Sales Forecasting

Question 1

Factors affecting sales forecasts

Answer 1

• consumer trends
• economic variables
• actions of competitors

Question 2

How can consumer trends affect sales forecasting

Answer 2

Demand for the product can be affected by changing customer tastes and fashions. This may affect the market as a whole (market size) or a business’s products specifically (market share)

Question 3

How can economic variables effect sales forecasts?

Answer 3

Demand for exports, for example, could be sensitive to changes in exchange rates, while sales at home will probably be affected if the economy slips into recession

Question 4

How can actions of competitors affect sales forecasts

Answer 4

For example, an imported product released by a competitor may reduce the sales of a business compared to the sales forecast. Such actions are hard to predict

Question 5

Difficulties in sales forecasting

Answer 5

• a business may have no historical data about the sale of its product
• Sales forecasts can quickly become outdated in markets with rapid tech changes
• consumers may express interest but their actual buying can fall short due to hesitation or changing priorities
• new competitors can throw off the forecasts by changing the market

Question 6

Qualitative sales forecasting techniques (3)

Answer 6

• intuition
• brainstorming
• the Delphi method

Question 7

What is intuition?

Answer 7

Where and experienced manager may have a ‘hunch’ or may make an educated guess that sales may rise even though the quantitative data show exactly the opposite

Question 8

What is brainstorming?

Answer 8

Where people a group discussion takes place to produce ideas concluding in a sales forecast

Question 9

What is the Delphi method?

Answer 9

Where a group of experts on the product provide their views on a range of issues, including market growth or sales growth. Their opinions are given in confidence with all parties being able to revise their forecast basted on other views in the group. Th pe group ultimately aims for a ‘consensus forecast’, one on which all experts can agree.

Question 10

Advantages of qualitative forecasting

Answer 10

• it allows managers/experts to use their experience and expertise to make predictions that historical data may not be able to take into account e.g. knowledge of customer trends
• it can be used when there is few/no historical data available
• can be used when market is dynamic and changing all the time e.g. technology

Question 11

Disadvantages of qualitative forecasting

Answer 11

• ignores a wealth of data that may act as an accurate template for future sales trends
• bias can exist in the personal opinions of those making the predictions e.g. over-optimistic sales forecasts
• the approach can be inaccurate and uncertain as there are no previous data on which to base it