Chapter 3- Sales Forecasting Flashcards
What is sales forecasting?
The art/science of predicting future demand by anticipating what customers are likely to do in a given set of circumstances
What is the purpose of sales forecasting?
Allows business to predict sales, once a business has what it believes is an accurate estimate of future sales it can then predict HRM needs, finance needs and to estimate the quantity and cost of purchasing raw materials.
What is extraploitation?
Using past experience of business data to forecast future sales.
When are quantitative methods of forecasting used?
When historical data is available
What are the quantitative methods of sales forecasting?
Time-series analysis and the use of market research data.
What is time-series analysis?
Uses evidence from past sales to predict future sales patterns.
Seasonal Analysis
Trend analysis
Cycle analysis
Random factor analysis
What is seasonal analysis?
Sales are measured on a monthly/weekly basis to examine the seasonality of demand
What is trend analysis?
Focuses on long-term data, which has been collected over a number of years, objective is to determine the general trend of sales- falling , rising, stagnant.
What is cycle analysis?
Same as trend analysis, long term figures are used but now looking at the relationship between demand levels and economic activity.
What is random factor analysis?
This method of analysis attempts to explain how unusual or extreme sales figures occur. Attempts to provide explanations for abnormal sales activity.
What are some of the methods of using market research data?
Survey of customers intentions
Direct sales info
Test marketing
What is a survey of customers intentions?
Makes predictions by asking people directly what they intend to do in the future. The results of these surveys allow businesses to predict sales patterns and plan for the future in terms of staffing and production levels.
What is direct sales information?
Sales staff within business interact closely with customers, they may notice developing trends, spot market changes and shifts in customer preferences. This information can be collected by management requesting statistical predictions of future sales.
What is test marketing?
Testing consumers’ response to a product, before the full release of the product. If the response of the test marketing process is negative then changes can be made to the films before being made available to the general market. Used to determine whether adjustments are needed or whether the forecasts are likely to be achieved.
What are qualitative methods of sales forecasting?
- Delphi Method
-Intuition
-Brainstorming
-Expert Opinion
What is the delphi method?
- Development of questionare focusing on a problem/issue
- Panel of experts selected, questionare given to each one.
- Ppts fills out questionare and hands it in
4.Responses are summarised then a further questionare is given out based on the findings of first questionare, sent to same panel of experts. - Experts independently rate and prioritise ideas included in the second questionare.
What are the advantages of the delphi method?
Flexible enough to be used in a variety of situations and can be applied to a range of problems.
Provides a structured way for a group of people to make decisions
What are the disadvantages of the delphi method?
Method will require a substantial period of time to complete as it is time consuming to coordinate and manage
Assumes that experts are willing to come to a consensus and allow their views to be altered by other experts.
What is brainstorming?
A subjective technique for generating new ideas usually between a group of people. Can be used to predict outcomes based on the group’s subjective thoughts/feelings.
All ideas welcome, no wrong suggestions as no judgements should be made. Will work best if the group contributes a large amount of creative ideas in a short space of time.
Should include participants from across different departments across the organisation and with different backgrounds.
Even if focused on a specialist idea, outsiders can bring fresh ideas.
What is intuition?
With limited data available to collect and examine, business leaders/managers may instead use their ‘gut feeling’ or intuition.
The use of intuition is cheap and fast. There is no need for gathering data,
Gut feeling and experience should not be the only guide, even if experienced managers feel strongly, there is no excuse not to carry out some further forecasting techniques.
What is expert opinion?
huge variety of expert opinion available on individual markets- there are consultants who specialise in specific areas who will have opinions on future demands/ expenditure patterns in the UK and global market.
Experts are useful for gaining specialised insights into likely future patterns and trends but should not be used on a ‘standalone basis’.
The opinion of experts should also be combined with information gathered from other sources.
Experts can also make mistakes and fail to forecast future trends correctly.
What are some external factors that can affect qual/quan sales forecasting?
Economic Factors: change in any of these economic variables could reduce the accuracy of the sales forecast (unemployment levels, inflation)
Consumer Factors: consumers’ tastes and fashions are constantly changing, businesses try to anticipate these changes through market research. However, consumers can be unpredictable and their preferences change quickly.
Competition Factors: A business cannot control the actions of their competitors, actions will not only affect the present business performance but the future
