METHODS OF SALES FORECASTING

METHODS OF SALES FORECASTING

        A marketing company may forecast its sales in a variety of ways. Some important methods used by companies for the purpose of sales forecasting are discussed below.

(1) Analytical and Statistical Method: A marketing company may forecast its future sales on the basis of sales recorded by a company in previous years. Sales forecasting by this method may be made through mathematical and statistical analysis. The purpose of this analysis is to work out the important impact of long-term trends, business cyclical movement, seasonal variations, irregular and casual fluctuations on the prospective demand of the product. Market potential and sales potential may be calculated on the basis of analysis of data of past sales.

(2) Sales Force Composite Methods or Grass Root Method: This method is also known as grass-roots approach or the poll of opinion method. Under this method the company’s sales people and middleman are required to provide their estimates of sales in their territories during the specified future period of time covered by the forecast. The total composite of these separate estimates is the company’s sales forecast for the specified period.

(3) Jury of Executive Opinion Method: In this methods of sales forecasting the executives responsible for the sales of the company estimate the probable sales volume for a future period. Each executive makes his own sales estimates on the basis of his market knowledge, experience, own views and other relevant factors. This sales estimate may be supported by logic, documentary evidence and rationale. The estimate furnished by all executive are then averaged in order to work out a tentative estimate of sales for the planning period. The method is effective if the executive’s estimate are based on market factor analysis.

(4) Survey of Buyers’ Intention Method: Under the Survey of Buyers’ Intention method the company conduct a sample survey of potential customers, asking them how much of the stated product they would buy at a given price during a specified future time period. Survey of buyers’ intention method for the purpose of sales forecasting is useful when there are relatively few buyers, when they are willing to clearly express their buying intentions and when their past record indicates that their follow-up action are consistent with their stated intentions.

(5) Market Survey Method: Under this method the task of sales forecasting is done on the basis of primary data of market, collected by the researcher or marketing research company. The main objective of market survey method is collecting and processing specific data regarding the market, in which the marketing company is dealing.

(6) Market Share Method: The market share method can also be used in calculating sales forecast. The marker share of the firm is main factor in this method. The market share can be termed as proportion of sales of a firm in the sales of entire industry in a specific product. Market share method takes into consideration the past trends, brand preferences, firm’s future plans, its competitive position, national and global economic situations etc.

(7) Expert’s Opinion Method: Under this method of sales forecasting the estimates of potential sales are determined by experts inside or outside the organisation. Outside experts to not have any link with the company. These experts function in professional manner and have independent existences. Sales forecasting may be done by an expert or a group of experts having specific knowledge in a particular field e.g. marketing finance, personnel, advertising etc. In this method experts examine economic condition, various inputs affecting demand supply position of the product, company’s capabilities and resources.

(8) The Delphi Method: The Delphi method can be termed as an improved method of surveys of expert’s opinion method. This method is used for working out comprehensive futuristic estimate, rather than for sales forecasting. In this method a sequence of questionnaires are provided to panel of experts belonging to various fields. Entire information obtained through questionnaire from all experts is passed on the others.

(9) Test Marketing Method:  Test marketing method for the purpose of sales forecasting is used frequently for new products for the determination of sufficient profitable sales potential in target markets of the company. Under this method the company market its product in selected markets, which are truly representative of its sales potential over a larger area or for the total market. The major benefit of test marketing is that it indicates to the management the extent of its markets.