Ankita Srivastava

In the words of G.R Terry Planning is a method or technique of looking ahead a constructive reviewing of future needs so that present actions can be adjusted in view of the established goal. Planning should take place before doing ; most individual and group efforts are made more efficient by determining before any operative action takes place on what shall be done, where, how and who shall do it.

The planning process takes place under deep thinking. As a result of this, goals and objectives, their nature, and the timing of the action required are carefully studied for achieving these predestined goals and objectives. In short, planning decides and establishes the desirable courses of action to be taken at a future date.

Setting Objectives Budgeting Programming Establishing procedures Scheduling

Organization sales structure Pricing Which Segment Who are your customer How will you contact them Benefits that you will talk about What should be your call to order ratio Targets

The objectives of the company should be clearly stated in quantitative terms. The specific activities to be performed and the sequence in which they are to be performed should be clearly indicated The necessary elements should be included All the elements of costs- money, material, man power etc- must be properly budgeted

Criteria should be established for measuring and evaluating progress, and the procedure for doing so must be specified. Alternative courses of action to cover any contingency should be provided. Provision should be made for periodic planning.

The planning process begins with the establishment of specific goals towards the fulfillment of which all the company efforts are directed. In order to fix these goals for the field sales organization, it is first necessary to determine the expected volume of sales during the plan period. This is the main function of sales forecasting.

Demand forecasting is a useful tool for planning. It helps estimate and forecast the market share of a firm. Most firms are very often confronted

with the task of projecting future sales of their

product. Identifying future sales problems is no easy task for companies, small or big. In some

cases, it is very difficult to get any information

about future market sales. Sales forecasting is not just an estimation of sales; it is also matching sales opportunities actual and potentialwith sales planning and procedures.

Sales Forecasting
Sales forecasting, according to Candiff and Still,

is an estimate of sales during a specified

future period which is tied to a proposed marketing plan and which assumes a particular set of uncontrollable and competitive forces.

Steps in Sales Forecasting

1.

Defining the objectives to be achieved.

Dividing various products into homogeneous groups. Analyzing the importance of various factors to be studied for sales forecasting.

2.

3.

4.
5.

Selecting the method.

Collecting information. and analyzing the related

6.

Drawing conclusions from the analysis made.

7. Implementing the decisions taken. 8. Reviewing and revising the sales forecasting from time to time.

There are two major types of forecasting, which can be broadly described as macro and micro: 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 products market share in a particular industry and considering what will happen to that market share in the future.

 According

to Stuits, A sales forecast is an estimate of the amount or unit for a specified future period under marketing plan or programme. According to American marketing Association forecasting is an estimate of sales in dollars or physical units for a specified future period under a proposed marketing plan or program and under an assumed set of economic and other forces outside the unit for which the forecast is made. The forecast may be for a specified item of merchandise or for an entire line.

Objectives of Sales Forecasting

The objectives of sales forecasting may be studied under the following two major heads

1. 2.

Short - run (range) objectives. Long - run (range) objectives.

Short - Run objectives

1.

Formulation of suitable production policy so as to meet the demand as per the sales forecast.
To make provision for the regular supply of raw material etc. for the production on the basis of sales forecast. To make the best utilization of machines on the basis of sales forecast. To make the regular supply of labour force as per the sales forecast.

2.

3.

4.

5.

To determine an appropriate price policy for a given period. To estimate and provide the requisite working capital on the basis of sales forecast.
To establish sales quotas targets for different market segments. To estimate stock requirements for unfinished semi-unfinished and finished products for a specified period of time.

6.

7.

8.

 1. 2.

Long Run objectives Estimating cash inflows from sales. Provision for capital expenditure.

3.

Planning of plant capacity so as to meet the future demand.

Manpower planning so that production and distribution may not suffer in the long run. Planning for acquisition of raw materials so as to meet the future demand.

4.

5.

6.Determining the dividend policy. 7. Establishing coordination between various functions of an organization.

8. Reducing selling costs and thereby reduces the final cost of the product.
9. To estimate future profits of the business enterprise.

Factors affecting or Influencing sales

forecasting
1.

Business Environment

2.
3.

Conditions within the industry

Internal Conditions of the business Enterprise

4. 5.

Socio Economic Conditions Factors Affecting Export Trade

Steps in sales Forecasting

1.

Forecasting Conditions:

of

General

Economic

General economic conditions within the boundaries of the nation, do effect the purchasing power of the individual customer. The standard measure for assessing general economic conditions will be: gross national product, per capita income, personal income, personal consumption expenditure, level of employment etc.

2.Forecast of Industry Sales:

Though the industry forecast are available from the trade associations and chambers of commerce, a SWOT analysis of the competition prevailing could throw much light on the competition within the industry.

3.Preparing Forecast of Company Sales:

The sales manager, while preparing the sales budgets of the company has to forecast the company and product sales for the coming year. The entire planning of the organization for production, manpower, financial arrangements, and revenue calculations will depend upon the accuracy of the sales manager's forecast.

Forecasting Method

Quantitative Method

Qualitative Method

Quantitative Method

Test Market Method

Time Series Projection

Moving average Method

Exponential Smoothing Method

Regression Method

Qualitative Method

Executive opinion Method

Delphi Method

Users Expectation Method

Build to Order Method

It is a popular method of measuring consumer acceptance of new product. The result from a test market is used to make prediction about future sales. Companies select a limited number of medium sized cities with population which they feel are representative of their customers in terms of such factors as age income or shopping behavior. A product is promoted just if it were being sold nationally.

Time series method use chronologically ordered raw data. Historical data are used to project future events. For example Past sales are used to project future sales. By studying the historical correlation of sales levels over time , a manager can find a general indication of the possible continuation of the time series. The primary advantage of time series analysis is its objectivity, because it is based on the established record of historical data.

Moving averages are used to allow for market place factors changing at different rates and at different times . With this method both the distant past and distant future have little value in forecasting. The moving average is a technique that attempts to smooth out the different rates of change for the immediate past usually the past 3 to 5 years. The forecast is the mean of these past periods and is only valid for one period in the future. The forecast is updated by eliminating the data for the earliest period and adding the most recent data.

It is similar to moving average forecast method. It allows consideration of all past data but less weight is placed on data as it ages. For example last year data has greater weight than data from 5 years ago. It is basically a weighted moving average of all past data.

Regression Analysis is a statistical method used to incorporate independent factors that are thought to influence sales ( for example advertising, population) into the forecasting procedure. Two or more variables are used to estimate the tendency of sales to vary. One variable required is the dependent variable which in this case is past sales. Simple regression procedure use only one independent variable such as population.

The well known delphi method consists of administering a series of questionnaire to panels of experts. Each new questionnaire depends upon the responses from the previous questionnaire. This approach enables each panel respondent to have access to information contributed by other respondents but eliminates the snowball or bandwagon effect (response based on the replies if others.

The opinion of sales personnel concerning future sales. The method is often used to generate forecast in the industrial equipment industry .

Consumer and industrial companies often poll their actual and potential customers , ranging from individual households to intermediaries. Some companies employ consumer panel that are given products and asked to supply information on the products quality, price, feature etc.

Driven by recurring demand forecasting nightmares and faced with a rapidly changing marketplace , major desktop computer wendors such as dell have decided to build final products only after firm orders are placed , a practice called build to order.

THE SALES FORECAST is a projection into the future of expected sales, given a stated set of environmental conditions.
THE SALES PLAN is a set of specified managerial actions to be undertaken to meet or exceed the sales forecast.

The sales force budget is the amount of the money available or assigned for definite period, usually one year. It is based on estimates of expenditures during that period and on proposals for financing the budget. Thus the budget depends on the sales forecast and the amount of revenue expected to be generated for the organization during that period. The budget for the sales force is a valuable resource that the sales manager redistributes among lower level managers.

The budget is an extremely important factor in the successful operation of the sales force. Top sales managers spend a great deal of time attempting to convince corporate management to increase the size of their budgets. Budgets are formulated for many reasons, including the major ones of planning , coordination and control.

Corporations and their functional units develop objectives for future periods and budgets determine how these objectives will be met. For example alternative marketing plan , the probable profit from each plan , and the individual budget for each will be considered before management is able to decide on future marketing programs.

The budget is a major management tool for coordinating the activities for all functional areas and sub groups within the entire organization. For example sales must be coordinated with production to ensure that enough products are available to meet demand. The production manager can use sales forecast and the sales departments marketing plans to determine the necessary production level. Budgeting allows the financial executives to determine the firms revenues and expenses ( e.g A/C recievables, inventory, raw material labor etc) and have enough capital to finance all business operations

Allocation of budgeted funds gives management control over their use. Sales managers estimate their budget needs, are given funds to operate their units and then are held responsible for reaching their stated goals by using their budgets effectively. As the sales programme is implemented and income and expense are actually generated, managers assess results against the amount budgeted and determine whether they are meeting objectives.

How much money does the sales manager receive to operate the sales force? Although no fixed financial formulas exist to appropriate funds , firms use one of three general method to determine how money should be allocated: A. some firms use an arbitrary percentage of sales B. other firms may use executive judgement C. A few companies estimate the cost of operating each sales force unit along with the cost of each sales program over a specified period to arrive at a total budget.

1. Base Salaries a. Management b. Sales people 2. Commissions 3. Other Compensation Social Security Retirement Plan Hospitalizations

Product Samples Office Transportation expenses Entertainment Travel

A quota refers to an expected performance objective. Quotas are routinely assigned to sales unit , such as regions and districts. Quotas also are assigned to individual sales people.