2.2.1 Sales forecasting

Define sales forecasting

Process of predicting future sales over a specific period, based on past data, market trends, and planned marketing activity.

What is the purpose of sales forecasting?

• Helps with planning - e.g. how much stock to order, how many staff to schedule

• Supports budgeting - Predicts revenue → links to cash flow forecast

• Helps set targets - Motivates sales teams and helps measure success

• Aids decision-making - e.g. whether to invest in new products or promotions

What are the difficulties of sales forecasting?

• Uncertainty about the future - External factors like economic changes, political instability, or pandemics make accurate forecasting hard.

• Fluctuating consumer trends - Customer preferences can change quickly (e.g. trends, fashion, tech)

• Changes in the market or competition - New competitors, price wars, or product launches can affect sales unexpectedly.

• Poor-quality data - If past data is inaccurate or outdated, the forecast will be flawed.

• Seasonal variations - Demand may vary depending on the season.

What are the factors of sales forecasting?

1. Consumer trends

2. Economic variables - inflation, interest rates, unemployment and economic growth can influence consumer spending.

3. Actions of competitors - new product launches, pricing strategies or marketing campaigns by rivals.

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