3.3.1 - Quantitative sales forecasting

Question 1

What is quantitative sales forecasting? (QSF)

Answer 1

• QSF is a statistical technique which uses data to make predictions about the future (in terms of sales not the weather etc)
• The method that your exam board would like you to know about is called “time series analysis”
• In a nutshell it uses historical data, smoothed out, to make better predictions for the future

Question 2

What can a business do with QSF information?

Answer 2

• Once a business has carried out time series analysis they will use this information to;
• Organise production
• Organise resources in the business e.g. employees, premises, raw materials
• Organise marketing to back up the sales predictions

Question 3

What are scatter graphs

Answer 3

• Interpretation of scatter graphs As a business director you need to find out if you need to put up the budget in a marketing department.
• Does more advertising guarantee more sales? If it does we call that correlation.

Question 4

Limitations of quantitative sales forecasting techniques

Answer 4

• Past performance is no guarantee of the future
• Businesses need to appreciate the SWOT and PESTLE factors that may affect future predictions, for example;

• Weather
• Trends
• Competitor activity
• Terrorist activity

• Relies on what has happened in the past continuing to happen, and historical data is not always a good indication of what might happen in the future
• In high technology markets change happens rapidly and products have a short product life cycle, therefore extrapolation can be misleading
• It is time-consuming and complex and is only as reliable as the data put in
• Use of moving averages doesn’t take into account how recent the data is
• Doesn’t link with corporate objectives