Unit 4:Marketing

4.3 Sales Forecasting

HL Only
Lesson Objectives
 All students should be able to list and discuss the elements of Sales
Forecasting

 All students will be able to define key terms highlighted throughout

the lesson and use them in the correct context

 Most students will be able to discuss the purpose of sales forecasting

 Some students will be able calculate moving averages and plot the
results on a line graph
What is Sales Forecasting?

 Sales forecasting involved predicting future sales for a business

 How is this done?

 Using quantitative information – numbers figures and trends

Past Present Future

Examining data from the past and present in order to predict

future sales is a method known as Time Series Analysis
 Time Series Analysis
There are 4 key aspects of time series analysis

1. The Trend
 Visible patterns that emerge when studying data from previous years

2. Seasonal Fluctuations
 Changes in demand based on season of the year

3. Cyclical Fluctuations
 Linked to changes in the economy – recession/boom

4. Random Fluctuations
Discussion: How
 Other fluctuations that do not fit into the other categories

 Can these be predicted? How?

reliable is this
information?
Moving Averages
This involves a business examining sales figures from the past
and calculating average to ensure an accurate and even
overview
Example

How do you calculate averages?

 Average is also known as Mean

 Add up the figures for all items

 Divide by the number of items there are

 Calculate the following

3 Year moving
Average

Years 2010 2011 2012 2013 2014 2015

Sales in 245 260 290 260 285 300

millions $
3 yr Trends 265 270 278 282

Remember to think of the letter T when completing

calculations
 Calculate the following

4 Year moving
average

Years 2010 2011 2012 2013 2014 2015

Sales in 245 260 290 260 285 300
millions $
8 year 1865 2230
moving
totals

4 year 233 278

Trends

Remember to think of the letter T when completing

calculations
 Plot your information on a Line Graph
1. Plot the original Sales figures given

2. Plot the moving averages calculated (trend line)

3. Extrapolation – Extend the trend line using a dotted line

4. The process of extrapolation can be used to predict future sales

 Calculating variations

 This simply involves calculating the difference between actual sales and the
trends you have calculated
 You may also be asked for an average variation

Years 2010 2011 2013 2013 2014 2015

Sales in 245 260 290 260 285 300

millions $
Trends 233 278

Variation 57 -18

Calculating average cyclical variation is simply getting the average of your variation column.
57 – 18 = 39 39/2 = 19.5
Sales Forecasting

Benefits Limitations
 Helps manage cash flow  Time consuming and complex in nature

 Increases efficiency  It ignores external factors such as

 Improved work force planning social political and economic factors

 Improved marketing planning

Think critically: How do we know if our predictions are reliable?

 Moving
Average Average
Fluctuations

Forecasting Sales
Forecasting
Key Terms
Sales
Forecasting
Variations

Extrapolation
 Reflection

 List 6 things you have learned in this weeks lessons

 2 lower order (key terms, definitions, facts)
 3 higher order (substantial pieces of information)

 What elements of the lessons did you enjoy

 What elements of the lessons did you not enjoy

Homework

Complete Handout given in class – Calulating

Moving averages