Sales Forecasting Flashcards
Sales forecasting
The process of predicting future sales levels by volume or value and future trends
quantitative sales forecasting
quantitative sales forecasting is based on data which can be historic trends or the results of quantitative research
what can sales forecasting be used for?
it could be used to inform resource management about inventory levels
methods of Quantitative sales forecasting
time series analysis, use of market research data ,extrapolation, correlation analysis
Extrapolation
extrapolation involves making statistical forecast by using historical trends that are projected for a specified period of time into the future .
Time series analysis
this is a forecasting technique that uses evidence from past sales to predict future sales pattern. The figures are plotted on a graph and trends are identified. The data might show sales are seasonal or they followed a pattern at all.
Methods of Time series analysis
Seasonal analysis
- Trend analysis
- Cycle analysis
- Random factor analysis
Benefits of Time series analysis
help business to plan
assist with the management of HRM,finance and production needs
can identify any seasonal variation in their rates
Drawbacks of Time series analysis
the future is uncertain
historical data does not provide
an accurate reflection of the future
moving Averages
this technique evens out any major fluctuations in the sales data series to allow the underlying trend to be seen more clearly. This process of removing fluctuation is known as smoothing. Smoothing mathematically removes any seasonal variations from a data series.
Advantages of moving average
Advantages:
* Helps the business to plan.
* Helps financial planning, including cash flow
management.
* Can help with production planning e.g. ordering in the
correct number of raw materials.
* Human resource planning, getting the right number and
type of staff in the jobs that are needed.
* May motivate managers to reach targets
Disadvantages of moving Averages
Disadvantages:
* It uses information from the past and does not consider
what might happen in the future (such as a competitor
launching a new product or if the economy might
go into recession, supplies of raw materials might be
disrupted, etc).
* It can only be useful when sales have been stable with
no major upsets.
* It is only as accurate as the information collected.
* It assumes that consumers will maintain their buying
habits.
* Does not account for qualitative issues.
Delphi Techniqu
usefulness of correlation
Business may seek to establish whether a relationship exists between two variable and so what extent in order to generate strategies such as sales and profit maximistaion or
correlation
a correlation measures the relationship between two variables
Other quantitative methods of sales forecasting
surveys of consumer’s intention
direct sales information
test marketing
Test Marketing
test marketing involves testing consumer’s response to a product before the full response/ release of a product. Test marketing can involve the release of a product in a geographical area as a small section of the target market.
survey of consumer’s intention
this method of forecasting makes predictions by asking people directly what they intend to do in the future. There a number of large market research companies that are continually gathering vast quantities of information and make money by selling this information to business. The result of these survey allow business allows business sales pattern and plan for the future in terms of staffing and production levels
Qualitative Sales Forecasting
qualitative methods are used when historical data is not available to carry out quantitative methods, it involves the use of opinion
Qualitative methods of sales forecasting
Delphi technique
Brainstorming
Intuition
Expert opinion
Brainstorming
Brainstorming is when Frequently employees who have experience
of the market will ‘brainstorm’. They will get together to
‘bounce’ ideas off each other in order to determine their
collective best estimate of what is likely to happen in the
future. Use might be made of previous life cycles of similar
products
Direct Sales Information
sales teams within businesses interact closely with customers sales. staff might not notice any developing trends and they have experience to spot market changes and shift in customer preferences and attitudes. The direct sales information can be collected by management requesting statistical predictions of future sales and by encouraging the upward flow of information through the operation.
Delphi Method
form of qualitative forecasting that involves consensus of a group of experts using a multi-stage process to converge on a forecast.
Advantages of Delphi Technique
Advantages:
* Experts can reconsider their judgements after reading
feedback from other members of the expert group.
* It is flexible enough to be used in a variety of situations
and be applied to a range of complex problems.
* Participants have time to think through their ideas
leading to a better quality of response.
* The Delphi method creates a record of the expert
group’s responses and ideas, which can be used when
needed.
disadvantages of the delphi techniques
Disadvantages:
* All depends on the content and structure of the
questionnaires.
* It assumes that experts are willing to come to a
consensus and allow their opinions to be altered by the
views of other experts.
* Expert panels often lose members because of boredom,
and disillusionment with the process.
* Monetary payments to the experts may lead to bias in
the results of the study.
* The method will more than likely require a substantial
length of time to complete and can be costly in terms of
the researcher’s
Mastered (22)
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Sales Forecasting
The process of predicting future sales levels by volume or value and future trends
quantitative sales forecasting
quantitative sales forecasting is based on data which can be historic trends or the results of quantitative research
what can sales forecasting be used for?
it could be used to inform resource management about inventory levels
methods of Quantitative sales forecasting
time series analysis, use of market research data ,extrapolation, correlation analysis
extrapolation
extrapolation involves making statistical forecast by using historical trends that are projected for a specified period of time into the future .
time series analysis
this is a forecasting technique that uses evidence from past sales to predict future sales pattern. The figures are plotted on a graph and trends are identified. The data might show sales are seasonal or they followed a pattern at all.
Methods of time series analysis
- Seasonal analysis
- Trend analysis
- Cycle analysis
- Random factor analysis
benefits of time series analysis
help business to plan
assist with the management of HRM,finance and production needs
can identify any seasonal variation in their rates
drawbacks of time series analysis
the future is uncertain
historical data does not provide
an accurate reflection of the future
time series analysis- trend analysis
time series analysis models
moving averages
this technique evens out any major fluctuations in the sales data series to allow the underlying trend to be seen more clearly. This process of removing fluctuation is known as smoothing. Smoothing mathematically removes any seasonal variations from a data series.
advantages of moving averages
Advantages:
* Helps the business to plan.
* Helps financial planning, including cash flow
management.
* Can help with production planning e.g. ordering in the
correct number of raw materials.
* Human resource planning, getting the right number and
type of staff in the jobs that are needed.
* May motivate managers to reach targets
disadvantage of moving averages
Disadvantages:
* It uses information from the past and does not consider
what might happen in the future (such as a competitor
launching a new product or if the economy might
go into recession, supplies of raw materials might be
disrupted, etc).
* It can only be useful when sales have been stable with
no major upsets.
* It is only as accurate as the information collected.
* It assumes that consumers will maintain their buying
habits.
* Does not account for qualitative issues.
Delphi Technique
