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Purpose:
To plan and achieve forecasted sales in the most
effective manner
Uses by other departments are:
1. Production : for setting up capacity
2. Finance : for raising the cash for investment
3. Purchase : for planning their purchase
4. HRD : for manpower planning
MMS - III
Sales Management
SALES FORECAST
What is Sales Forecast :
It is estimated units or Rupees sales for a
specific future time period based on an assumed
marketing environment and a proposed
marketing plan
Three Factors :
1. Product Level (say 5 types)
2. Geographic Area (5 types)
3. Time Period (generally 3 types)
In combination there could be 75 different types
of forecast possible
MMS - III
Sales Management
SALES FORECAST
Product Level :
1.
2.
3.
4.
5.
MMS - III
Sales Management
SALES FORECAST
Time Period :
1. Short Term
2. Medium Term
3. Long Term
Geographic Area :
Customer
Area (Territory) / Branch
Region / Zone
Nation
World
MMS - III
Sales Management
SALES FORECAST
Market Potential :
It is the maximum possible estimated sales of a
given product or service for the entire industry in
a given market for a specific period of time.
It is also known as Industry Sales Forecast
Market Forecast :
It is the expected industry sales of a given
product or service at one specific level of
Industry marketing expenditure, in a given
market, for a specific period of time.
MMS - III
Sales Management
SALES FORECAST
Company Sales Potential :
It is the maximum possible estimated sales of a
given product or service for a company in a
given market for a specific period of time.
Sales Management
SALES FORECAST
Sales Budget :
It is the estimate of expected sales volume in
units or revenues from the companys products
and services and the selling expenses.
Sales budget is generally higher than sales
forecast
Sales Quota :
It is the sales goal (or performance goal) set for a
marketing unit for a specific period of time
MMS - III
Sales Management
SALES FORECAST
Forecasting Approaches :
1. Top Down Approach
- also known as Break down approach
2. Bottom Up Approach
- also known as Build Up Approach
MMS - III
Sales Management
SALES FORECAST
Top Down Approach Steps:
1. Forecast relevant external environmental
factors over specific period of time
2. Market Potential for relevant Industry over
specific period of time
3. Work out Company Sales Potential
Industry potential X Market share
Sales Management
SALES FORECAST
Top Down Approach :
In last step breaking down of company
sales forecast to different region is based
on market potential of diff areas.
Two Major methods available are :
(a)
Market Build Up Method
mainly by Business Marketers
(b)
Multiple Factor Index Method
mainly by Consumer Marketers
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SALES FORECAST
Bottom Up Approach Steps:
1. Sales persons sales forecast of individual
customers
2. Combined into Area / Branch Sales
forecasts
3. Combined into Region / Zones Forecasts
4. Combined into Company Sales Forecast
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SALES FORECAST
Sales Forecasting Methods :
1. Qualitative Methods
2. Quantitative Methods
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SALES FORECAST
Qualitative Methods :
1. Executive Opinion Method
2. Delphi Method
3. Sales Force Composite
4. Survey of Buyers Intentions
5. Test Marketing
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SALES FORECAST
Quantitative Methods :
A. Moving Average Method
B. Exponential Smoothing
C. Decomposition
D. Ratio Method
E. Regression Analysis
F. Econometric Analysis
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Advantages :
(a) market trend is considered
(b) useful when sales trend is known
Disadvantage
(a) arbitrary smoothing constant
(b) cant predict long term/new product forecast
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Advantages :
(a) simple to calculate
(b) requires less data
Disadvantages
(a) long term periods & new products not possible
(b) accuracy depends on past data
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SALES FORECAST
Guidelines to improve Forecasting accuracy :
1. Use multiple forecasting methods
2. Identify suitable methods
3. Develop a few factors
4. Obtain a range of forecasts
5. Use Computer Hardware and Software
tools
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Sales Management
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SALES FORECAST
Sales Budget :
It is the estimate of expected sales volume in
units or revenues from the companys products
and services and the selling expenses.
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SALES FORECAST
Sales Manager is responsible for making
three detailed budgets :
(1)
(2)
(3)
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SALES FORECAST
Methods for deciding sales expenses budget :
(a) Percentage of Sales method
(b) Executive judgement method
(c) Objective and task method
Review Situation
Communication
Subordinate budgets
Approval of sales budget
Budgets for Other departments
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