Sales forecasting 2.2.1

Question 1

Define sales forecasting.

Answer 1

Is the prediction of future sales and volume tends.

Question 2

What’s the purpose of sales forecasts?

Answer 2

Avoids cash flow problems.
Frees up management time.
Production capacity.
Employ more workers.
Start promotional activity.

Question 3

What’s the purpose of sales forecasting - avoid cash flow problems?

Answer 3

Helps the business to manage their production, staff and financing needs more effectively and possibly avoid unforeseen cash flow problems.

Question 4

What’s the purpose of sales forecasting - frees up management time?

Answer 4

A well-constructed sales forecast can allow the business owners to spend more time developing their business rather than responding to day-day developments in sales and marketing.

Question 5

What’s the purpose of sales forecasting - production capacity?

Answer 5

• Can use a sales forecast to estimate if they need to increase or decrease production. Allow them to see if they have enough production capacity to deal with the expected demand.
• Business may need to buy or rent new premises if there is a huge increase in sales forecast.

Question 6

What’s the purpose of sales forecasting - employ more workers?

Answer 6

If a business has high sales forecasts for a new product or service it may need to take on new employees to cope with new levels of demand.
-Failure to meet required staffing levels could result in poor reviews, customer service and this may have an impact on future sales.

Question 7

What’s the purpose of sales forecasting - start promotional activity?

Answer 7

If sales are forecast to be very low and the product or service is not in the decline phase of the product lifecycle - then the business may decide to try and increase sales through promotion and marketing.

Question 8

What factors affect sales forecast?

Answer 8

Consumer trends
Economic variables
Actions of competitors.

Question 9

What are consumer trends?

Answer 9

Habits or behaviours which consumers have towards the products they buy and services they use.

Question 10

What are economic variables?

Answer 10

Examples include interest rates, employment, consumer confidence, stage in economic cycle.

Question 11

Factors affecting sales forecast - consumer trends

Answer 11

• A sales forecast may take into account consumer trends.
• Documents like MINTEL can help businesses identify an upcoming trend.
• Market research to find new popular products.

Question 12

Factors affecting sales forecast - economic variables

Answer 12

Variables - interest rates, inflation, unemployment rate and GDP can affect how a business plans its sales forecast.

Question 13

Factors affecting sales forecast - Actions of competitors

Answer 13

The actions of competitors may affect sales forecasting.
If the business has products that face declining sales, due to a competitors superior product they may decide to produce or sell less of those products.

Question 14

What are the difficulties of sale forecasting?

Answer 14

• Short term. New businesses lack sales history so can’t use previous data to make sales forecasts.
• Subject to bias/ a new business will have a lack of sales data so may have to estimate
• No guarantees of success in a dynamic market if a competitor comes along

Question 15

Difficulties of sales forecasting - no guarantees of success

Answer 15

No guarantees that sales will meet these levels

-This could be down to any number of uncertain factors.

Question 16

Difficulties of sales forecasting - dynamic markets

Answer 16

Trends for fashion and customer interest constantly change making it hard to estimate the demand for products.

Question 17

Difficulties of sales forecasting - short term

Answer 17

A sales forecast is useful to a business which can produce and sell products or services in a one year period.