Sales forecasting

4.3 Oxford textbook

Sales forecasting

Sales forecasting is the process of predicting what a firm’s future sales will be. It helps reduce uncertainty and ensure better planning. Uses quantitive methods.

Time series analysis

A time series analysis is a quantitative sales forecasting method that predicts future sales levels from past sales data

Key aspects of a time series analysis

• The trend - Can indicate the rise and fall of sales over a given period of time. 

• Seasonal fluctuations - these are changes in demand due to the varying seasons of the year. 

• Cyclical fluctuations - these are changes due to the business cycle in an economy. For example, a recession. 

• Random fluctuations - notable changes or fluctuations that stand out from a given trend. For example, demand for ice cream on a rare warm day in winter. 

Moving average

A moving average is a sales forecasting method that identifies and emphasises the direction of a trend. 

Extrapolation

A line of best fit done to provide a sales forecast

Variation

Variation is the difference between actual sales and the trend values.