4 Sales Forecastbdgt
-
Upload
vinitshah90 -
Category
Documents
-
view
31 -
download
0
Transcript of 4 Sales Forecastbdgt
![Page 1: 4 Sales Forecastbdgt](https://reader036.fdocuments.us/reader036/viewer/2022062620/551af8294a7959580a8b4913/html5/thumbnails/1.jpg)
Sales forecasting
![Page 2: 4 Sales Forecastbdgt](https://reader036.fdocuments.us/reader036/viewer/2022062620/551af8294a7959580a8b4913/html5/thumbnails/2.jpg)
Key terms in forecasting• Market• Market refers to the set of existing and potential
buyers of a product or services.• Potential market• Potential market is a set of consumer who evince
interest in the marketer’s offer. • Eg:- the potential market of luxury homes are all
consumers in the high income and rich segment, who have the resources to buy them.
• Target Market• Refers to a market segment which a firm chooses to
serve.• Eg:- Builder may choose to target young professionals
in major cities, who have the resources or access to resources to buy them
![Page 3: 4 Sales Forecastbdgt](https://reader036.fdocuments.us/reader036/viewer/2022062620/551af8294a7959580a8b4913/html5/thumbnails/3.jpg)
Terms in forecasting
• Market penetration
• Refers to the set of consumers. Who are already the firms customers, to the total numbers of consumers in the target market.
• Eg:- The set of consumers in the target market who have brought luxury homes.
![Page 4: 4 Sales Forecastbdgt](https://reader036.fdocuments.us/reader036/viewer/2022062620/551af8294a7959580a8b4913/html5/thumbnails/4.jpg)
Market potential – TV Set• The forecasting exercise involves understanding
market potential 1. To know the number of households2. Assume each h/h has TV set3. Market potential = No. h/h in the country4. Assume 6 people constitute a h/h,we have 142 mn
h/h.• 25% of people are below poverty line (no)• 40% in low income group (cannot afford)• 35% of total pop’n which is real market can be
targeted • Market potential refers to the upper limit of market
demand
![Page 5: 4 Sales Forecastbdgt](https://reader036.fdocuments.us/reader036/viewer/2022062620/551af8294a7959580a8b4913/html5/thumbnails/5.jpg)
Sales forecasting
• The goals & strategies outlined in marketing plan determines sales forecasting
• Marketing goals can be:-
1. To liquidate inventory
2. Expand market share thru aggressive advertising
• The sales forecast will differ in each case
• Once established it becomes the key factor of all –operational planning
![Page 6: 4 Sales Forecastbdgt](https://reader036.fdocuments.us/reader036/viewer/2022062620/551af8294a7959580a8b4913/html5/thumbnails/6.jpg)
Forecasting is the basis of sound budgeting
1. Financial planning for working capital requirements
2. Plant utilization
3. Scheduling of production facilities
4. Manpower needs
5. Raw material purchases
• All the above depend on sales forecasting
![Page 7: 4 Sales Forecastbdgt](https://reader036.fdocuments.us/reader036/viewer/2022062620/551af8294a7959580a8b4913/html5/thumbnails/7.jpg)
Market potential
• Is the total expected sales of a given product or service for the ENTIRE INDUSTRY in a specific market over a stated period.
• Eg:- the market potential for beer in India for 2006 is expected to be 4 million barrels
![Page 8: 4 Sales Forecastbdgt](https://reader036.fdocuments.us/reader036/viewer/2022062620/551af8294a7959580a8b4913/html5/thumbnails/8.jpg)
Sales potential
• Refers to the maximum share (or percentage) of market potential that an individual firm can reasonably EXPECT to achieve
• Eg:- kingfisher beer accounted for 20% of the approximate 3.5 million barrels of beer consumed in India
![Page 9: 4 Sales Forecastbdgt](https://reader036.fdocuments.us/reader036/viewer/2022062620/551af8294a7959580a8b4913/html5/thumbnails/9.jpg)
Sales forecast• Is an estimate of sales (in rupees / units) that
an individual firm expect to achieve
1. During a specified forth coming time frame / period,
2. In a stated market
3. Under a proposed marketing plan
• The sales forecast is typically LESS than the sales potential due to:-
1. Constraint on production facility
2. Financial resources
![Page 10: 4 Sales Forecastbdgt](https://reader036.fdocuments.us/reader036/viewer/2022062620/551af8294a7959580a8b4913/html5/thumbnails/10.jpg)
Methods of sales estimation• Three fundamental technique are:-
1. Market factor derivation
2. Surveys of buyers intention
3. Test markets
![Page 11: 4 Sales Forecastbdgt](https://reader036.fdocuments.us/reader036/viewer/2022062620/551af8294a7959580a8b4913/html5/thumbnails/11.jpg)
1) Market factor derivation• Is an item or element in a market that:-1. Causes the demand for the product or services2. Related to demand for it• Example:-• The number of births in a town is a market - factor underlying the DEMAND
for BABY FOOD• Using the market-factor method:-
Estimated numbers of birth, 2007 in Town x……… 40,00,000
Times, % who buy baby-food (50%) X 0.50
-----------------------------
Hence the Total market potential for baby food 20,00,000
Times , potential market share (10%) X 0.10
Firm can forecast (units) 2,00,000
![Page 12: 4 Sales Forecastbdgt](https://reader036.fdocuments.us/reader036/viewer/2022062620/551af8294a7959580a8b4913/html5/thumbnails/12.jpg)
2) Survey of buyer’s intention• Contacting potential customers & questioning them
about their likely intention of purchasing the product at the price asked
• Example:-• We may survey 240 mothers (probing their intention to
buy product)• 170 out of them (71%) liked the product• BUT at Rs. 60/- instead of paying Rs.90.00• The new product will only give ( or 4%) if we keep
price at Rs.90/-• Intention to buy survey may be misleading• Intention may not result into actual purchase
![Page 13: 4 Sales Forecastbdgt](https://reader036.fdocuments.us/reader036/viewer/2022062620/551af8294a7959580a8b4913/html5/thumbnails/13.jpg)
3) Tests markets
• Companies sometime test-market a product in cities & towns that are similar to the co’s other market.
• If the market inputs are almost identical to the national launch , test market is reliable method
• Because the results are not mere guess estimates as in other method
![Page 14: 4 Sales Forecastbdgt](https://reader036.fdocuments.us/reader036/viewer/2022062620/551af8294a7959580a8b4913/html5/thumbnails/14.jpg)
Territory potential• Enables the sales manager to allocate selling
efforts properly & evaluate the relative performance of each district
• Normally a marketing index based on two or more marketing Factors is used.
• Eg:- the sale & mktg mgmt uses the “Buying power index” based on 3 factors:-
1. Population2. Effective buying income 3. Retail sales• These estimates can be used for allocating adv,
pro & selling inputs to each territory
![Page 15: 4 Sales Forecastbdgt](https://reader036.fdocuments.us/reader036/viewer/2022062620/551af8294a7959580a8b4913/html5/thumbnails/15.jpg)
Sales forecasting• Is an essential step in sales planning
• If overly optimistic the firm will suffer losses
• If sales forecast is too low:-
1. May not be able to supply adequately
2. Miss on market opportunities
• Valid sales forecast plays a major role in firms success
![Page 16: 4 Sales Forecastbdgt](https://reader036.fdocuments.us/reader036/viewer/2022062620/551af8294a7959580a8b4913/html5/thumbnails/16.jpg)
Difficulty in forecasting are two fold:-
1. In case of new product . No past data is available
2. Change in marketing plans, industry market or general market
• Eg:-• Changes in price structure• Changes in existing competitor’s strengths , new
entrant in a industry• Market demand, if affected by innovative
technology• Recession, political instability, natural calamity
etc…
![Page 17: 4 Sales Forecastbdgt](https://reader036.fdocuments.us/reader036/viewer/2022062620/551af8294a7959580a8b4913/html5/thumbnails/17.jpg)
forecast• When a forecast is developed for the next
period, sales in the oldest period is dropped fm the average & is replaced by the actual sales in the latest period, HENCE the name “MOVING AVERGE”
• Example:-
1. Determining seasonality of Toy sales (Rs.1000)
2. De- Seasonalized toy sales
3. Forecasting toy sale using moving average method
![Page 18: 4 Sales Forecastbdgt](https://reader036.fdocuments.us/reader036/viewer/2022062620/551af8294a7959580a8b4913/html5/thumbnails/18.jpg)
a) Determining seasonality of toy sales (Rs.1000)
Qtrly 2001 2002 2003 2004 2005 Qtrly
Average
Seasonal
Index
1 26 30 23 40 45 33 0.54
2 40 31 31 36 50 40 0.66
3 38 50 50 49 60 47 0.77
4 110 124 124 135 150 125 2.05
Qtrly Avg = 61
Seasonal Index = Quartely average / overall averageThus 33/61 = 0.54 40/61 = 0.66
![Page 19: 4 Sales Forecastbdgt](https://reader036.fdocuments.us/reader036/viewer/2022062620/551af8294a7959580a8b4913/html5/thumbnails/19.jpg)
B) Decentralized toy sales DTSQTLY 2001 2002 2003 2004 2005
1 48 56 43 74 83
2 61 47 64 55 76
3 49 65 52 64 78
4 54 60 52 66 73
Actual qtrly / seasonal Index – 26/0.54 = 48
![Page 20: 4 Sales Forecastbdgt](https://reader036.fdocuments.us/reader036/viewer/2022062620/551af8294a7959580a8b4913/html5/thumbnails/20.jpg)
C) Forecasting toy sale using moving average method
Qtrly /yr 3/01 4/01 1/02 2/02 3/02 4/02 1/03 2/03 3/03 4/03
Actual sales
(Rs’000)
52 52 74 55 64 66 83 76 78
2-period moving avg.
52
*
63 65 60 65 75 80 77
3-period moving avg.
59
**
60 64 62 71 75 79
• (52 + 52 / 2 = 52) ; (52+74 / 2 = 63)
** (52+52+74 / 3 = 59.3); (52+74+55 / 3 = 60.1)
![Page 21: 4 Sales Forecastbdgt](https://reader036.fdocuments.us/reader036/viewer/2022062620/551af8294a7959580a8b4913/html5/thumbnails/21.jpg)
THANKS