2. FORECASTING
FORECASTING IMPLIES PREDICTING THE
FUTURE AFTER STUDYING AND ANALYSING THE
PAST AND PRESENT DATA.

3. Sales Forecasting
MEANING
Prediction of the future sales of a particular
product over a specific period of time based on
past performance of the product, inflation rates,
unemployment, consumer spending patterns,
market trends, and interest rates.
Sales forecasting, though crucial, is one of the
grey areas of marketing management.

4.  A sales forecast predicts the value of sales over a
period of time. It becomes the basis of marketing
mix and sales planning.
 A short-term sales forecast (say for a period of
one year) when linked to the sales budget helps in
the preparation of an overall budget for the firm
as a whole.
 A long-term sales forecast (say for a period of 5
years or so) on the other hand, focuses on capital
budgeting needs and process of the firm.

5. Two types of approaches:
 Breakdown Approach
 Market Build-up Approach

6. Reasons for undertaking sales
forecasts
Businesses are forced to look well ahead in order to plan
their investments, launch new products, decide when to
close or withdraw products and so on.
- Employment levels required
- Promotional mix
- Investment in production capacity

8. QUALITATIVE TECHNIQUES
Qualitative techniques are a valuable resource for
any forecaster. The value of experience and the
ability to analyze complex situations as input to
sales forecasts should never be discounted.

9.  Qualitative Forecasts consider the range of factors
which influence the demand.
 These factors are then ranked in order of importance and
each of them in turn is analyzed to reveal future trends.
Qualitative methods of forecasting are:
1.Consumer expectations
2.Sales force composite
3.Jury of executive opinion
4.Delphi technique

10. Qualitative techniques
Consumer Expectations
Consumers are frequently interviewed with the
help of questionnaires concerning their buying
habits, motives and intentions. The consumer
feedback is used to estimate the expected
consumption or purchases of the product.

11. Advantages
 Forecast estimates straight from buyers.
 Information about projected product can be
detailed.
 Insights give assistance in planning the
market strategy.
 Practical for forecasting new-products.

12. Disadvantages
 Company has to choose potential customers
carefully and the number of customers has to be
small.
 Works well with business to business goods, but
not with consumer goods.
 Depends on how precisely the users make
their evaluations.
 Takes a lot of money, time and labour.

13. Delphi technique
Delphi is based on iterative approach and it
uses anonymous repeated feedback. The
people involved in the feedback give their
own forecast about the subject and the
feedbacks are gathered into a summary.

14. STEP 1 – Various Experts are asked to answer independently
STEP 2 – A summary of all the answers is then prepared. No expert
knows, how any other expert answered the questions.
STEP 3 – Copies of summary for modification if necessary
STEP 4 – Another summary is made of these modifications, and copies
again are distributed to the experts. This time,however, expert
opinions that deviate significantly from the norm must be justified in
writing.
STEP 5– The forecast is generated from all of the opinions and
justifications that arise from step 4.

15. Advantages
 The effects of group dynamics is reduced.
 Statistical information can be used.
Disadvantages
 Can take a long time and is money consuming

16. Sales Force Polling
Some companies use as a forecast source salespeople who have
continual contacts with customers. They believe that the
salespeople who are closest to the ultimate customers may have
significant insights regarding the state of the future market.
Forecasts based on sales force polling may be averaged to
develop a future forecast. Or they may be used to modify other
quantitative and/or qualitative forecasts that have been
generated internally in the company.

17. Advantages
 It is simple to use and understand.
 It uses the specialized knowledge of those closest to the
action.
 It can place responsibility for attaining the forecast in the
hands of those who most affect the actual results.
 The information can be broken down easily by territory,
product, customer, or salesperson.
Disadvantages
 Salespeople’s being overly optimistic or pessimistic
regarding their predictions and inaccuracies due to broader
economic events that are largely beyond their control.

18. Executive Opinions
The subjective views of executives or experts from
sales, production, finance, purchasing, and administration
are averaged to generate a forecast about future sales.
Usually this method is used in conjunction with some
quantitative method, such as trend extrapolation. The
management team modifies the resulting forecast based on
their expectations.

19. Advantages
The forecasting is done quickly and easily,
in the absence of adequate data.
Disadvantages
Strong leadership fosters group pressure for
unanimous opinion.

20. Advantages of qualitative technique
 Qualitative forecasting techniques have the
ability to predict changes in sales patterns.
 Qualitative forecasting techniques allow
decisionmakers to incorporate rich data
sources consisting of their
intuition, experience, and expert judgment.

21. Disadvantages
 Forecasters’ inability to process large amounts of complex
information.
 Forecaster’s overconfident in their ability to forecast
accurately.
 Political factors within organizations, as well as political
factors between organizations.
 Forecasters may be influenced by initial forecasts (e.g., those
generated by quantitative methods) when making qualitative
forecasts.
 Qualitative forecasting techniques are expensive and time
intensive

22. CONCLUSION
Qualitative techniques are recommended for
those situations where managers or sales force
are particularly aimed at predicting sales
revenues. These techniques are often utilized
when markets have been disturbed by strikes,
wars, natural disasters, recessions or inflation.
Under these conditions historical data are
useless and judgmental procedures that
account for the factors causing market stocks
are usually more accurate.