3.3.1 quantitative sales forecasting

sales forecasting

the process of predicting future sales levels by volume or value and future trends

sales forecasting is used to:

• inform resource management about inventory levels, production output and logistics

• information cash flows and budgets

• aid workforce planning

time-series analysis

• shows past sales figures in date order

• marketers use this historical data, after fluctuations have been smoothed out to identify trends

• trends can then be used to predict future sales

moving averages

• Shows whether a trend is significant by smoothing out fluctuations on data

• Allows for better identification of an overall trend

• Identifies influencing factors on future sales e.g. seasonal, cyclical or random fluctuations

• Sufficient data is needed to give validity to the trend identified

cyclical moving averages

sales fluctuate in line with trade cycle i.e. sales above average in boom periods and vice versa

seasonal moving averages

sales vary in line with season, so look at sales for particular time of year in comparison to average (trend) sales

random moving averages

sales pattern varies for a wide variety of reasons, mostly unpredictable e.f. weather, adverse publicity, changes in fashion

correlation

identifying of a relationship between 2 variables e.g. marketing budget and sales

negative correlation

zero correlation

positive correlation