4.3 sales forecasting Flashcards
What is sales forecasting?
is a quantitative technique used to predict a firm’s level of sales revenue over a given time period,
What is the benefit of sales forecasting?
1.Can drive strategic planning in a business/make more informed decisions.
2. allows organizations to predict, and prepare for opportunities of opps.
3. helps plan for future, minimize risk.
4. helps businesses identify sales trends / imporve operational efficiency.
What are the limitations of sales forecasting?
- Not indicative of the future/ can be inaccurate
- The less accurate, the longer the time period.
- Market research can be time consuming and expensive.
- product oriented organizations do not rely on market research to sell products.
- Qualitative, random vairables factors are often ignored.
What is the difference between a guess and sales forecasting?
A guess is an uninformed or random estimate made without data or analysis. It’s based on intuition rather than evidence.
Sales forecasting, on the other hand, is a data-driven prediction of future sales. It relies on historical data, market trends, and business insights to make an informed estimate.
What are the two types of bias might we encounter when trying to forecast sales?
First Impression Bias
This occurs when people place too much weight on their initial experience with something, whether it’s a product, person, or data trend. In sales forecasting, this could mean relying too heavily on early sales data and assuming that initial trends will continue, even when new information suggests otherwise.
Recency Bias
This happens when people give more importance to recent events or data rather than looking at the bigger picture. In forecasting, this can lead to overreacting to short-term fluctuations rather than considering long-term trends.
