DEMAND FORECASTING ENTAI LS ESTI MATI NG

SALES OF A PRODUCT DURI NG SOME FUTURE

TI ME PERI OD.
A sales forecast is an estimate or probable sales for one
companys brand of the product during a stated time
period in a specific market segment and assuming the
use of a predetermined marketing plan.
It is based on a specific marketing plan.
It can be expressed in dollars or product units.
It is best prepared after market potential and sales
potential have been estimated.
It typically covers a 1-year period.
Marketing goals and broad strategies must be
established before a sales forecast is made.
Once it is made, it becomes a key controlling factor in
all operational planning throughout the company.
THERE ARE TWO BASI C PROCEDURES USED
TO FORECAST SALES:
A top-down approach in which management:
Develops a forecast of economic conditions and
industry trends.
Determines the market potential for a product.
Determines the sales potential for the product.
Measures the share of this market the firm is
currently getting or plans to capture.
Forecasts the firms sales of the product.
A bottom-up approach in which management:
Generates estimates of future demand from
customers or the companys salespeople.
Combines the estimates to get a total forecast.
Adjusts the forecast based on managerial insights
into the industry, competition, and general
economic trends.
PREDI CTI ONS OF MARKET DEMAND MAY BE BASED
ON TECHNI QUES RANGI NG FROM UNI NFORMED
GUESSES TO SOPHI STI CATED STATI STI CAL MODELS.
COMMON METHODS I NCLUDE:
Market-factor analysisdemand for a product is assumed to be
related to the behavior of certain sales activity.
Survey of buyer intentionsa sample of current or potential
customers are asked how much of a particular product they
would buy at a given price during a specified future time period.
Test marketinga firm markets its product in a limited
geographic area, measures sales, and then projects the
companys sales over a larger area.
Past sales and trend analysisa flat percentage increase is
applied to the volume achieved last year or to the average
volume of the past few years.
Sales-force compositea bottom-up method consisting of
collecting estimates of sales for the future period from all
salespeople.
Executive judgmentobtaining opinions regarding future sales
volume from one or more executives.
PREDI CTI ONS OF MARKET DEMAND MAY BE BASED
ON TECHNI QUES RANGI NG FROM UNI NFORMED
GUESSES TO SOPHI STI CATED STATI STI CAL MODELS.
COMMON METHODS I NCLUDE:

Past sales and trend analysisa flat percentage
increase is applied to the volume achieved last year or
to the average volume of the past few years.
Sales-force compositea bottom-up method
consisting of collecting estimates of sales for the
future period from all salespeople.
Executive judgmentobtaining opinions regarding
future sales volume from one or more executives.