Sales forecasting Flashcards
what is sales forecasting?
process of estimating future sales with accuracy
What are the three main methods of sales forecasting?
- extraploation
- correlation
- confidence intervals
define extrapolation?
- uses trends established from historical data to forecast the future
What is a trend?
general path that a variable takes over a period of time
What is a moving average?
a quantitative method used to identify underlying trends in a raw set of data
WHat is correlation?
- looks at the strength of a relationship between two variables
What are confidence intervals?
gives the percentage probability that an estimated range of possible values in fact includes the actial value being estimated
What are the three key factors effecting accuracy and reliability of sales forecasting?
- consumer trends
- economic variables
- competitor actions
What situations is sales forecasting likely to be innacurate ?
- business is new
- very elastic product
- product is a fashion item
- significant changes in market share
How is extrapolation done?
using moving averages
Benefits of extrapolation?
- simple method of forecasting
- not much data is required
- quick and cheap
Drawbacks of extrapolation?
- unreliable if significant fluctuations in historical data
- assumes past trend will continue
- ignores qualitative factors
How are confidence intervals useful to business?
- business benefits from use of statistics in estimating or predicting future events
- helps business evaluate the reliability of a particular estimate
- business needs to know how confident they should be in estimates
How are confidence intervals used in quality management?
- percentage reliabliltiy of machines
- chance quality control sample will detect issue
How are confidence intervals used for market research?
- statistical estimates for sales forecasting
- reliability of data from customer surveys
