Sales forecasting

SALES FORECASTING Sale forecasting is a method of assuming the prospect of sale of product in future market. It is the art of foreseeing future market demand and necessities of buyers. Long term and short-term investment of companies are decided on accurate sales forecasting. In a defined set of environment, sales forecast gives a projection of future market demand. Forecasts generally are done by analysing company’s past sales data and economic trend. Newly founded companies depend on market research and competitive intelligence for sales forecast.

Types of Sales Forecast 

Short term forecast:

Forecasts for a period of three months ahead. Short term fluctuation is most important for this type of projection. 

Medium term forecast:

Forecasts for a period of one year ahead. Budget allocation is dependable on this type of forecast. 

Long term forecast:

Sales projection is given for a period of three years ahead. Long term resource implications are decided by long term sales forecast.

Importance of Sales Forecast Key advantages of this process are        

Future projection on sales revenue Efficient resource allocation Future management of workforce Prediction on future cash flow Future growth plan Acquiring investment capital in future.

Efficient investment of Research and development team Upcoming marketing strategy Financial management in future

Sales Forecasting Procedure The following are the step by step procedure of sales forecasting     

Goal setting Gathering of information Analysis Selection of right model Forecasting Rigorous study of outcomes

Sales forecasting techniques 

Qualitative technique

1. User survey method- Market survey is done among the customers asking their likely purchases for the forecast period.

2. Executive opinion panel- Involvement of professionals who have expertise on market trend. This is an arbitrary procedure. 

Salesforce Composite- Product by product sales forecast are made by each salesperson. Thus, individual sale forecasts help to generate overall company forecast.

1. Delphi method- A questionnaire is prepared by project managers and circulated to and circulated to each member of the team. Thus, each individual opinion is transformed into a general forecast.

2. Bayesian decision theory- The decision maker assigns a probability of each specified event or state of nature. Forecast is then made of the sum of these probabilities.

3. Product testing and test marketing – Pre-production models with samples are provided to the potential customers and a market survey is done based on their reaction on the sample. Thus, it helps to forecast the future sales of the product. 

Quantitative Techniques

1. Time series analysis: Importance is given to analysis of past series to predict the future. This a relatively a simple process. Process includes moving averages, exponential smoothing, time series and Z charts.

2. Casual Techniques: Process includes leading indicators, simulation and diffusion model. A relationship between measurable independent variable and forecasted dependable variable is established.

Many retail sales analytic software are available in the market to help making accurate and efficient sales forecasting. For details, you can visit http://www.salestemperature.com/. They provide affordable, simple and straightforward solution for sales forecasting.

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