Professional Documents
Culture Documents
Agenda Agenda
Sales Potential and Sales Forecasting
Different Methods for the above Converting industry forecast into company sales forecast Evaluation of forecasts
opportunities present in a particular market segment open to a specified company selling a good or service during a stated future period
o illustrate! an estimate of the number of lo"# priced pocket
cameras that might be sold in San Mateo County! California! during the calendar year $%&' by the Eastman (odak Company "ould be the $%&' San Mateo County sales potential for Eastman (odak lo"# price pocket cameras
maximum possible sales opportunities present in particular market segments open to a specified company selling a good or service during a stated future period
hey are derived from market potentials after analyses of historical market share relationships and ad+ustments for changes in companies, and competitors, selling strategies and practices
particular manufacturer! such as to Eastman (odak Company! "hile Market potential indicates sales opportunities available to an entire industry! say steel industry
units! in a future period under a particular marketing program and an assumed set of economic and other factors outside the unit for "hich the forecast is made
A sales forecast may be for a single product or for an entire
product line
)t may be for a manufacturer,s entire marketing area! or for any
sub# division of it
Sales SalesForecasting ForecastingMethods Methods -ury of Executive .pinion he Delphi echni*ue Poll of Sales Force .pinion Pro+ection of Past Sales ime# series Analysis Exponential Smoothing Evaluation of past sales pro+ection methods Survey of Customer,s /uying Plans 0egression Analysis Econometric Model /uilding and Simulation
Jury Juryof ofExecutive ExecutiveO O inion inion here are t"o steps in this method1
i23igh# ranking executives estimate probable sales! and! ii2An average estimate is calculated he assumption is that the executives are "ell informed about the
industry outlook and the company,s market position! capabilities and marketing program
All should support their estimates "ith factual material and explain
their rationales
Jury Juryof ofExecutive ExecutiveO O inion inionMethod Method Companies using the +ury of executive opinion method do so because of the follo"ing reasons1
$2 his is a *uick and easy "ay to turn out a forecast 42 his is a "ay to pool the experience and +udgment of "ell# informed
people
52 his may be the only feasible approach if the company is so young
that it has not yet accumulated the experience to use other forecasting methods
62 his method may be used "hen ade*uate sales and market statistics
are missing! or "hen these figures have not yet been put into the form re*uired for more sophisticated forecasting methods "
#he #he$el $el hi hi#echni%ue #echni%ue Several years ago! researchers at the 0and Corporation developed a techni*ue for predicting the future that is called the Delphi echni*ue
"hich the responses to one *uestionnaire are used to produce the next *uestionnaire
hus information available to some and not to other experts is
disseminated to all! enabling all to base their final forecasts on 7all available8 information
&
grass# roots approach8! individual sales personnel forecast sales for their territories9 then individual forecasts are combined and modified! as management thinks necessary! to form the company sales forecast
his approach appeal to practical sales managers because forecasting responsibility is assigned to those "ho produce the results "eaknesses of Poll of Sales Force .pinion Method
0efer Page :o2 66 of Cundifff and Still ext for strengths and
'
sales
ime# series analysis1 A statistical procedure for studying historical sales data sales forecasting
:ext year,s sale; a>this year,s sale?@ >$#a? >this year,s forecast?
)*
marketers! because it is easiest to use "here the potential market consists of small numbers of customers and prospects! substantial sales are made to individual accounts! the manufacturer sells direct to users! and customers are concentrated in a fe" geographical areas> all the more typical of industrial than consumer marketing?
))
forecasting! determines and measures the association bet"een company sales and other variables
)t involves fitting an e*uation to explain sales fluctuations in
terms of related and presumably causal variables! substituting for these variables values considered likely during the period to be forecasted! and solving for sales
)/
here are three ma+or steps in forecasting sales through regression analysis1
$2 )dentify variables causally related to company sales 42 Determine or estimate the values of these variables related to sales 52 Derive the sales forecast from these estimates
Econo, etric Econo, etricModel Model.uilding .uildingand and Si, ulation Si, ulation
Econometric
model building and simulation is attractive as a sales forecasting method for companies marketing durable goods his approach uses an e*uation or system of e*uations to represent a set of relationships among sales and different demand# determining independent variables hen! by 7plugging in8 values >or estimates? for each independent variable >that is! by 7simulating8 the total situation?! sales are forecast An econometric model >unlike a regression model? is based upon an underlying theory about relationships among a set of variables! and parameters are estimated by statistical analysis of past data An econometric sales forecasting model is an abstraction of a real# "orld situation! expressed in e*uation form and used to predict sales
For example! the sales e*uation for a durable good can be "ritten 1
S; 0 @ :
+onverting +onverting2ndustry 2ndustryForecast Forecastto to+o, +o, any anySales SalesForecast Forecast
Deriving a company sales forecast from an industry sales forecast
re*uires an appraisal of company strengths and "eaknesses >as "ell as marketing programs? against those of competitors he result is an estimate of expected market share that >"hen applied to the industry sales forecast? results in forecast of company sales Forecasting a company,s market share varies in complexity from one industry to another )n the steel industry! the number of competitors is small and market share is stable! so determining a given company,s market share is a simple task# a matter of pro+ecting a past trends and ad+usting for anticipated changes in the company,s relative strengths and "eaknesses /ut in the "omen,s clothing industry! the number of competitors is large and market shares fluctuate "idely! so determination of market share is difficult
evaluate them carefully! regardless of the extent of their personal involvement in the preparation Every forecast contains elements of uncertainty All are based on assumptions So a first step in evaluating a sales forecast is to examine the assumptions >including any hidden ones? on "hich it is based Sales executives should vie" each assumption critically Sales executives should evaluate the accuracy and economic value of the forecast as the forecast period advances Forecasts should be checked against actual results! differences explained! and indicated ad+ustments made for the remainder of the period
)"