SALES FORECASTING

Sales Forecasting is the process of estimating what your business’s sales are

going to be in the future.Sales forecasting is an integral part of business management. Without a solid idea of what your future sales are going to be, you can’t manage

your inventory or your cash flow or plan for growth. The purpose of sales forecasting is to provide information that you can use to make

intelligent business decisions.

Types of forecasting

• Macro forecasting is concerned with forecasting markets in total. This is about determining the existing level of Market Demand and considering what will happen to market demand in the future.

• Micro forecasting is concerned with detailed unit sales forecasts. This is about determining a product’s market share in a particular industry and considering what will happen to that market share in the future

FACTORS FOR SELECTING FORECASTING

• Risks attached to them, and then it stands to reason that the forecast should be prepared as accurately as possible.

• The availability of data and information - in some markets there is a wealth of available sales information .

• The position of the products in its life cycle.

INFORMATION REQUIRED FOR FORCASTING

• What customers say about their intentions to continue buying products in the industry

• What customers are actually doing in the market

• What customers have done in the past in the market

TECHNIQUES OF SALES FORECASTING

• TIME SERIES TECHNIQUES.

• CORRELATION OR REGRESSION TECHNIQUES.

• QUALITATIVE TECHNIQUES.

TIME SERIES TECHNIQUES

• Time series techniques are quantitative techniques that is they use values recorded at regular time intervals to predict future values.

Time series techniques look at one or more of the following patterns:

Level, Trend, Seasonality, Noise.

Correlation techniques

This forecasting task is to predict the increase in sales given some marketing action as a sales promotion or advertising campaign. In this case, correlation techniques are used to compare how a change In one variable causes a change in another variable.

Qualitative techniques

• These techniques are predicted on the idea that pattern in sales figures from previous time period will repeat. If forecaster doubts that assumption,qualitatives technique provides another forecasting tool. They tap into the expertise of people in the organization.

Statistical Data Analysis

To determine what statistical data analysis is, one must first define statistics. Statistics is a set of techniques that are used in collecting, analyzing, presenting, and interpreting data. Statistical methods are used in a wide variety of occupations and help people identify, study, and solve many complex problems. Statistics is also widely used in the business and economic world. Statistics makes complex data more understandable to decision makers and managers, who are then able to make better informed decisions.

BASIC STEPS IN STATISTICAL DATA ANALYSIS

• Defining the Problem:

An exact definition of the problem is imperative in order to obtain accurate data about it. It is extremely difficult to gather data without a clear definition of the problem

Collecting the Data We live and work at a time when data collection and statistical computations have become easy almost to the point of triviality. Paradoxically, the design of data

collection, never sufficiently emphasized in the statistical data analysis textbook, have been

weakened by an apparent belief that extensive computation can make up for any deficiencies in the

design of data collection. One must start with an emphasis on the importance of defining the

population about which we are seeking to make inferences, all the requirements of sampling and

experimental design must be met.

Analyzing the Data

• Statistical data analysis divides the methods for analyzing data into two categories: exploratory methods and confirmatory methods. Exploratory methods are used to discover what the data seems to be saying by using simple arithmetic and easy-to-draw pictures to summarize data. Confirmatory methods use ideas from probability theory in the attempt to answer specific questions. Probability is important in decision making because it provides a mechanism for measuring, expressing, and analyzing the uncertainties associated with future events. The majority of the topics addressed in this course fall under this heading.

Reporting the Results

• Through inferences, an estimate or test claims about the characteristics of a population can be obtained from a sample. The results may be reported in the form of a table, a graph or a set of percentages. Because only a small collection (sample) has been examined and not an entire population, the reported results must reflect the uncertainty through the use of probability statements and intervals of values

Sales Forecasting and the Business Plan

• Summarize the data after it has been reviewed and revised. The summary will form a part of your business plan. The sales forecast for the first year should be monthly, while the forecast for the next two years could be expressed as a quarterly figure. Get a second opinion. Have the forecast checked by someone else familiar with your line of business. Show them the factors you have considered and explain why you think the figures are realistic.

conclusion

• As sales forecasting is the prediction of expected demand given a set of