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Types of Sales Forecasting

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Administrative professional working in the areas of administration, finance, and marketing.

Learning the types of sales forecasting can make you a better employee and leader.

Learning the types of sales forecasting can make you a better employee and leader.

Importance of Sales Forecasting

Forecasting is an important aspect of administration. In fact, measuring and forecasting market demand is the cornerstone of successful marketing planning. A sales forecast estimates the volume of sales that a company can expect to attain within the plan period.

9 Ways Sales Forecasting Is Vital

  1. Supply and demand for the products can easily be adjusted, by overcoming temporary demand, in the light of the anticipated estimate, and regular supply is facilitated.
  2. Good inventory control is advantageously benefited by avoiding the weakness of understocking and overstocking.
  3. Allocation and reallocation of sales territories are facilitated.
  4. It is forward planning as all other requirements of raw materials, labour, plant layout, financial needs, warehousing, transport facility, etc., depend in accordance with sales volume expected in advance.
  5. Sales opportunities are searched out on the basis of the forecast, and thus the discovery of selling success is made.
  6. It is a gear, by which all other activities are controlled as a basis of forecasting.
  7. Advertisement programmes are beneficially adjusted with full advantage to the firm.
  8. It is an indicator to the finance department of how much and when finance is needed, and it helps to overcome difficult situations.
  9. It is a measuring rod by which the efficiency of the sales personnel or the sales department as a whole can be measured.

Factors Influencing a Sales Forecasting

A sales manager should consider all the factors affecting the sales while predicting their firm's sales in the market. An accurate sales forecast can be made if the following factors are considered carefully:

1. General Economic Condition

It is essential to consider all economic conditions relating to the firm and the consumers. The forecaster must see the general economic trend-inflation or deflation, which affects the business favourably or adversely. Thorough knowledge of the economic, political, and general trends of the business facilitates building a forecast more accurately.

2. Consumers

Products like wearing apparel, luxurious goods, furniture, vehicles, the size of the population by its composition, customers by age, sex, type, economic condition, etc., have an important role in determining the sales volume.

3. Industrial Behavior

Markets are full of similar products manufactured by different firms, which compete among themselves to increase sales. As such, the pricing policy, design, advanced technological improvements, promotional activities, etc., of similar industries must be carefully observed. A new firm may come up with products for the markets and naturally affect the market share of the existing firms.

4. Changes Within the Firm

Future sales are greatly affected by the changes in pricing and advertising policy. quality of products etc. A careful study in relation to the changes in the sales volume may be studied carefully. Sales can be increased by a price cut, enhancing advertising policies, increased sales promotions, concessions to customers, etc.

5. Periods

The required information must be collected on the basis of period short run, medium run, or long run forecasts.

Understanding the different kinds of sales forecasting can help you choose the best fit for your business—and jumpstart your success.

Understanding the different kinds of sales forecasting can help you choose the best fit for your business—and jumpstart your success.

Types of Sales Forecasting

Approaches to forecasting techniques and procedures vary from firm to firm. There are many methods. A firm may manufacture the products or distribute the products. The following are the various methods of sales forecasting.

Methods of Sales Forecasting

  1. Jury of Executive Opinion.
  2. Sales Force Opinion.
  3. Test Marketing Result.
  4. Consumer's Buying Plan.
  5. Market Factor Analysis.
  6. Expert Opinion.
  7. Econometric Model Building.
  8. Past Sales (Historical Method).
  9. Other Factors.

1. Jury of Executive Opinion

This method of sales forecasting is the oldest. One or more of the executives, who are experienced and have good knowledge of the market factors, make out the expected sales. The executives are responsible while forecasting sales figures through estimates and experiences. All the factors-internal and external, are taken into account.

2. Salesforce Opinion

Under this method, salesmen or intermediaries are required to make out an estimate of sales in their respective territories for a given period. Salesmen are in close touch with the consumers and possess good knowledge about the future demand trend.

3. Test Marketing Result

Under the market test method, products are introduced in a limited geographical area and the result is studied. Taking this result as a base, a sales forecast is made. This test is conducted as a sample or pre-test basis in order to understand the market response.

4. Consumer's Buying Plan

Consumers, as a source of information, are approached to know their likely purchases during the period under a given set of conditions. This method is suitable when there are few customers This type of forecasting is generally adopted for industrial goods. It is suitable for industries that produce costly goods to a limited number of buyers – wholesalers, retailers, potential consumers, etc. A survey is conducted on a face-to-face basis or survey method. It is because changes are constant while buyer behaviour and buying decisions change frequently.

5. Market Factor Analysis

A company's sales may depend on the behaviour of certain market factors. The principal factors which affect sales may be determined. By studying the behaviours of the factors, forecasting should be made. Correlation is the statistical analysis which analyses, the degree of the extent to which two variables fluctuate with reference to each other. The word 'relationship' is of importance and indicates that there is some connection between the variable under observation. In the same way, regression analysis is a statistical device which helps us to estimate or predict the unknown value of one variable from the unknown values of another variable.

6. Expert Opinion

Many types of consultancy agencies have entered the field of sales. The consultancy agency has specialised experts in the respective field. This includes dealers, trade associations, etc. They may conduct market research and possess readymade statistical data. Firms may make use of the opinions of such experts. These opinions may be carefully analysed by the company, and a sound forecasting is made.

This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.


Tapash Ghosh on November 30, 2018:

This kind of blogging makes learning easy

Asher Socrates from Los Angeles, CA on March 08, 2016:

Great way to layout this article. Very informative and valuable sales and goal analytics and opinions. Thanks for the the insight and quality material you are providing. Keep up the great work! I will be bookmarking and following you.

datapole on May 04, 2013:

Very Informative