Quantitative sales forecasting

Question 1

What is quantitative sales forecasting?

Answer 1

QSF is a statistical technique which uses data to make predictions about the future (in terms of sales)

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

How do you calculate three period moving average?

Answer 3

1. Take the first 3 years data and calculate an average
2. leave out the first year and calculate the average for the next three years
3. add all your calculated averages to the table. The calculation goes next to the middle year.

Question 4

What is a 4 quarter moving average?

Answer 4

As a business manager or owner you may need to look at your sales data in terms of the 4 seasons in the year

As your sales may fluctuate widely but you still need to schedule your production on a month by month basis you would use this technique

It is calculated the same way as 3 period moving average, only is done with four sets of data.

Question 5

What are the limitations of quantitative sales forecasting techniques?

Answer 5

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