What Is Sales Forecasting Marketing Essay

What Is sales Forecasting Marketing Es assertForecasting is a little more scientific than looking into the vitreous silica ball . The scientific bum of prediction lies in studying past , present and emerging trends , present and future actions and their effects . What go byed in the past is germane(predicate) to what is happening now and what could happen in the future .Forecastingis defined as the movement of making statements about the events whose actual outcomes drive not stock-still been observed . A common example might bethe estimationof some variable of interest at some specified future meet .Predictionis similar , but it is more general term. Both might refer to formal statistical methods employing the time serial publication ,cross sectionalorlongitudinaldata and alternatively to less formal judgemental methods . Usage can differ between argonas of application for example inhydrology , the terms call and promise are sometimes reserved for the estimation of values at certain specificfuturetimes , while the term prediction is apply for more general estimates , such as the number of times the floods will occur over a long period .WHAT IS gross revenue FORECASTING ?SALES FORCATING Sales anticipation is estimating what a companys future sales are likely to be , base on the sales records as well asthe marketplace research . Information used for sales presage must be well organized and may include information on the competition and the statistics that affect the businesses client base . Companies conduct sales foretelling in hopes of identifying the patterns so that the revenue and the cash flowcan be maximized .Sales regarding is a elusive area of management . Most managers believe that they are good at forecasting . However , forecasts made usually turn out to be impairment . Marketers argue about whether sales forecasting is a science or an art . The short answer is that it is a bit of both. Sales forecast should be conducted regularly and all the forecasting results learn to be measured , so that the future methods can be adjusted if necessary .Before the forecasting process begins selling , sales or other managers should determine how far ahead the forecast should be done . Short term forecasting is a uttermost of three months and is often effective for analyzing computes and markets . Intermediate sales forecasting is between a period of three months and two years and may be used for schedules , history and production . Long term forecasting is for a minimum of two years and can be used for long term forecast period and is good for dealing with growth into new markets or new products .Basically sales forecasting is analyzing all the parts of a business from keep down inventory to the strengths and weaknesses of sales people . Managers must think about changes in customer sales or other changes that could affect the forecasting figures . They must be competitive when they are assessing the compe tition and how they can surpass the competition to better meet the needs of the target market .IMPORTANCE OF SALES FORCASTINGSales forecasting is the basis of all the business activities . All the business activities may it be a sales related matter , production related matter , finance , advertising etc depend on sales forecasting . Any business firm starts its plan with sales forecasting . Sales forecasting is a self-importance legal opinion tool for a company . A sales forecast reports , graphs and analyzes the pulse of any business . It is a vital basis for a companys budget . The future direction of the company depends on the sales forecasting .Salesare the lifeblood of the business .Its what dish outs you pay employees , cover operating expenses , buy more inventory , market new products and attract more investors . Sales forecasting is a crucial part of thefinancial planningof the business . Its a self assessment tool that uses the past and the current sales statistics to i ntelligently predict the future performance .Sales forecasts are also an important part of starting a new business . Almost all new businesses need loans or start up capital to purchase everything necessary to get off the set up office space , equipment , inventory , employee salaries andmarketing . You cant just walk into a bank with a bright idea and lots of enthusiasm . You need to show them numbers that prove your business is viable . In other words , you need a business plan .The importance of Sales forecasting can be stated as follows 1 . Overstocking and the under stocking of materials can be maintained by a good inventory control.2 . With the help of sales forecasting , sales opportunities can be found out on the basis of the forecast .3 . All the activities in an organization , are controlled on the basis of forecasting .4 . Advertising and sales promotion expenses are based on sales forecasting .5 . Sales forecasting is also important in the field of personnel department . The number of sales persons , executives etc can be increased or decreased on the basis of sales forecasting .6 . Sales forecasting is the basis for financial Planning .7 . In the field of production , with the help of sales forecasting , producer is able to adjust his production schedules and avoid idle time which leads to efficiency .8 . Supply and demand of the products can be easily adjusted .9 . It helps in knowing when and how much to buy .10 . It helps in the product mix decisions .SALES FORECASTING ON THE BASIS OF PAST umpteen businesses prepare their sales forecast on the basis of their past sales .Past years Sales forecasting is done with the help of Time series analysis .Time series analysis shoots the breaking of past sales down into the four components The trend are the sales growing , flat run along or are in decline Seasonal or cyclical factors Sales are affected by the swings in the general economic action at law . Seasonal and cyclical factors occur in a reg ular pattern .Erratic events these include strikes , fashion fads , war scares and other disturbances to the market , which need to be isolated from the past sales data in order to be able to identify the more normal pattern of the sales .Responses the results of the particular measures that have been taken to increase the sales (e.g. a major new advertising campaign) .Using the time series analysis to prepare an effective sales forecast requires the management to Smooth out the erratic factors .Adjust for the seasonal variation .Identify and estimate the effect of the specific marketing responses .SALES FORECASTING ON THE BASIS OF PRESENT MARKETAs a starting point for estimating the market demand , a company needs to know the actual manufacturing sales that is taking place in the market . This involves identifying its competitors and estimating their sales . An intentness trade association will often collect and publish the total industry sales , although rarely listing the ind ividual company sales sepa stridely .By using this information , each company can easily quantify its performance against the whole market . This is an important piece of analysis , Say for example that Company A has sales that are rising at the rate of 10% per year . However , it finds out that the overall industry sales are rising by the rate of 15% per year . This must correspond that Company A is losing the market share , its relative standing in the industry .Another elbow room to estimate the sales is to buy the reports from a marketing research firm such as AC Neilsen , Mintel etc . These are usually good sources of information for the consumer markets where the retail sales can be tracked in great detail at the point of sale . Such sources are less useful in the industrial markets which usually rely on the distributors.SALES FORECASTING FOR FUTURE MARKETSo far we have identified that how a company can determine the current position .How can the future market demand and the company demand be forecast ?Very few products or the services lend themselves to easy forecasting . These tend to involve a product whose absolute level or the trend of sales is fairly constant and where the competition is either non-existent ( e.g. monopolies such as public utilities ) or stable ( pure oligopolies ) . In most of the markets , the total demand and company demand are not stable which makes the good sales forecasting a critical success factor .A common method of preparing the sales forecast has three stages Prepare the macroeconomic forecast what will happen to overall economic activity in the relevant economies in which a product is to be sold .Prepare an industry sales forecast what will happen to overall sales in an industry based on the issues that influence the macroeconomic forecast .Prepare a company sales forecast based on what management expect to happen to the companys market share .Sales forecasts can be based on the following three types of informa tion What the customers sayabout their intentions to continue buying products in the industry .What the customers are actually doingin the market .What the customers have donein the past in the market .There are many market research businesses that undertake surveys of the customer intentions and sell this information to the businesses that need the data for sales forecasting purposes . The value of the customer intention survey increases when there are a relatively small number of customers , the cost of reaching them is small and they have the clear intentions . An alternative way of measuring the customer intentions is to sample the opinions of the sales force or to the consult industry experts .