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Salesforecasting (3)

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  • 1. SALES FORECASTING By:Rini Joshi Shashank Mishra 1 WILSON COLLEGE, SY-BMS
  • 2. "Everything you have in your life, you have attracted to yourself because of the way you think, because of the person that you are. You can change your life because you can change the way you think.” -Brian Tracy 2 WILSON COLLEGE, SY-BMS
  • 3. What is Sales forecasting..?  Def: The prediction, projection or estimation of expected sales over a specified future time period.  Sales forecasting for an established business is easier than sales forecasting for a new business 3 WILSON COLLEGE, SY-BMS
  • 4. Why…???  To raise necessary cash for investment and operation.  To establish capacity and output level.  To acquire and stock and amount of supplies.  To hire the required number of people. 4 WILSON COLLEGE, SY-BMS
  • 5. Level of Sales Forecasting Product-byproduct Sales forecasting Seasonal 5 WILSON COLLEGE, SY-BMS Geographical
  • 6. Types Of Sales forecasting  There are two major types of forecasting, which can be broadly described as macro and micro:  Macro forecasting is concerned with forecasting markets in total.  Micro forecasting is concerned with detailed unit sales forecasts. 6 WILSON COLLEGE, SY-BMS
  • 7. Which type of forecasting to use depends on several factors:  The degree of accuracy required..  The availability of data and information..  The time horizon that the sales forecast is intended to cover..  The position of the products in its life cycle. 7 WILSON COLLEGE, SY-BMS
  • 8. Steps in the Forecasting Process “The forecast” Step 6 Monitor the forecast Step 5 Prepare the forecast Step 4 Gather and analyze data Step 3 Select a forecasting technique Step 2 Establish a time horizon Step 1 Determine purpose of forecast 8 WILSON COLLEGE, SY-BMS
  • 9. Sales Forecasting Techniques SALES FORECASTING QUALITATIVE TECHNIQUE 9 WILSON COLLEGE, SY-BMS QUANTITATIVE TECHNIQUE
  • 10. Sales Forecasting Techniques QAULITATIVE TECHNIQUES  Consumer/User survey method  Jury of executive opinion  Sales force composite  Delphi method  Product testing and test marketing 10 WILSON COLLEGE, SY-BMS
  • 11. Consumer/User survey Method (Market Research)  Involves asking consumer about there likely purchase for the forecasted period   Well defined buyers Limited in number  Advantage: Simple and Easy  Disadvantage: buyers might change their opinions 11 WILSON COLLEGE, SY-BMS
  • 12. Jury of Executive opinion  Specialist & experts are consulted who have knowledge of the industry being examined  Committee members came together and discuss forecasts and agree one of the estimates or come up with a new estimate for whole company. 12 WILSON COLLEGE, SY-BMS
  • 13. Cont.  Advantage : Developing a general, rather than product by product forecast  Disadvantage: Difficulty in allocating the forecast among individual product  Cause the statistics are not collected from the market  Allocation can be Arbitrary 13 WILSON COLLEGE, SY-BMS
  • 14. Sales force composite  Each sales-person makes a product-by-product forecast for their particular sales territory.  Advantage: simple  Disadvantage:  1- Over estimate  More than sales potential  Over production (extra cost)  Additional cost for keeping stock.  14 WILSON COLLEGE, SY-BMS
  • 15. CONT..  Disadvantage:  2- Under estimate:  15 Less than sales potential  Demand do not match  Shift to competitors and decrease in sales and decrease in profitability WILSON COLLEGE, SY-BMS
  • 16. Delphi Method • Very similar to jury of executives method but this time members are both inside and outside the company  A questionnaire is given to each member of the team which asks question usually of behavior nature  Main objective is to translate opinion into some from of forecast • 16 This will continue until all members agree on same forecast. (it is suitable for long-term forecasts). WILSON COLLEGE, SY-BMS
  • 17. CONT..   17 Advantage: No group pressure, more objective Disadvantage: Takes long time. WILSON COLLEGE, SY-BMS
  • 18. Product testing and test marketing  This research method is heavily preferred when company offers a new product to the market (innovation).  Advantage: provide real feedbacks about customers reactions and make estimates upon that.  Disadvantage: Rivals might get aware of it. 18 WILSON COLLEGE, SY-BMS
  • 19. QUANTITATIVE TECHNIQUE  TIME SERIES ANALYSIS  CASUAL TECHNIQUE 19 WILSON COLLEGE, SY-BMS
  • 20. TIME SERIES ANALYSIS  The time series analysis method predicts the future sales by analyzing the historical relationship between sales and time.  While breaking time series into components, the three most common patterns observed are 1. Trend form 2. Level form & 3. Seasonal form 20 WILSON COLLEGE, SY-BMS
  • 21. CONT.. • Seasonality: A seasonal pattern(e.g., quarter of the year, month of the year, week of the month, day of the week) exists when demand is influenced by seasonal factors. • Trend: During the growth and decline stages of the product life cycle, a consistent trend pattern in terms of demand growth or demand decline can be observed. • Level : It is difficult to capture short term patterns that are not repetitive in nature. In short run, sometimes there is a swing, which could be in either direction, upward or downward, and it usually has momentum that lasts for a few periods 21 WILSON COLLEGE, SY-BMS
  • 22. CASUAL TECHNIQUE  Causal forecasting model show the cause for demand and its relation to other variables Examples: Soft drink can be related to the average summer temperature. Rainfall can give us an estimate of crop and in turn an estimate of the demand for consumer durables in the rural areas. 22 WILSON COLLEGE, SY-BMS
  • 23. FORECASTING ERROR  Flaw in data.  Unpredictable economic or socio-political environment.  Non-realistic & accurate assumption  Technical and technological changes 23 WILSON COLLEGE, SY-BMS
  • 24. 24 WILSON COLLEGE, SY-BMS