SALES FORECASTING
WHAT IS A SALES FORECAST?
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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. The short-term sales forecast in effect also provides the essential
financial dimension to sales in terms of expected sales revenue and expenses
required. Also, it helps in assessing the cash inflow and outflow needs and
their sources.
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. It provides for changing the marketing
strategy of the firm, if needed, and includes reference to emerging product
market needs, new market segments to be catered, review of distribution network
and promotional programmes, organisation of sales force, and marketing set up.
The long-term sales forecast triggers the task of aligning the production,
procurement, financial and other functional needs of the firm with the
finalised sales forecast.
HOW TO PREPARE A SALES FORECAST?
The preparation of a
sales forecast requires (a) the availability of historical information on the
product and industry sales, (b) identification of Product Sales Determinants, (c) prediction regarding the behaviour of market forces for the
period under forecast, (d) use of appropriate techniques for forecasting, (e)
judgement of executives preparing the sales forecast, and (f) the firm's market
share objectives. These sales forecasting requirements are discussed below.
