3. Sales Budget Conservative estimate of the expected volume of sales and is used for purchasing. production and cash flow decisions 7/13/2011 Srishti School of Business
4. Sales Forecast A sales forecast is the estimated rupees or unit sales for a specific future time period based on a proposed marketing plan and an assumed market environment. OR Expected level of company sales based on a chosen marketing plan and an assumed marketing environment. 7/13/2011 Srishti School of Business
5. Sales Forecasting - Why is it necessary? To raise the necessary cash for investment and operations To establish capacity and output levels To acquire and stock the right amount of supplies To hire the required number of people 7/13/2011 Srishti School of Business
6. Sales forecasting is the process of predicting sales of goods and services. Among the major factors considered when forecasting sales are: Sales Forecasting 1. Past sales levels and trends 2. General economic trends 3. Economic trends in the company’s industry 4. Other factors expected to affect sales in the industry 5. Political and legal events 6. The intended pricing policy of the company 7. Planned advertising and product promotion 8. Expected action of competitors 9. New products contemplated by the company or other firms 10. Market research studies 7/13/2011 Srishti School of Business
7. Terms: Potential Market – A set of consumers who profess a sufficient level of interest in a product or service Available Market - A set of consumers who have interest , income and access to a particular product or service Qualified available market - A set of consumers who have interest, income, access and qualifications for the particular product or service 7/13/2011 Srishti School of Business
8. Terms: Target Market - Part of the qualified available market the company decides to pursue Penetrated Market -A set of consumers who are buying the company’s product or service Sales Target - Sales goal for a product line, company division or a sales rep. It is a benchmark to evaluate achievements against goals set. 7/13/2011 Srishti School of Business
10. Industry sales forecast, or market potential, is the estimated sales for all sellers. Company sales potential is the maximum estimated or potential sales the company may reach in a defined time period under given conditions. The company’s share of the estimated sales for an entire industry is referred to as market share. 7/13/2011 Srishti School of Business
11. Sales forecasting vs. Plan Sales forecasting - is a projection in to the future of expected sales, given a stated set of environmental conditions Sales plan- is a set of specified managerial actions to be undertaken to meet or exceed the sales forecast 7/13/2011 Srishti School of Business
12. Forecasting approaches Top down/Break down approach Bottom-up/buildup approach 7/13/2011 Srishti School of Business
13. Forecasting approaches Top down/Break down approach Fore cast relevant external environmental factors over specified time period Step 1 Forecast industry sales (or market potential ) for relevant industry over specified time period Step 2 Step 3 Company sales potential =industry sales forecast(step-2)x company’s share of total industry sales in % Step 4 Company sales forecast of the product/services under study Step 5 Sales/marketing manager forecasts for regions, branches,territories, & customers 7/13/2011 Srishti School of Business
14. Forecasting approaches Bottom up / Build up Approach Combined into company Sales forecast Step 4 Combined into regional/zonal sales forecast Step 3 Step 2 Combined into area/branch sales forecast Step 1 Sales persons’ sales forecast of individual customers 7/13/2011 Srishti School of Business
