Sales Forecasting Vocabulary

Vocabulary flashcards covering core definitions, techniques, and influencing factors related to sales forecasting.

Sales forecasting

The predicting of future sales volume and trends. The process of predicting future sales levels based on historical data, market trends, and other relevant information. 

Sales volume

The number of units a business will sell.

Sales revenue

How much money a business will earn from selling a product in the future.

Trends

How numbers will be moving up or down (e.g., rising or slow decline).

Extrapolation

A forecasting method where a business looks at past sales figures over time, identifies a trend (e.g., sales increasing by $£5000$ each year), and extends that existing trend forward into the future to estimate sales.

Consumer trends

Factors influencing sales forecasts, including goods going in and out of fashion (e.g., latest catwalk designs), changes in shopping habits (e.g., online sales), and changing demographics (e.g., UK ageing population with high net migration).

Economic factors influencing sales forecasts

Changes in the economy affecting sales predictions, including interest rates (low rates encourage spending as reward for saving is low), employment levels, consumer confidence, and the stage in the economic cycle (Boomtime = spending, Recession = saving).

Competitor actions influencing sales forecasts

Market activities by rivals that affect predictions, such as competitors entering or exiting the market, changes in price or promotional activities, and a competitor being better able to respond to changes.

Seasonality

A pattern where a business's sales regularly rise or fall at particular times of the year (e.g., a toy shop having high sales around Christmas).

Moving average

A technique used when a trend is unclear or to account for seasonality, calculated by taking sales figures from several time periods and averaging them repeatedly over a moving set of time periods to smooth out seasonal peaks and troughs to identify the underlying trend.

Explain how a business can use a moving average to forecast sales

: A business calculates the 3-period moving average to smooth out short-term fluctuations in data. By plotting these averages (the trend) they can draw a line of best fit  and then extrapolate to make a future sales prediction.