2.2.1 Sales forecasting

What is sales forecasting?

Sales forecasting is the predictivo of future sales volumen, sales revende and trends based on históricas data

What are the purposes of sales forecasting?

• Accounts

• Marketing

• Operations

• People

Explain why accounts is a purpose of sales forecasting

Used to construct cash-flow forecasts, setting budgets

Explain why marketing is a purpose of sales forecasting

Tells a business when to run promotions, how much to spend on advertising

Explain why operations is a purpose of sales forecasting

Helps departments plan how much stock to buys, how much to produce, how many staff are needed

Explain why people is a purpose of sales forecasting

Influences HR decisions about recruitment or redundancies, staff training

What are the three factors affecting sales forecasts?

• Consumer trends

• Economic variables

• Actions of competitors

What factors are likely to affect consumer trends?

• changing tastes and habits (eating, lifestyle)

• demographics (age, religion, gender)

• globalisation

• seasonal variations (easter chocolate demand increases)

• legal influences (sugar tax)

What are some examples of economic variables?

• exchange rates

• economic growth

• interest rates

• taxation

• inflation

• consumer incomes

• unemployment

How do exchange rates affect sales forecasts?

If the exchange rate strengthens, it becomes cheaper for UK consumers to buy goods and services that are imported

How does economic growth effect sales forecasts?

During periods of economic growth, people tend to spend more, boosting sales. During recessions, consumers spend less, leading to lower sales

How do interest rates effect sales forecasts?

If interest rates are high, cost of loans increases and therefore demand for loans falls. Loans are used to make purchases. Therefore, sales forecasts might be adjusted downwards as businesses may expect sales of their product to fall.

How does taxation effect sales forecasts?

A rise in taxation, such as VAT, makes products more expensive, decreasing sales

How does inflation effect sales forecasts?

When inflation is rising, prices for many goods rises so consumers tented to spend less, sales forecasts are reduced at these time

How do consumer incomes effect sales forecasts?

When consumer incomes increase, they spend more, demand for normal and luxury goods increases. As income rises the demand for inferior goods decreases, and as income falls, demand rises.

How does unemployment effect sales forecasts?

During a recession unemployment rises, spending falls, effecting sales

How do actions of competitors effect sales forecasts?

• Competitors pricing, promotion and product ranges can undermine a firm’s sales forecast

• Competitors are difficult to predict though

What are the difficulties of sales forecasting?

• Seasonality- demand for products will depend on the season

• Natural disasters- cannot be foreseen

• Fluctuations in demand- changes in taste and preferences

• New competition- new products and businesses

• New businesses- no past data, difficult to predict

• Historical data may not reflect future performance- leads to uncertainties