sales forecasting Flashcards
(25 cards)
What is sales forecasting
art or science of predicting future demand by anticipating what consumers will do in a given set of circumstances
Examples of something a business may ask
what deman will look like due to 10% increase in income
Once they have an accurate estimate of sales what can businesses do
-estimate quantity and cost of purchases of raw materials
-determine production levels
-hrm and finance needs
What is quantitative sales forecasting
used when there is historical data available and rely on data and are objective
time series analysis
use of market research
What is using past experience or past business data to forecast future sales called
extrapolation
What is qualitative sales forecasting methods
when historical data is not available and involve use of opinions to predict future events and are subjective
-delphi
-brainstorming
-intuition
-expert opinion
What factors need to be considered when carrying out sales forecasts
-economic factors-unemployment levels, inflation will all effect sales forecasts and reduce its accuracy
-consumer factors- tastes and fashions constantly changing so try to anticipate through market research
competition factors-actions will affect future business performance reducing accuracy of sales forecast
new businesses will also struggle to make predictions of sales when no previous to base it on
What is time series analysis
uses evidence from past sales records to predict future sales patterns
Explain seasonal analysis and trend analysis
-sales measured on a monthly or weekly basis to examine seasonality of demand-icecream more in hot days
-focussed on long term data collected over number of years to determine general tendency of sales
Explain cycle analysis and random factor analysis
-long term figures used to examine relationship between demand and economic activity such as demand for products or stage in business cycle
-explain how unusual or extreme sales figures occur
What is correlation
relationship between two variables such as advertising expenditure and sales achieved
What if there is no correlation
questions need to be aksed as to why there was no correlation
What is market analysis
examination if features of market such as market size, sales to predict future trends
What is the moving average
technique for identifying underlying trends removing fluctuations in data
Market analysis ads and disads
-assess opportunities in market
-predict what is likely to hapoen in future
-see potential influences in market demand
-dont take into account external factors
-nor market change or competition
How can future sales be predicted?
draw line of best fit and extrapolate
Benefits of sales forecast and drawbacks
-sufficient production levels
-sufficient raw materials to meet demand and well trained staff
however
-could be underestimate or overestimate(downturn in economy, competitor activity, new entrants)
What is brainstorming
-subjective technique used for generating new, useful ideas to predict outcomes bases on group’s subjective thoughts and feelings
-basis is problem statement the focus of the discussion (such as how to increase sales)
-most effective when members are creative in contributions and contribute high quantities of ideas in short time and works best in groups of 6-12 with people from various departments to bring in fresh ideas to inspire experts
What is intuition
-leaders and managers use gut feeling or their intuition to due experience of other existing markets and products
-cheap and fast as no need for data but should not be the only guide
What is expert opinion
consultants who specialise in markets and have opinions on future demand and expenditure patterns
-businesses affected by seasonal variation may consult long term weather forecasts to predict sales
-gain specilist insight into future patterns and trends but should not be used on standalone basis and use panels of experts for more accuracy
What is the Delphi technique
members of panel of experts respond to questions toneach other until agreement reached
Steps in delphi technique
assemble panel
create questionare that are open ended
analyse and fed back until agreement reached
Ads and disads of delphi
-particpents have time to think through response so better quality
-flexible to be used in a variety of situations and applied to range of complex problems
-structured way for group of individuals to make decisions
-method require long period of time to manage and coordinate
-moniter payments of experts may lead to bias in results
-assumes experts willing to come to consensus and allows opinions to be altered by views of others
Themes for evaluating quan and qual
-quan relies on trends so more accurate
-other factors economic, competitors,consumer trends
-experience and confidence of management team to forecast
