Chapter 3- Sales Forecasting Flashcards
What is sales forecasting?
The process that enables a business to estimate future sales. It predicts future demand by anticipating what consumers are likely to do in a given set of circumstances
Can be categorised into quantitative and qualitative techniques
Quantitative sale forecasting methods
1) Time series analysis
2) Use of market research data
Qualitative sales forecasting methods
1) Delphi technique
2) Brainstorming
3) Intuition
4) Expert opinion
What is time series analysis?
Uses evidence from past sales records to predict future sales patterns. There are several methods:
1) Seasonal analysis
2) Trend analysis
3) Cycle analysis
4) Random factor analysis
What is seasonal analysis?
sales are measured on a monthly or weekly basis to examinee the seasonality of demand
What is trend analysis?
This focuses on long term data which has been collected over a number of years
What is cycle analysis?
Long term figures are used but now the objective is to examine the relationship between demand levels and economic levels
What is random factor analysis?
Attempts to explain how unusual or extreme sales figures occur
What is extrapolation?
Process of using past data to inform about an underlying trend in the market
What is the Delphi method?
Based on researching the views of a panel of experts
How does the Delphi method work?
Begins with the development of a questionnaire in which participants answer independently and return.
A further questionnaire is developed based on findings and is sent to the same panel of experts
Members are then able to prioritise ideas and arrive at a consensus forecast on the topic discussed
Advantages of the Delphi method:
+ Is flexible to be used in a variety of situations and can be applied to a range of complex problems
+ Provides a structured way of making group decisions
+ Participants have time to think through ideas= better quality responses
+ Creates a record of responses which can be used when needed
Disadvantages of the Delphi method:
- Time consuming process to complete and to manage
- Assumes experts will come to a consensus view and allow their opinions to be changed by others
- Monetary payments to experts may lead to bias of results
What is brainstorming?
A subjective technique for generating new ideas and promoting creative thinking; usually in a group
All ideas are welcome and there are no wrong answers or no judgements. Most effectively done in groups of 6-12 people of a varied group
What is intuition?
Can be difficult to predict future demand if a product is new to the market, as it may have little historical data if the market is unstable and is constantly changing. Due to little data available, business leaders may have to use their intuition or ‘gut feeling’
They often use knowledge of separate markets and transfer it to the new market/product
