Methods of Sales Projection - DOC by lim36953

VIEWS: 86 PAGES: 4

More Info
									                                         CHAPTER 5

                 FORECASTING MARKET DEMAND AND SALES BUDGETS



I.     MANAGING SALES INFORMATION

II.    FORECASTING MARKET DEMAND

       A.   Marketing Decision Support System – an ongoing, future-oriented structure

            designed to generate, process, store, and later retrieve information to aid decision

            making in an organization's marketing program.

III.   USES OF SALES FORECASTS

       A.   Sales Forecast – the estimated dollar or unit sales for a specific future time period

            based on a proposed marketing plan and an assumed market environment.

       B.   A sales forecast is important for at least five reasons

            1.      A sales forecast becomes a basis for setting and maintaining a production

                    schedule—manufacturing.

            2.      It determines the quantity and timing of needs for labor, equipment, tools,

                    parts, and raw materials—purchasing, personnel.

            3.      It influences the amount of borrowed capital needed to finance the production

                    and the necessary cash flow to operate the business—controller.

            4.      It provides a basis for sales quota assignments to various segments of the

                    sales force—sales manager.

            5.      It is the overall base that determines the company's business and marketing

                    plans, which are further broken down into specific goals—marketing officer.

IV.    THE FORECASTING PROCESS

       A.   Forecasting Process – refers to a series of procedures used to forecast.
     B.   Market Factor – an item or element that (1) exists in a market, (2) may be measured

          quantitatively, and (3) is related to the demand for a product or service.

     C.   Market Index – simply a market factor expressed as a percentage relative to some

          basic figure.

     D.   The Breakdown And Buildup Forecasting Categories

          1.      Company Sales Potential – the maximum estimated or potential sales the

                  company may reach in a defined time period under given conditions.

          2.      Market Share – the company's share of the estimated sales for an entire

                  industry.

V.   SALES FORECASTING METHODS

     A.   Survey Forecasting Methods – qualitative sales-forecasting methods.

          1.      Executive opinion

                  a.      Executive Forecasting – a qualitative sales-forecasting method done

                          by an individual.

                  b.      Delphi Method – a survey method that entails administering a series

                          of questionnaires to panels of experts.

          2.      Sales Force Composite – an approach to forecasting that obtains the opinion

                  of sales personnel concerning future sales.

                  a.      Should salespeople be paid bonuses for accurate forecasts?

          4.      User’s expectations

          5.      Build-to-order

     B.   Mathematical Forecasting Methods – quantitative sales-forecasting methods

          1.      Test Markets – mathematical forecasting method that measures consumer

                  acceptance of new products.
           2.   Time series projections

                a.     Naive Method – a time-series projection method based on the

                       assumption that what happened in the immediate past will continue to

                       occur in the immediate future. The formula is stated this way:

                             Next Year's Sales = This Year's Sales x This Year's Sales
                                                                     Last Year's Sales

                b.     Moving Average – a time-series projection method that allows

                       consideration of all past data with less weight placed on data as they

                       get older.

                c.     Exponential Smoothing – a time-series projection method similar to

                       the moving-average forecast method, but it allows consideration of all

                       past data and less weight is placed on data as it ages. The forecasting

                       equation is:

                       Next Year's Sales = a (This Year's Sales) + (1-a)(This Year's Forecast)

                d.     Trend projections

                       i.        Eyeball Fitting – Information-series projection method in

                                 which data are plotted on a graph and used to estimate a linear

                                 trend.

                       ii.       Least Squares Technique – a time-series projection using the

                                 past to predict future sales.

                e.     Regression analysis – a statistical method used to incorporate

                       independent factors that are thought to influence sales (for example,

                       population, advertising) into the forecasting procedure.

VI.   THE TOP BRASS APPROVES THE FINAL FORECAST
        A.   The Need To Overcome "Computerphobia"

VII.    THE SALES MANAGER'S BUDGET

        A.   Sales Force Budget – the amount of money available or assigned to the sales force

             for a definite period, usually a year.

        B.   Budget Purposes

             1.      Planning

             2.      Coordination

             3.      Control

        C.   Sales Force Budgeting Methods

        D.   Forecasted Budget For Sales Regions

        E.   Budgets Should Be Flexible

VIII.   THE BOTTOM LINE

								
To top