Sales Forecasting Sales Planning All Sales Planning starts

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Sales Forecasting

Sales Forecasting

Sales Planning • All Sales Planning starts with Sales Forecasting • This becomes the

Sales Planning • All Sales Planning starts with Sales Forecasting • This becomes the source document for planning for all other departments of the company • Finance • Production • Materials • HR • Expansions (Capacity planning)

Why is Sales Forecasting necessary? • • • Determining Sales Force size Designing territories

Why is Sales Forecasting necessary? • • • Determining Sales Force size Designing territories Establishing sales targets/budgets Determining sales compensation levels Evaluating salesperson performance Evaluating prospective accounts

Types of Forecasts • Sales forecasts are sales predictions for a future period •

Types of Forecasts • Sales forecasts are sales predictions for a future period • Forecasts have to be defined in terms of products, geographical area and time periods Geographical Area World Country Region Territory Customer Product level Industry Sales Company Sales Product line Sales Product form Sales Product item Sales Time Period Short Range Medium Range Long Range

Industry and Firm level forecasts • Market Potential – Best possible level of industry

Industry and Firm level forecasts • Market Potential – Best possible level of industry sales in a given geographic area for a specific period • Market Forecast – Expected level of industry sales given a specific industry strategy in a given geographic area for a specific period • Sales Potential – Best possible level of firm sales in a given geographic area for a specific period • Sales Forecast – Expected level of firm sales given a specific strategy in a given geographic area for a specific period

Uses of Forecasts • • • To identify opportunities To guide selling efforts Designing

Uses of Forecasts • • • To identify opportunities To guide selling efforts Designing sales territories Fixing sales budgets and sales targets A market potential provides an assessment of overall demand opportunity available to all firms in an industry • A sales potential adjusts market potential to reflect industry competition and demand opportunity for individual firms • Inaccurate forecasts may result in excess inventory (overforecasting) or missing out sales opportunities ( underforecasting)

Types of Sales Forecasting processes • Top down – done at the company level

Types of Sales Forecasting processes • Top down – done at the company level and broken down to territory level • Bottoms-up – built up from the customer level and collated upto the territory level and upto the company level.

Methods of sales forecasting approaches Top-down approach Bottoms-up approach • Moving averages (2 year,

Methods of sales forecasting approaches Top-down approach Bottoms-up approach • Moving averages (2 year, • Survey of buyer’s 3 year, 4 year) intentions • Exponential • Jury of executive smoothing (α, smoothing opinion constant) • Delphi method • Decomposition (trend, cyclical, seasonality, random) • Sales force composite • Breakdown method • Statistical methods • Projections of past

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