Sales forecasting Flashcards
How do businesses anticipate the future
They use sales forecasting techniques
What is sales forecasting
Methods to predict future demand by anticipating what consumes will do in given circumstances
If a business has used sales forecasting to predict sales what else can it predict
HRM needs, finance needs, estimate quantity and cost of raw materials and determine production levels
What is extrapolation
Using past experience or past business data to forecast sales
What are the 2 categories that sales forecasting fall into
Quantitative and qualitative techniques
Name 2 quantitative techniques of sales forecasting
Time series analysis
Use of market research data
Name 2 qualititive sales forecasting techniques
Delphi technique
Brainstorming
Intuition
Expert opinion
When are quantitative methods of sales forecasting used
When historical date is available
What is time series analysis
It uses evidence from past sales records to predict future sales patterns
What are the methods of time series analysis
1 seasonal analysis - measured on a monthly or weekly basis to examine seasonal demand eg sales of ice cream lighter on cold days
2 trend analysis - focus on long term date, collected over a number of years to determine a general trend of sales
3 cycle analysis - long term figures used but to examine the relationship between demand level and economic activity
4 random factor analysis - used to attempt to explain unusual or extreme sales figures
What is trend analysis and extrapolation
1 Extrapolation involves taking the past and extending it into the future - if sales have grown steadily in the past at around 5% a year it may be reasonable to extrapolate from this that sales will continue to grow by 5% a year
2 we can also use probability to predict the future. If sales show a general trend of increase but fluctuated we can allow for this.
On an extrapolated sales graph how are future sales usually displayed
As a dotted line
What are moving averages
Used to identify trends from past sales figures which even out major fluctuations
It smooths out seasonal variations if plotted on a graph and helps to plot predicted trends
How is a 3 month moving average calculated
Take 3 adjacent figures eg fis for Jan Feb March and add them and divide by 3 - this becomes the moving average fig for feb as it is mid point for the 3 months
What is a correlation
It measures the relationship between to variables eg is there a link between a businesses advertising expenditure and amount of sales achieved
There can be a strong correlation, a non existing correlation or a negative correlation