Moving

Qualitative Methods

Executive Averages
Opinion

Quantitative Methods
Exponential
Smoothing
Delphi Method
Decomposition

Sales Force Naive/Ratio

Composite Method
Regression
Survey of Buyers’ Analysis
Intentions
Econometric
Analysis
 In this method of forecasting, the views of
senior executives of the company are
obtained for forecasting sales.
The oldest, simplest and the most widely
used method.
Advantages: Disadvantages
(i) Forecasting can be done (i) unspecific
quickly and easily.
(ii) Less expensive than other (ii) subjective
method.
(iii) Very popular (iii) Difficult to breakdown the
forecast into sub units
Developed during late 1940’s
By Rand Corporation
Forecasts of experts are taken by a
coordinator separately, which are
summarized and informed to experts, who
again give their coordinator separately,
which are summarized and informed to
experts, who again give their opinions on
the same matter. This process is continued
till there is a near consensus.
 Advantages: Disadvantages
(i) Objective forecast is (i) Difficulty getting a
accurate. panel experts.

(ii) Useful foe (ii) Longer time for

technology, new getting consensus.
product, and industry
sales forecast.
(iii) Both long and short (iii) Break-down of
term forecasting forecast into products
possible. or territories is not
possible.
 Each salesperson estimates how much
quantity or value each existing and
prospective consumer will buy of each of the
company’s product and services in his/her
territory.
 Advantages: Disadvantages
(i) Forecasting is don by a (i) Sales forecast are often
salespeople who are pessimistic or optimistic,
closest to the market.

(ii)Detailed sales estimate (ii) If sales forecast are used

broke down by customer, to set sales quotas, which are
product and territory are linked to incentive schemes,
possible. salespeople may deliberately
under estimate the demand.
(iii) Involvement of (iii) Many salespersons are
salespeople. not interested in sales
forecasting, and prefer to
spend time in the field
meeting sustomers.
Also called “market research” or “market
survey”.
 In this method, existing and potential
costumers are asked about their likely
purchases of the company’s products and
services, during the forecast period.
 Advantages: Disadvantages
(i) Useful in forecasting (i) Difficulty getting a
sales for industrial panel experts.
products, consumer,
durables, and new
products.
(ii) It also gives customer’ (ii) Longer time for
reasons for buying or not getting consensus.
buying.

(iii) Relatively inexpensive (iii) Break-down of

and fast. forecast into products or
territories is not possible.
 This is a forecasting method that
measures consumer acceptance of a new
product. This is be done by estimating the
sales or demand for a new product or
service in a representative small market,
which is extrapolated over the total
market to estimate the total demand for
the product.
1.Full-blown test markets
2.Controlled test marketing
3.Simulated test marketing
Full-blown test markets
Buyer surveys are carried out to get information
about consumer attitude, usage and satisfaction
towards a new product.

Controlled test marketing

The company with a new products hires a
research firm and gets a panel of stores at specified
geographic locations.

Simulated test marketing

In this method, about 30-40 consumers are
selected, based on their brand familiarity and
preferences in a particular product category.
 Advantages: Disadvantages
(i) Their usefulness for (i) Chances of spoilages.
forecasting the sales
of new or modified
product.
(ii) In deciding whether (ii)It is difficult for the
the company should go company to wait to
ahead for a national measure test result.
launch of a new product
without spending huge
amount.
  In this method of forecasting, the moving
averages of the company sales of the
previous periods are calculated for
forecasting the sales of the future periods.
The formula used is:
Actual sales for past
3 or 6 years
Sales for next year =
Number of years
(3 or 6)
 Advantages: Disadvantages
(i) Relatively simple (i) Unable to predict a
method. downturn or upturn in the
market.

(ii) Easy to calculate (ii) Cannot predict long-

term sales forecast
accurately

(iii) Widely used for short (iii) Historical data is

term and medium term needed.
sales forecasts.
 This is a forecasting method in which the
forecaster can allow sales in certain
periods to influence the sales forecast
more than the sales on other periods
By using a smoothing constant (L) in the
equation:
sales forecasts for next period =
(L) (actual sales this period) +
(1 – L) (this period’s sales forecast)
 Advantages: Disadvantages
(i) Simple to operate. (i) Arbitrary

(ii) Forecasters knowledge or (ii) Long term and new

intuition can be used in product forecasting
forecasting. are not possible.

(iii) Useful method when

sales date have a trend or a
seasonal pattern.

(iv) Immediate response to a

upturn or downturn in sales.
(v) Used by many firms.
 This is one of the methods of sales
forecasting in which the company’s periods
of sales data are broken down (or
decomposed) into major components, such
as trends, cycle, seasonal, and erratic
events.
These components are then recombined
to forecast the sales for the future period.
 Advantages: Disadvantages
(i)Conceptually sound (i) Difficult and complex
method. statistical method are needed
to break down sales data into
various components.

(ii) Historical data is needed.

  it is a forecasting method, which is based on the
assumption that what happened in the immediate
past will continue to happen in the immediate
future.

The formula used is:

Sales for next year = Actual sales for this year X

Actual sales for this year

Actual sales for last year

 Advantages: Disadvantages
(i) Simple to calculate. (i) Cannot be used for
long-term and new
products.

(ii) Requires less data. (ii) Accuracy of sales

forecast would be less, if
past sales fluctuate
considerably.
(iii)Accuracy is good in
short-term forecast.
 It is a statistical method of sales
forecasting that derives an equation based on
relationship between the company sales
(dependent variable, x) and independent
variables, or factors (y1, y2) which influence
the sales.

 Simple regression analysis

 Multiple regression analysis
 Advantages: Disadvantages
(i) High forecasting (i)Technically complex
accuracy

(ii) Objective method (ii) Expensive and time

consuming.

(iii) Can predict turning (iii)Use of computer and

points of the company’s software packages
sales. essential.
 This is another method of forecasting in
which many regression equations are built
to forecast industry sales, general
economic conditions, or future events with
the help of computer hardware and
software.
Advantages Disadvantages
Accurate forecasts of Large volume of data is
economic conditions and required.
industry sales are
possible.
 Use Multiple Forecasting Methods
Identify Suitable Methods
Develop a Few Factors
Obtain a Range Factors
Use Computer Hardware and Software
 It is the estimate of expected sales
volume and selling expenses for the
company’s products and services, for the
budget period.
The sales manager is responsible for
preparing three detailed budgets.
(i) Sales volume budget
(ii)Selling expense budget
(iii) administrative budget of the sales
department
(i) Sales Volume Budget
derived frim the sales forecast, is broken
down into:
(a)Product-Wise Quantities
The average selling price per unit, and
sales revenue.
(b) Territory-Wise
Quantities to be sold and sales revenue
( c) Costumer-Wise and Salesperson-Wise
Sales volume quota during yearly,
quarterly and monthly budget time.
(ii) Selling expense budget
 includes expenditures for personal
selling activities.

(iii) Administrative budget of the sales

department
 the budget should be include
operating expenses.
 Planning
Coordination
Control
Percentage of Sales Method
-multiplying the sales volume budget by
various percentages of each category of
expenses.
Executive Judgement Method
uses judgement to decide the budgeted
selling expenses for each category.

 Objective and task Method

1. Look at the sales volume objective
2. Task and action are decided that are
required and to be carried out.
3. Estimate the costs of carrying out
the task.
1.Review situation
2.Communication
3.Subordinates budgets
4.Approval of the sales budgets
5.Other departments