and time constraints

Question 6

What are the difficulties of sales forecasting for a business?

Answer 6

• Effective sales forecasting requires skill, time and the accurate use of timely data
• Smaller businesses in particular may lack the experience or specialised personnel to construct, analyse & interpret sales forecasts
• It is difficult to avoid experience bias (e.g. opinions of the future based on experiences in the past)
• Businesses may face problems in constructing sales forecasts that ignore the priorities of key stakeholders
• Sales forecasts will rarely reflect the full range of external influences that can affect future inflows, such as fashions, trends & the actions of competitors