sales forecasting

2. Qualitative
Methods
Executive
Opinion
Delphi Method
Sales Force
Composite
Survey of Buyers’
Intentions
Quantitative
Methods
Moving
Averages
Exponential
Smoothing
Decomposition
Naive/Ratio
Method
Regression
Analysis
Econometric
Analysis

3. In this method of forecasting, the views of
senior executives of the company are
obtained for forecasting sales.
The oldest, simplest and the most widely
used method.
Advantages: Disadvantages
(i)Forecasting can be done (i) unspecific
quickly and easily.
(ii)Less expensive than other (ii) subjective
method.
(iii) Very popular (iii) Difficult to breakdown the
forecast into sub units

4. Developed during late 1940’s
By Rand Corporation
Forecasts of experts are taken by a
coordinator separately, which are
summarized and informed to experts, who
again give their coordinator separately,
which are summarized and informed to
experts, who again give their opinions on
the same matter. This process is continued
till there is a near consensus.

5. Advantages: Disadvantages
(i) Objective forecast is
accurate.
(i) Difficulty getting a
panel experts.
(ii) Useful foe
technology, new
product, and industry
sales forecast.
(ii) Longer time for
getting consensus.
(iii) Both long and short
term forecasting
possible.
(iii) Break-down of
forecast into products
or territories is not
possible.

6. Each salesperson estimates how much
quantity or value each existing and
prospective consumer will buy of each of the
company’s product and services in his/her
territory.

7. Advantages: Disadvantages
(i) Forecasting is don by a
salespeople who are
closest to the market.
(i) Sales forecast are often
pessimistic or optimistic,
(ii)Detailed sales estimate
broke down by customer,
product and territory are
possible.
(ii) If sales forecast are used
to set sales quotas, which are
linked to incentive schemes,
salespeople may deliberately
under estimate the demand.
(iii) Involvement of
salespeople.
(iii) Many salespersons are
not interested in sales
forecasting, and prefer to
spend time in the field
meeting sustomers.

8. Also called “market research” or “market
survey”.
In this method, existing and potential
costumers are asked about their likely
purchases of the company’s products and
services, during the forecast period.

9. Advantages: Disadvantages
(i) Useful in forecasting
sales for industrial
products, consumer,
durables, and new
products.
(i) Difficulty getting a
panel experts.
(ii) It also gives customer’
reasons for buying or not
buying.
(ii) Longer time for
getting consensus.
(iii) Relatively inexpensive
and fast.
(iii) Break-down of
forecast into products or
territories is not possible.

10. This is a forecasting method that
measures consumer acceptance of a new
product. This is be done by estimating the
sales or demand for a new product or
service in a representative small market,
which is extrapolated over the total
market to estimate the total demand for
the product.

11. 1.Full-blown test markets
2.Controlled test marketing
3.Simulated test marketing

12. Full-blown test markets
Buyer surveys are carried out to get information
about consumer attitude, usage and satisfaction
towards a new product.
Controlled test marketing
The company with a new products hires a
research firm and gets a panel of stores at specified
geographic locations.
Simulated test marketing
In this method, about 30-40 consumers are
selected, based on their brand familiarity and
preferences in a particular product category.

13. Advantages: Disadvantages
(i) Their usefulness for
forecasting the sales
of new or modified
product.
(i) Chances of spoilages.
(ii) In deciding whether
the company should go
ahead for a national
launch of a new product
without spending huge
amount.
(ii)It is difficult for the
company to wait to
measure test result.

14. Sales for next year =
Number of years
(3 or 6)
In this method of forecasting, the moving
averages of the company sales of the
previous periods are calculated for
forecasting the sales of the future periods.
The formula used is:
Actual sales for past
3 or 6 years

15. Advantages: Disadvantages
(i) Relatively simple
method.
(i) Unable to predict a
downturn or upturn in the
market.
(ii) Easy to calculate (ii) Cannot predict long-
term sales forecast
accurately
(iii) Widely used for short
term and medium term
sales forecasts.
(iii) Historical data is
needed.

16. This is a forecasting method in which the
forecaster can allow sales in certain
periods to influence the sales forecast
more than the sales on other periods
By using a smoothing constant (L) in the
equation:
sales forecasts for next period =
(L) (actual sales this period) +
(1 – L) (this period’s sales forecast)

17. Advantages: Disadvantages
(i) Simple to operate. (i) Arbitrary
(ii) Forecasters knowledge or
intuition can be used in
forecasting.
(ii) Long term and new
product forecasting
are not possible.
(iii) Useful method when
sales date have a trend or a
seasonal pattern.
(iv) Immediate response to a
upturn or downturn in sales.
(v) Used by many firms.

18. This is one of the methods of sales
forecasting in which the company’s periods
of sales data are broken down (or
decomposed) into major components, such
as trends, cycle, seasonal, and erratic
events.
These components are then recombined
to forecast the sales for the future period.

19. Advantages: Disadvantages
(i)Conceptually sound
method.
(i) Difficult and complex
statistical method are needed
to break down sales data into
various components.
(ii) Historical data is needed.

20. it is a forecasting method, which is based on the
assumption that what happened in the immediate
past will continue to happen in the immediate
future.
The formula used is:
Sales for next year = Actual sales for this year X
Actual sales for this year
Actual sales for last year
Ratio Method

21. Advantages: Disadvantages
(i) Simple to calculate. (i) Cannot be used for
long-term and new
products.
(ii) Requires less data. (ii) Accuracy of sales
forecast would be less, if
past sales fluctuate
considerably.
(iii)Accuracy is good in
short-term forecast.

22. It is a statistical method of sales
forecasting that derives an equation based on
relationship between the company sales
(dependent variable, x) and independent
variables, or factors (y1, y2) which influence
the sales.
 Simple regression analysis
 Multiple regression analysis

23. Advantages: Disadvantages
(i) High forecasting
accuracy
(i)Technically complex
(ii) Objective method (ii) Expensive and time
consuming.
(iii) Can predict turning
points of the company’s
sales.
(iii)Use of computer and
software packages
essential.

24. This is another method of forecasting in
which many regression equations are built
to forecast industry sales, general
economic conditions, or future events with
the help of computer hardware and
software.
Advantages Disadvantages
Accurate forecasts of
economic conditions and
industry sales are
possible.
Large volume of data is
required.