Quantitative sales forecasting

What is sales forecasting

Sales forecasting is the prediction of future sales based on historical data

What can this be skewed by

• Random fluctuations

• trends

• seasonal fluctuations

• cyclical fluctuations

What is quantitative sales forecasting

Quantitative sales forecasting is a statistical technique that involves smoothing out historical data to make better predictions about future sales

What are the main methods of quantitative sales forecasting

• Moving averages

• Extrapolation

• Correlation

What is time series data and what does time series analysis do

Time series data are sales figures that are collected in consistent time intervals e.g. every month and are presented in time order and time series analysis is used to reveal underlying patters in time series data.

What are moving averages

Moving averages are a series of averages calculated from successive segments of a series of data which is used to smooth data so that trends may be more easily identified

What are the 2 types of moving averages that are essential

Three period and four quarter moving averages

How to calculate 3 period

• 1+2+3 divide by 3

• 2+3+4 divide by 3

• 3+4+5 divide by 3

How to calculate 4 period

Same as 3 period but involves adding 4 numbers then dividing by 4

How to find 8 year moving total

Go down along 4 year moving total and add them together e.g

Q1 = 2500 and Q2 = 2600 add them together = 5100 8 year moving total

Q2 = 2600 and Q3 = 2700 add them together = 5300 8 year moving total

How to find trend

8 year moving total divided by 8

What does casual modelling do

Casual modelling tries to explain data by showing a link or relationship between sets of data e.g sales and marketing

What is correlation

Correlation is where there is a link between two variables and correlations may be positive or negative

What is extrapolation

Extrapolation is the prediction of future sales from past data Extrapolation can often be done simply by extending a line of best fit

What can a manager then use this information for

• Sales perfomance can be measured against these targets

• Businesses can extrapolate on a graph that doesn’t have a line of best fit and will assume that the trends will carry on

What do businesses need to appreciate

Businesses need to appreciate SWOT and PESTLE factors that may affect future predictions such as

• Weather

• trends

• Competitor activity

Limitations of QSF

• Seasonality - weather related factors (unusually hot summers or unusually cold winters)

• Market changes ( Change in consumer income / or consumer preferences)

• Competition ( entrance of new rivals)