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Sales Forecasting, Notes for Diistance MBA

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Sales Forecasting, Notes for Diistance MBA
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Bhagirath Jakhar
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Post Sales Forecasting, Notes for Diistance MBA - December 9th, 2009

Sales Forecasting

Sales potential is larger than sales forecast.

• Company do not have sufficient production capacity to capitalize on full sales potential.
• No good distributive network.
• Limited financial resource.
• Company’s being more profit oriented than sales oriented.

Sales forecast is depended on how much amount of resources can sell if it implements a particular marketing programme.

Sales Forecast Methods:-
1) Qualitative method a) Expert’s opinion.
b) Survey of buyer’s expectation.
c) Sales Force composite.
d) Delphi technique.
e) Historical analogy.

2) Quantitative method a) Test Marketing.
b)Naïve method.
c)Trend method.
d)Moving average
e)Regression method.
f)Exponential smoothing.

[B]1) Qualitative method –[/B] it based on judgments-expert/collective.

a) Expert’s opinion method – Simplest method used in commercial organisation for forecasting future demand of product/service. Marketing professionals/channel members and professional bodies (market consumers) are asked to give their opinion method works in 2 days.
1) Seasoned industries.
2) Group of industries
Discussion takes place based on key executive sub their op. and discussion is done based on it and consensus is reached.

b) Delphi Method: - Improvement over expert opinion method forecast is based on likely time period of occurrence of certain future Group of exp and a Delphi coordinator. Gives their opinion include to co-ordinate. The co-or processes, complies, refers then back to the panel member. (Process is on for at least 3 rounds) Process stops when consensus is obtained and deviant opinion given with reason.
Coordinator carries out stats analysis of the response, deriving average answers, variability etc. Only coordinator is aware of the members present in the team and access to all responses. Delphi for is median forecast-Method widely used

c) Sale force composite method – Sales people come up with forecast. Since people in direct contact like sales people/ channel members are better informed about the trends and demand for the product. Ind forecast is combined with over all demand forecast.
Results can be affected by the staff’s biases, lack of interest in the process, eg. About economic changes and trends. This method is used to generate forecast for industrial equipment manufacturing industries.
Eg: - PET mach/ Printing machinery.

d) Survey of buyer’s expectation- Buyer’s intention and market test sample of potential buyer’s – information about product performance etc.
Likes/ dislikes.
(4 P’s)

Gathering this information for demand forecasts.
Negative point:- Actual demand varies from stated intention.
Positive point:- method effective for relatively few buyers usually for ( OEM) and B2B buyers.

e) Historical analogy method- Used where there is not past demand data.

Eg: - New product, but markets sold other product with similar features.
Marketing person may use historical analogy between eg: - two products and derive the demand for the new product using historical data.

Sales forecasting- Quantitative method

Test Marketing- Company’s selected a limited no of cities with population which are representative of target customer- demographic terms – age, income, lifestyle and shopping habits etc.

A product is made available at outlets and features are highlighted either thro in store promotion/ small advertising campaign. Then the performance is tracked through consumer research and modification-before national launch.
Target objective is
1) To study level of acceptance.
Second type of test market with similar characteristics is identified- one is called ‘test market’- same as above mention without promo campaign – 2nd is called ‘Control Market’ – where Product is sold with a promotional campaign.

The different between both markets is a measure of effectiveness of promotion campaign. Any inconsistency with sales variation in both the market is an indicator of the gap between customer perception and performance of the product feature.

Result- One can measure effectiveness of product helps in making customer loyal, campaigns effectiveness and in store promotion.

Naive Method:
This is one of the simplest method- future sales are forecasted as the value of sales for previous period .i.e. Next months sales are predicted based on the month’s performance.

Negative method ignores irregular component and assumes that seasonality and cyclicality do not exist and trend is flat.
A more complex form, trend is projected in a/c s for influence of trend components in time series. The sales manager is required to calculate the rate of change in sales by dividing the most recent period by the time period immediately preceding it.
Next year’s sale= this year’s sale* × This year’s sale/ Last year’s sale

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Business Education
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Re: Sales Forecasting, Notes for Diistance MBA - June 11th, 2015

Top 10 institutes for Distance/Correspondence MBA
  1. Narsee Monji Institute of Management Studies (NMIMS)
  2. Institute of Management Technology
  3. Symbiosis Center for Distance Learning
  4. Sikkim Manipal University Directorate of Distance Education
  5. IGNOU
  6. Prin LN Welingkar Institute of Management
  7. Amity University
  8. ICFAI University
  9. Annamalai University
  10. MIT School of Distance Education
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