Definition: Sales Forecast is the assessment made for the future sale of products produced by the company. This forecasting plays a very important role in making production decisions. If the company do not forecast a sale they may produce unnecessarily excessive products, and in contrary may fail to produce demanded quantity of products.
Sales forecasting is treated distinctively by different producers, some may treat it as an art, some as science, and some may treat it as a data analysis process.
However, making a factual sales forecasting is practically not possible, but the forecasting may help in achieving the desired results.
Content: Sales Forecast
- Methods of Sales Forecast
- Types of Sales Forecast
- Importance of Sales Forecast
Methods of Sales Forecast
1. Executive Opinion
This method of sales forecasting is based on the experienced group of executive’s opinion of the enterprise as they have appropriate knowledge of the market conditions of the previous years of sale.
Thus, they can judge more accurate assumptions or estimates for the upcoming production of goods considering all the internal and external factors.
2. Delphi Method
This method is very much similar to the executive opinion method. However, the significant difference amidst both the methods is that in Delphi method members of the panel do not meet or discuss with each other face to face in any committee or meeting.
Every individual takes an individual decision from their place and send their decision to the co-ordinator by way of post or e-mail. Then, the co-ordinator summarizes the opinion of all experts and prepare a report by considering all the opinions.
However, this method does not end up here. The report prepared by co-ordinator is again sent to all the executives to review and compare their opinion. But, this time with the report of other members’ viewpoint and are requested to send their fresh opinion again.
If any executive after comparing opinions, feels to change their opinion with proper research, they can change and again send a fresh report to the co-ordinator.
This process continues untill the desired result of forecasting is achieved, i.e., opinions of all experts individually match or nearby matches with each other’s opinion. So, the forecasting will be more accurate.
However, this method itself provides more accurate prediction or forecasting as experts do not face any peer pressure while making a decision. The only condition here is that, the experts should have specialized knowledge and experience.
3. SalesForce Opinion
In this method of sales forecasting the opinion of the salespersons are considered as a base for making the predictions for sales forecasting as they experience the direct relation with the customers of their territory.
Thus, it is much easier for them to understand the customer’s choice and taste of products. This will help in forecasting the future trends of the market.
However, the success of such kind of forecasting depends upon the individual salesperson’s competence.
4. Marketing Test
This method by its name defines that it is like a hit and trial technique of sales forecasting. In this method a particular geographical area is selected for introducing the product and understanding the market response. Then, based on the study of results sales forecasting is made.
It helps the management to interpret the loops and rectify them before the bulk production of goods. However, the results may differ according to different geographical areas.
5. Consumer’s Choice Survey
In this method, various sample surveys are performed amidst customers to understand their choices and preferences regarding brands for the period of forecasting.
An appropriate questionnaire is required for this method to collect or gather the relevant data from the clients directly by answering the asked questions. This helps in understanding the consumer’s buying plans.
Types of Sales Forecast
Following are some of the types of sales forecasting:
Companies having a large turnover adopts this method for making their forecasting decisions and to understand the economic trends of the market by way of studying government plans and customers spending habits.
In this type of forecasting, predictions of industries having similar kind of businesses are combined to calculate the industrial or market forecast. It can be affected with the controllable and uncontrollable factors of the environment and market; such as prices and technological development.
This type of forecasting is related with the market shares forecasting by selecting the marketing plans inside the company along with other industries by considering all controllable and uncontrollable elements.
Importance of Sales Forecast
Following are the Importance of sales forecasting:
- It helps set targets for the employees of the company to achieve the desired results.
- It plays a beneficial role in setting the budget of the company for the upcoming years as it helps in setting the finance limit to overcome from difficult situations.
- Efficient sales forecasting helps in reducing the wastage of resources and helps in maintaining control over demand and supply of the products, as lack of proper forecasting may result in over or low production of goods.
- Sales forecasting helps in evaluating the efficiency of the personnel.
- Proper and efficient sales forecasting is advantageous for better inventory control management.
- Effective sales forecasting helps in the allocation of the territories for selling the products.
Sales Forecasting is a process of estimating the future possibilities of sales in a market. It could be done on the basis of various techniques and approaches. Proper forecasting helps the company in its decision-making process and avoids the unnecessary wastage of resources.