3.3.1 quantitative sales forecasting

Question 1

define Sales forecasting

Answer 1

is the process of predicting future sales levels by volume or value and future trends

Question 2

Quantitative sales forecasting is based on

Answer 2

data which can be historic or the result of quantitative research

Question 3

Sales forecasting will be used to:

Answer 3

• Inform resource management about inventory levels, production output and logistics
• Inform cash flows and budgets
• Aid workforce planning

Question 4

Time-series analysis shows

Answer 4

past sales figures in date order
Marketers use this historical data, after fluctuations have been smoothed out, to identify trends
Trends are then used to predict future sales

Question 5

describe moving averages and what they show

Answer 5

Moving averages
Shows whether a trend is significant by smoothing out fluctuations in data
Allows for better identification of an overall trend
Identifies influencing factors on future sales e.g. seasonal, cyclical or random fluctuations
Sufficient data is needed to give validity to the trend identified

Question 6

how do you calculate moving averages

Answer 6

add up the first 3/4 sales depending on if its quaternary or tertiary then divide it by how many there are eg 3/4
then continue with the rest

Question 7

what do scatter graphs do

Answer 7

Scatter graphs plot the relationship between 2 variables to identify correlation

Question 8

what is a correlation

Answer 8

Correlation is the identifying of a relationship between 2 variables

Question 9

correlations can be

Answer 9

positive
negative
zero

Question 10

describe positive correlations

Answer 10

the 2 variables move in the same direction

e.g. as temperature goes up ice cream sales go up

Question 11

describe negative correlations

Answer 11

the 2 variables move in opposite directions

e.g. as road tax prices go up the sales of new 4 x 4s goes down

Question 12

describe zero correlations

Answer 12

there is no relationship between the factors

e.g. average rain fall and sales of text books

Question 13

The strength of correlation can be expressed on a spectrum from

Answer 13

-1 to +1

Question 14

Limitations of quantitative sales forecasting techniques

Answer 14

The further into the future the greater the uncertainty
Sales will be influenced by external influences which are difficult to accurately predict
The past is not always a fair indication of the future
May be manipulated or biased
Inadequate market research
Unexpected events

Question 15

what is extrapolation

Answer 15

Using past data to extend an identified trend into the future

Question 16

describe extrapolation

Answer 16

A useful technique when trends can clearly be identified
and
The market is relatively stable

However
The past is not always a good indication of the future

Conditions and trends can soon change
Competitors’ actions
Consumer tastes
Market conditions