Forecasting Of Demand

Chapter Outline

MANAGING SALES INFORMATION

FORECASTING MARKET DEMAND
USES OF SALES FORECASTS
THE FORECASTING PROCESS
SALES FORECASTING METHODS
THE TOP BRASS APPROVES THE FINAL
FORECAST
THE SALES MANAGER'S BUDGET
THE BOTTOM LINE

MANAGING SALES
INFORMATION

FORECASTING MARKET DEMAND

Marketing Decision Support System an

ongoing, future-oriented structure designed to
generate, process, store, and later retrieve
information to aid decision making in an
organization's marketing program.

USES OF SALES FORECASTS

Sales Forecast the estimated dollar or

unit sales for a specific future time period
based on a proposed marketing plan and
an assumed market environment.

Importance of Sales Forecasts

A sales forecast becomes a basis for setting and maintaining a

production schedulemanufacturing.
It determines the quantity and timing of needs for labor, equipment,
tools, parts, and raw materialspurchasing, personnel.
It influences the amount of borrowed capital needed to finance the
production and the necessary cash flow to operate the business
controller.
It provides a basis for sales quota assignments to various segments
of the sales forcesales manager.
It is the overall base that determines the company's business and
marketing plans, which are further broken down into specific goals
marketing officer.

THE FORECASTING PROCESS

Forecasting Process refers to a series of procedures

used to forecast.
Market Factor an item or element that (1) exists in a
market, (2) may be measured quantitatively, and (3) is
related to the demand for a product or service.
Market Index simply a market factor expressed as a
percentage relative to some basic figure.
The Breakdown And Buildup Forecasting Categories

Company Sales Potential the maximum estimated or

potential sales the company may reach in a defined time period
under given conditions.
Market Share the company's share of the estimated sales for
an entire industry.

SALES FORECASTING METHODS

Survey Forecasting Methods qualitative
sales-forecasting methods.
Executive opinion
Executive Forecasting a qualitative salesforecasting method done by an individual.
Delphi Method a survey method that entails
administering a series of questionnaires to
panels of experts.

Survey Forecasting Methods

Sales Force Composite an approach to
forecasting that obtains the opinion of sales
personnel concerning future sales.
Should salespeople be paid bonuses for
accurate forecasts?

Survey Forecasting Methods

Users expectations
Build-to-order

Mathematical Forecasting
Methods

Test Markets mathematical forecasting method that

measures consumer acceptance of new products.
Time series projections
Naive Method a time-series projection method based
on the assumption that what happened in the immediate
past will continue to occur in the immediate future. The
formula is stated this way:
Next Year's Sales = This Year's Sales x This Year's Sales
Last Year's Sales

Mathematical Forecasting
Methods

Moving Average a time-series projection

method that allows consideration of all past data
with less weight placed on data as they get older.
Exponential Smoothing a time-series
projection method similar to the moving-average
forecast method, but it allows consideration of
all past data and less weight is placed on data as
it ages. The forecasting equation is:
Next Year's Sales = a (This Year's Sales) + (1-a)(This Year's Forecast)

Mathematical Forecasting
Methods
Trend projections

Eyeball Fitting Information-series projection method

in which data are plotted on a graph and used to
estimate a linear trend.
Least Squares Technique a time-series projection
using the past to predict future sales.
Regression analysis a statistical method used to
incorporate independent factors that are thought to
influence sales (for example, population, advertising)
into the forecasting procedure.

THE TOP BRASS APPROVES

THE FINAL FORECAST
The Need To Overcome "Computerphobia "

THE SALES MANAGER'S

BUDGET
1.Sales Force Budget the amount of money available or
assigned to the sales force for a definite period, usually a
year.
2.Budget Purposes
Planning
Coordination
Control
3.Sales Force Budgeting Methods
4.Forecasted Budget For Sales Regions
5.Budgets Should Be Flexible

THE BOTTOM LINE