SALES FORECASTING

Sales Forcasting Its the prediction of the future sales of a particular product over a specific period of time based on past performance of the product, inflation rates, unemployment, consumer spending patterns, market trends, and interest rates.

Why?
In the preparation of a comprehensive marketing plan, sales forecasts help the marketer develop a marketing budget, allocate marketing resources, and monitor the competition and the product environment.

Sales forecasting is management's primary tool for predicting the volume of attainable sales. Therefore, the whole budget process hinges on an accurate, timely sales forecast.

Forecasting, however, involves not only the collection and analysis of hard data, but also the application of business judgment in their interpretation and application. For example, forecasting requires business owners and managers to not only estimate expected units sold, but also to determine what the business's production (materials, labor, equipment) costs will be to produce those items.

Types of forecasting
There are two major types of forecasting, which can be broadly described as macro and micro: Macro forecasting is concerned with forecasting markets in total. This is about determining the existing level of Market Demand and considering what will happen to market demand in the future. Micro forecasting is concerned with detailed unit sales forecasts. This is about determining a products market share in a particular industry and considering what will happen to that market share in the future.

These two forecasting methods encompass a number of methodologies which can be divided into three general categories: qualitative, times-series analysis and regression, and causal.

QUALITATIVE METHODS. Qualitative methods rely on non-statistical methods of deriving a sales forecast. A company solicits the opinion or judgment of sales executives, a panel of experts, the sales force, the sales division supervisors, and/or outside expert consultants. Qualitative methods are judgmental composites of expected sales.

The Delphi Technique,The Probability Assessment Method (PAM) ,The Program Evaluation and Review Technique (PERT),A Visionary forecast

TIME-SERIES ANALYSIS AND PROJECTION. Trend projection techniques may be most appropriate in situations where the forecaster is able to infer, from the past behavior of a variable, something about its future impact on sales.

Trend projection analysis,regression analysis,Exponential smoothing,

CAUSAL METHODS. When analysts find a cause-effect relationship between a variable and sales, a causal model may provide better forecasts than those generated by other techniques

Life-cycle analysis forecasts new product growth rates based on analysts' projections of the phases of product acceptance by various groupsinnovators, early adapters, early majority, late majority, and laggards. Typically, this method is used to forecast new product sales.

Creating the Sales Forecast for a Product

The First stage in creating the sales forecast is to estimate Market Demand. Definition: Market Demand for a product is the total volume that would be bought by a defined customer group, in a defined geographical area, in a defined time period, in a given marketing environment. This is sometimes referred to as the Market Demand Curve.

SALES FORECAST VERSUS PLAN

THE SALES FORECAST IS A PROJECTION INTO THE FUTURE OF EXPECTED SALES, GIVEN A STATED SET OF ENVIRONMENTAL CONDITIONS. THE SALES PLAN IS A SET OF SPECIFIED MANAGERIAL ACTIONS TO BE UNDERTAKEN TO MEET OR EXCEED THE SALES FORECAST.