2.2.1 Sales Forcasting

Question 1

Define sales forecasting

Answer 1

Is the prediction of future sales and volume tends

Question 2

The purpose of sales forecasts

finance

Answer 2

• Inform cash-flow forecasts i.e. how much money can the business expect to flow in from sales
• Predict sales volume and sales revenue (2.2.2)
• Assess ability to break-even (2.2.3)
• Help set budgets (2.2.4)

Question 3

The purpose of sales forecasts

Marketing

Answer 3

• Identify when promotional activity is needed e.g. before a potential peak or to avoid a dip
• Plan distribution

Question 4

The purpose of sales forecasting

people

Answer 4

Sales team
Seasonal staff
Peak times
Operative to ensure supply meets demand

Question 5

The purpose of sales forecasting

Resource management

Answer 5

• required levels of output
• stock management
• can supply match demand

Question 6

Factors affecting sales forecasts include

consumer trends

Answer 6

• Goods come in and out of fashion
• Difficult to predict what the next trend will be
• Follow experts e.g. London fashion week as an indicator of short term fashion trends
• Shopping habits
• Online sales – how will this affect who buys what, where and when?
• Demographics
• UK has an ageing population with high net migration

Question 7

What factors affect sales forecast

Answer 7

Customer trends
Economic variables
Actions of competitors

Question 8

Factors affecting sales forecasting

economic variables

Answer 8

• Interest rates
• If interest rates are low this encourages consumers to spend as the reward for saving is low
• Employment
• The amount of people employed in an economy directly influences spending power, those in employment will have an income to purchase goods and services with
• Consumer confidence
• If consumers are confident in the future of the economy they are more likely to spend, however if the economy is in decline they are more cautious
• Stage in economic cycle
• If the economy is recovering then consumer confidence will be higher and employment rising which will impact on sales as identified above

Question 9

Factors affecting sales forecasting

actions of competitors

Answer 9

• Competitors entering or exiting the market
• This will impact on market share and therefore sales
• Changes in price and promotion
• e.g. what if a competitor lowers price or increases promotional activities?
• Competitor is better able to respond to consumer trends
• Greater flexibility and speed of response to changes in consumer wants

Question 10

Difficulties in sales forecasting

Answer 10

• By definition the future is unknown and therefore uncertain
• Changing external environment
• Unpredictable events
• Time frame
• Past is not a clear indication of the future
• Lack of perfect information