Table of Contents
Techniques of Sales Forecasting
There are several techniques or methods of sales forecasting, and a company may use one or more of them. The important techniques of sales forecasting are briefly explained below.
1. Survey of buyers’ intentions
Under this method of sales forecasting, first, a list of all potential or prospective buyers is drawn up. Then, a face to face interview with a selected group of potential buyers is conducted. On the basis of the interview, the buyers’ intentions are ascertained and an estimate of the sales of the products of the firm is made. This method is a practical method of sales forecasting. This method or approach is, generally, adopted by industrial marketers, i.e., marketers of industrial goods.
2. Opinion poll of sales force
Under this method of sales forecasting, an opinion poll of the sales force is conducted. On the basis of the opinion poll, an estimate of the sales of the firm is made. This method is a very good method of sales forecasting, because the salesmen have a good idea of market conditions. Further, it is less expensive. This method is, generally, used when it is not possible to make use of the first method (i.e., the survey of buyers’ intentions).
3. Expert opinion
Under this method, the opinions of the experts are sought, and on that basis sales forecasts are made. The experts may be outside experts or top executives of the firm itself, such as the production executive, marketing executive, finance executive, etc.
4. Market test method
A company may conduct a direct market test, and on the basis of its outcome, sales forecast is made. This method may be used either independently or as a supplement to other methods. It is used more frequently by consumer goods marketers. It may also be used by industrial goods marketers. When this method is used by industrial goods marketers, it is called a market probe.
5. Projection of past sales
Under this approach of sales forecasting, the past year sales of the firm are studied, and by making certain changes in the last year’s sales (i.e., by adding or deducting a certain percentage to or from last year’s sales), sales forecasts are made. This approach is simple and easy to adopt. It is also the most widely used approach. It is also a safe method for companies engaged in more or less stable industries. However, in many cases, this method is not reliable. Again, this method cannot be adopted in the case of new products or by new companies.
6. Products in use analysis
Under this method, a firm undertakes a census of a number of products or closely related brands already in use in the market, and on the basis of such a census, makes the sales forecast for its products. This method is based on two assumptions. First, it assumes that the future market for a product will vary in direct proportion to the quantity already in use. Secondly, it assumes that the present users of the product of a concern will continue to patronize the same in future.
Under this method, a company estimates its sales by applying a certain percentage (based on past sales or expected sales) to the sales forecast of the whole industry. The sales forecast for the whole industry can be obtained from the Government or trade associations or other outside agencies. This method is very simple. Besides it is quick and less expensive.
8. Statistical demand analysis
Under this method, the important factors which are likely to cause variations in the sales, such as the population, disposable income in the hands of the people, the prices of the products, advertising programmes, etc., are analyzed, and on the basis of such an analysis, sales forecast is made by a firm for it products. This method has become quite popular with the introduction of computers.
9. Time series analysis
Under this approach of sales forecasting, long-term trends, cyclical changes, seasonal variations and irregular fluctuations in the sales of a concern are isolated (ignored), and the sales forecast is made on the basis of normal trends. This approach is inexpensive. So, it is widely used.