Part One: Types of Sales Forecasting Series
We will discuss these methods in the following:
The Jury Method, Salesforce Opinion, #Test #Marketing #Result, Consumers' Buying Plan, & #Market #Factor #Analysis.
The Survey of Experts Opinion, Econometric Model Building, Past Sales (Historical method), & #Statistical #Methods, the Delphi Method, End of Use Method, Market Share Method, Substitution Method, Market Test, & Market Survey Method.
#Jury of #Executive #Opinion:
This method of sales forecasting is the oldest. One or more of the executives, who are experienced and have good knowledge of the market factors make out the expected sales. The executives are responsible while forecasting sales figures through estimates and experiences. All the factors-internal and external are taken into account. This is a type of committee approach. This method is simple: experiences and judgment are pooled together in a sales forecast figure. If there are many executives, their estimates are averaged in drawing the sales forecast.
Pros:
(a) This method is simple and quick.
(b) Detailed data are not needed.
(c) There is an economy.
Cons:
(a) It is not based on factual data.
(b) It isn't easy to draw a final decision.
(c) More or less, the Jury method rests on guesswork and may lead to wrong forecasts.
#Sales #Force #Opinion
Salespersons or intermediaries are required to estimate sales in their respective territories for a given period. Salespersons are in close touch with the consumers and possess sound knowledge about the future demand trend. Thus, all the sales force estimates are processed, integrated, modified, and a sales volume estimate is formed for the whole market for a given period.
Pros:
(a) Specialized knowledge is utilized.
(b) Salespersons are confident and responsible for meeting the quota fixed.
(c) This method facilitates breaking down products, territories, customers, salespeople, etc.
Cons:
(a) Success depends upon the competency of salespersons.
(b) A broad outlook is absent.
(c) The estimation may be unattainable or too low for the forecasts as the salespersons may be too optimistic or pessimistic.
#Test #Marketing #Result
Under the market test method, products are introduced in a limited geographical area, and the result is studied. Taking this result as a base, a sales forecast is made. This test is conducted as a sample on a pre-test basis to understand the market response.
Pros:
(a) The system is reliable as the forecast is based on the actual results.
(b) Management can understand the defects and take steps to rectify them.
(c) It is suitable for introducing new products, in a new territory, etc.
Cons:
(a) All the markets are not homogeneous. But the study is made based on the part of a market.
(b) It is a time-consuming process.
(c) It is costly.
# Consumers' #Buying #Plan:
As a source of information, consumers are approached to know their potential purchases during the period under a given set of conditions. This method is suitable when there are few customers.
This type of forecasting is generally adopted for industrial goods. Suitable for industries that produce costly goods to a limited number of buyers- wholesalers, retailers, and potential consumers. A survey is conducted on a face-to-face basis or survey method.
Pros:
(a) Firsthand information is possible.
(b) User's intention is known.
Cons:
(a) Customer's expectation cannot be measured precisely.
(b) It is difficult to identify actual buyers.
(c) It is good when users are few but not practicable when consumers are many.
(d) Long-run forecasting is not possible.
(e) The system is costly & buyers may change their buying decisions.
#Market #Factor #Analysis
Behavior drives certain market factors. Therefore, the principal factors which affect the sales may be determined. By studying the behaviors of the elements, forecasting should be made. Correlation is the statistical analysis that analyses the degree of the extent to which two variables fluctuate regarding each other.
The word 'relationship' is important and indicates some connection between the variables under observation. Regression analysis is a statistical device that helps us estimate or predict the unknown values of one variable from the known values of another variable.
Minimizing the number of market factors is essential. For example, the demand decision-makers must consider price, competition, advertising, disposal income, buying habits, consumption habits, consumer price index, & population change.
#Survey of #Experts #Opinion
Many types of consultancy agencies have entered the field of sales. The consultancy agency has specialized experts in the respective field. This includes dealers, trade associations, etc. They may conduct market research and possess ready-made statistical data. Firms may make use of the opinions of such experts. The company may carefully analyze these opinions, and good forecasting is made.
Pros:
(a) Forecasting is quick and inexpensive.
(b) It will be more accurate.
(c) Specialized knowledge is utilized.
Cons:
(a) It may not be reliable.
(b) The success of forecasting depends upon the competency of experts.
(c) A broad outlook may be lacking.
#Econometric #Model #Building
This is a mathematical study approach and an ideal way to forecast sales. This method is more helpful in marketing durable goods. It is in the form of equations, representing relationships among different demand-determining market factors. Sales are forecast by analyzing the market factors (independent variable) and sales (dependent variable).
This system does not entirely depend upon correlation analysis. It has great scope, and the adoption of this method relies on the availability of complete information. The market factors which are more accurate, quick, and less costly may be selected for sound forecasting.
In part two tomorrow we continue.
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