sales forecasting Flashcards
what is a sales forecast ?
a projection of achievable sale revenue based on data analysis trends, economic variables and competitor actions
the process of trying to estimate or predict future sales
what can a business estimate from a sales forecast ?
- their future workforce size
- their financial needs
- production levels and costs
what are the main purposes of sales forecasting ?
- forecasting sales for new products or investments into new markets
- forecast profits and losses and take action if possible
- ## analyse production capacity and availability
what is the challenge of sales forecasting ?
for any business to gain a sufficiently detailed understanding of the key data of a market
what does key market data include ?
- the size of the market in value
- the speed of market growth
- predicted trends in future market growth
- predicted trends in future market growth
- key PESTLE factors driving changes in the market
- market segments in existence
- current marketing mix design to meet consumer preferences
- likelihood of developing a USP for new entrants
influences on sales forecasts ?
economic environment, actions of competitors, stability of the market, reliability of market research
what are quantitative sales forecasts ?
methods make use of numerical data to forecast future sales values for a business
they are heavily reliant upon the data and therefore the accuracy of this data is critical for the success of a forecast
what are the two main quantitative techniques ?
time series analysis
correlation analysis
what is time series analysis ?
a forecasting technique that uses evidence from the past to predict future sales patterns
- figures are plotted on a graph and trends are identified
- might show sales that are seasonal, ones that follow a cycle or trend or random sales
what is a moving average ?
this technique evens out any major fluctuations in the sales data series to allow the underlying trend to be seen more clearly
what is smoothing ?
the process of removing fluctuations
- removes any seasonal variations from a data series
what is extrapolation ?
firms often use the past as an indication of what they expect to happen in the future
advantages of extrapolation ?
easy to do
quick and cheap to use
requires limited volumes of data
disadvantages of extrapolation ?
ignores qualitative data
assumes past trends will continue
ignores external environment changes
how reliable is the data ?
