2.2.1 Sales Forecasting

Question 1

What do sales forecasts do?

Answer 1

Predict future revenues based on past sales figures

Question 2

Sales forecasts will usually focus on what happens in the future to what?

Answer 2

• The volume and value of sales
• The size of the market
• Sales as a result of promotional activity

Question 3

What factors (consumer trends) can affect sales forecasts?

Answer 3

Seasonal variations- demand for certain goods is essential e.g. major religous festivals, holiday periods & annual events- impact demand for wide range of products

Fashion- Often led by celebs & their influence can have a relitavely short impact on sales

Long term trends- Consumer behaviour, attitudes and spending habits can have a relitavely short-term impact on sales

Question 4

What factors (economic variables) can affect sales forecast?

Answer 4

Economic growth- During periods of economic growth increased consumer incomes will lead to higher than forecast sales

Inflation- The general increase in prices overtime reduces consumers’ spending power

Unemployment- Increased levels of unemployment are often experienced during periods of recession & tend to be a key cause of reduced spending in economy

Question 5

What factors (competitor actions) can affect sales forecasts?

Answer 5

Sales forecasts should consider short-term actions of competitors such as sales promotions as well as longer-term strategies such as changes to product ranges and expansion plans

Competitor actions are difficult to predict so the usefulness of past data to predict future sales may be limited

Question 6

What are some difficulties of sales forecasting?

Answer 6

• The future does not always mirror the past- Fads &fashion/ tastes change/economic factors/competitor actions/ the unexpected
• Too much data- Media coverage/Past sales data/governnment data
  Volatile Consumer Trends
• Consumer tastes can change rapidly, especially in fast-moving industries like fashion or technology.
  Makes past data less reliable for predicting future sales.
• Unpredictable External Factors
  Events like economic recessions, political instability, pandemics, or natural disasters can significantly affect sales.
  These are difficult or impossible to predict using past data alone.
• Interpretation- experience bias/specialist opinion/ budget and time constraints

Question 7

What are the difficulties of sales forecasting for a business?

Answer 7

• Effective sales forecasting requires skill, time and the accurate use of timely data
• Smaller businesses in particular may lack the experience or specialised personnel to construct, analyse & interpret sales forecasts
• It is difficult to avoid experience bias (e.g. opinions of the future based on experiences in the past)
• Businesses may face problems in constructing sales forecasts that ignore the priorities of key stakeholders
• Sales forecasts will rarely reflect the full range of external influences that can affect future inflows, such as fashions, trends & the actions of competitors