Sales Forecasting Technique

(a)    Historic Estimate.

This technique makes use of the assumption that what happened in past will be able to sell the same quantity in winter this year also. It is useful if the activity is affected by pattern of seasonality. It is useful for determining model, size and color distribution. It is successful only when pattern of events remain unchanged i.e.; if economy is static.

(b)    Sales force estimate.

This technique is based upon the principle – that the persons in contact with the market know best about the future market trends. Individual sales makes sales estimates of their territories and submit it with the District Sales Manager who analysis it, modifies it and sends the same to Factory Sales Managers. Factory Sales Manager in consultation with other related factory executives formulates the final estimate of sales. This technique is useful when an industry is making a limit number of products (e.g., commercial power generating equipment) and there are a few large customers.

(c)Trend line technique.

Trend line technique is employed when there is an appreciable amount of historical data. This technique is more reliable than the historic estimate. The technique is more accurate as it makes use of a large past data and possesses scientific validity. However, it is time-consuming, involves long mathematical calculations and assumes an infinite population of relatively small customers so that the decision of an individual customer cannot have an appreciable effect on total product demand.

(d)Market survey i.e. market Research Technique.

This technique finds application when a concern introduces a new product, naturally, no historic or past data regarding sales will be available. This technique may be very informal, utilizing the sales force to feet out the potential customers in order to establish the extent of the market or it may be a systematically conducted survey suing special mathematical tools. Generally, a new product is introduce din a relatively small critical trial area, market reactions noted and the total scales is projected form these results.

(e)Delphi Method.

 A panel of experts   is interrogated by a sequence of questionnaires in which the response to one questionnaire is used to produce the next questionnaire. Any set of information available to so experts and not other is thus passed on to the other, enabling all the experts to have access to all the information for feasting. This method solicits and collects opinion form experts to arrive at a reliable consensus. Delphi method is applicable to forecasts of long-range and new-product sales.

(f) Judgmental Techniques.  They involve:-

(i)    Opinions of consumers and customers. Questionnaires related to buying the product may be sent to a selected group of consumers and to the customers how have already purchased the product. The information thus received can be very useful in estimating product performance and its probable demand in future.
(ii)    Retail ad wholesale dealers can provide some insight into the pace of current and future sales.
(iii)    The opinion of area sales managers can also be quite useful.

(g) Prior knowledge.

This is used by ancillary units which are more or less a part of the large organization. The large organization informs each ancillary unit as to how many component parts to make. The forecast estimate is needed only to establish the material and tool requirements etc.

(h) Forecasting by past average.

If our objective is to forecast or predict the sales of an item for the next sales period, then using this method.

Forecasted sales for next period = Average sales for previous period.

Example

Period No.       1            2           3         4         5       6     
Sales                7           5            9         8        5        8

Forecasted sales for period no. 7 =
                                                               
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