Help for the brand leader on how to do forecasting, the analytics behind it as well as the importance.

1. SALES FORECASTING
CHAPTER 3

2. Sales Forecasting
 Estimate of company sales for a specified future period…
 Sales forecasting is an important aspect of sales
management.
 These forecasts are the result of painstaking efforts by a
number of individuals and departments in the firm.
 Forecasts aids sales managers in improving decision making.

3.  However no one sales forecasting method is suitable for every
situation.
 Sales managers must be familiar with the various forms of
forecasting and their use.
 Particular attention must be given to matching the sales
forecasting method to the decision-making situation.

4. Sales Quotas and Budgets
 Two of the most vital managerial uses of the sales forecasts
are the setting of sales quotas and the developing of sales
budget.

5. Sales Quotas
 Sales goals and objectives sought my management.
 They are the performance standards for the sales force; comparison of
the actual sales with assigned quotas is the basis of much of the sales
function’s evaluative effort.
 The establishment of the realistic quotas is one of the most critical tasks
faced by a sales manager.
 The forecast is the company’s actual prediction of what sales will be in a
forthcoming time period.
 If sales quotas are realistic, they are the best and fairest method for
setting sales quotas.

6. Sales Budgets
Another important evaluative technique.
 Sales Budget is a management plan for expenditures to
accomplish sales goals.
 It’s a blueprint for sales force action

7. Sales Forecasting Concepts
There are 3 levels of concern in sales forecasting…
1. Market Potential
2. Sales Potential
3. Market Share

8. ESTIMATING MARKET AND SALES
POTENTIAL
 Continuous assessment and monitoring of market and sales potentials is
important to effective sales forecasting.
 a company must keep track of trends in sales and market share.
 it must also remain alert to basic shifts in product offerings and
competitive marketing program.
 Market and sales potential assumes that the current product offerings are
relevant to a particular market.
 If a competitor were to come out with a greatly improved product,
company’s sales would be effected.

9.  Market potential is dependent upon two major
factors:
• Ability To Buy
• Willingness To Buy

10. Ability To Buy…
 The ability to buy refers primarily to wether or not a buyer
has the financial resources to purchase a product.
 Sales potential is also dependent upon the buyer’s ability to
purchase the good or service.

11. Willingness To Buy…
 The willingness of customers to buy also influences market
potential, but is far more difficult to assess.
 Marketing research studies are the most common method of
estimating the effect of customer willingness to buy upon
sales potential.
 Marketing research methodology is quite varied; it ranges
from simple mail questionnaires to focus groups to actual
test marketing of a product in selected localities.

12. Test Marketing
 Test marketing is expensive in terms of time and money.
 Some firms are turning to it as a way of estimating market and sales
potential.
 Test marketing involves marketing a product in a limited geographic
region, measuring sales, and then using the results to predict the
product’s sales over a larger market area.
 The most frequent use of test marketing is to estimate demand and
project sales for a new product.
 Test marketing can also be used to assess different product features,
marketing options, and sales strategies.

13. Sales forecasting procedures
 Preparing a forecast of general economic conditions,
 Preparing a forecast of industry sales,
 Preparing a forecast of the product or company sales.

14. Forecasting general
Economic Conditions
 Sales forecasting is based upon an assessment of general
economic conditions.
 The standard yardstick for measuring general economic
activity is the Gross Domestic Product (GDP).
 GDP is the value of all the goods and services produced
within a country during a given year.
 For many sales forecasters, estimates of general economic
conditions are difficult to evaluate because of problems in
determining their accuracy and their economic usefulness.

15. Estimating Industry Sales
Many firms attempt to predict industry sales.
 The development of industry forecasts seems to be related
to the size of the firm:
 Smaller firms are apparently less concerned with, or less able
to develop, such forecasts.
 They often rely on industry estimates available from trade
associations and government sources.

16. Estimating Industry Sales
 Some of the estimates are based upon the relationship
between industry sales and a national economic indicator
such as GDP or National Income.
 Large organizations are likely to have a corporate economist
who provides support and information for sales forecasting.

17. Projecting Company and
Product Sales
 Company and product sales estimates are the major areas of
concern for a firm’s sales forecasting function, since they are
the revenue forecasts upon which other planning activity
throughout the company are based.
 Forecasting methods can be classified as either Qualitative or
Quantitative.

18.  Qualitative Methods rely upon subjective, but informed,
opinions or judgments.
 Quantitative Forecasting applies mathematical and statistical
techniques.
Both are useful in sales forecasting function.

19. QUALITATIVE METHODS
 Expert evaluation technique
 Jury of Executive opinion
 Delphi Technique
 Demand Estimation
 Sales force Composite Method
 Survey of Buyer’s Intentions
 Market Survey
 Factor Listing

20. Expert Evaluation Technique
 In this technique the experience of people is used. It includes
executives, sales people, marketing people, distributors or
ouside experts. These experts are familier with a product line
or group of products that are responsible to generate sales
forecast. It involves combining inputs from multiple sources.

21. Jury of Executive Opinion
 The jury of executive opinion is probably the oldest
approach to forecasting, and is used by many firms.
 Managers from sales, marketing research, accounting,
production & advertising assemble to discuss their opinions
on what will happen to sales in future.
 These forecasts are usually made for only the most
aggregate of the sales categories such as districts, product
groups, or customer classes.

22. Delphi Technique
 A similar, forecasting method, which has been developed
recently is called the DELPHI Method.
 Its is used to make long-range projections by group of
experts.
 Delphi Method also gathers, evaluates, and summarizes
expert opinions as the basis for a forecast, but the procedure
is more formal than that for the jury of executive opinion
method.

23. Demand Estimation
 Demand Estimation is the process of finding current values
of demand for various values of prices and other
determining variables.
 Business enterprise needs to know the demand for its
product. An existing unit must know current demand for its
product inorder to avoid under production or over
production.
 The current demand should be known for determining
pricing and promotion policies so that it is able to secure
optimum sales or maximum profits.

24. Sales Force Composite
 A sales forecasting technique that predicts future sales by
analyzing the opinions of sales people as a group.
 Salespeople continually interact with customers, and from
this interaction they usually develop a knack for predicting
future sales.
 It is considered very valuable management tool and is
commonly used in business and industry throughout the
world.

25. Sales Force Composite
 A sales forecasting technique that predicts future sales by
analyzing the opinions of sales people as a group.
 Salespeople continually interact with customers, and from
this interaction they usually develop a knack for predicting
future sales.
 It is considered very valuable management tool and is
commonly used in business and industry throughout the
world.

26. Survey of Buyer’s Intentions
 Applicable to situations in which potential purchasers are
well defined and limited in number, such as industrial
markets.
 Forecast survey of a limited and well-defined group of
buyers.

27. Market Survey
 Approach that uses interviews and surveys to judge
preferences of customer and to assess demand. The main
objective of test marketing is to study the level of customer
acceptance.

28. QUANTITATIVE METHODS
Associative Model
Time Series Model

29. Associative Models
Associative models assume that the variable being
forecasted is related to other variables in the
environment. They try to project based upon those
association.

30. Time series Models
Time series models look at past patterns of data and attempt to
predict the future based upon the underlying patterns
contained within those data. The time series models are
classified as
 Naive Method
 Simple mean Method
 Simple Moving Average
 Weighted Moving Average
 Exponential Smoothing

31. Naive Method
 It uses last peroid’s actual value as a forecast. Estimating
technique in which the last period’s actuals are used as this
period’s forecast, without adjusting them or attempting to
establish casual factors. It is used only for comparison with
the forecasts generated by the better techniques.

32. Simple Mean Method
 It is the method for inventory valuation or delivery cost
calculation, where even if accepting inventory goods with
different unit cost, the average unit cost is calculated by
multiplying the total of these unit costs simply by the
number of receiving. Uses an average of all past data as a
forecast

33. Simple Moving Average
 Uses an average of a specified number of the most recent
observations, with each observation receiving the same
emphasis*(weight)

34. Weighted Moving Average Method
 Uses an average of a specified number of the most recent
observations, with each observation receiving a different
emphasis(weight). Each of the observation used to compute
the forecasted value is weighted equally.

35. Exponential Smoothing
 In exponential smoothing older data is given progressively
less relative weight(importance) whereas newer data is given
progressively greater weight. It is employed in making short
term forecasts. It is a statistical technique for detecting
significant changes in data by ignoring irrelevant fluctuations.
It is used in daily living of people.

36. THANK YOU