Sales Forecasting and Budgeting Lecture PDF

Selling and Sales Management Lecture 09: Sales Forecasting and Budgeting Learning Outcomes 1) Be able to use qualitative methods to forecast sales 2) Be able to use quantitative methods to forecast sales 3) Use budgeting in selling and sales management Planning Short-term Forecasts...

Selling and Sales Management Lecture 09: Sales Forecasting and Budgeting Learning Outcomes 1) Be able to use qualitative methods to forecast sales 2) Be able to use quantitative methods to forecast sales 3) Use budgeting in selling and sales management Planning Short-term Forecasts Up to three months Eg; production planning General trend of sales less important Medium-term Forecasts Have direct implications for the planners Most important in the area of budgeting If sales forecast incorrect, entire budget is incorrect Usually for one year ahead Long-term Forecasts Usually for three years and more Depending on industry Considers most macro environment factors such as government legislations, economic trends Qualitative / Judgmental / Subjective Techniques 1) Consumer / User Survey Method 4) Delphi Method Asking customer about likely purchases for Has a forecasting team the period Members do not meet in committee Called market research method Project manager asks everyone question – 2) Panels of Executive Opinion behavioral Eg; expect new technology? If so, what Called jury method happens to market share Specialists or experts are consulted who have knowledge of the industry 5) Bayesian Decision Theory Experts usually come from outside the company Also a quantitative approach They come with prepared forecast and defend Similar to critical path analysis Uses network diagram and probabilities for 3) Salesforce Composite each outcome Salesperson making product-by-product forecast 6) Product Testing and Test Marketing Individual forecasts build up to company For new or modified products forecast Limited marketing or region Bottom up approach Eg; household durables such as vacuum cleaners, canned foods Quantitative Techniques / Time Series – Moving Average Quantitative Techniques / Time Series – Moving Average Quarterly Sales Sum of Quarterly Deviations Forecasts Forecasts Budgeting Zero based budgeting: each budget constructed without reference to previous budgets Strategic budgeting: identifying new, emerging opportunities and plan Types Rolling budgets: evaluate previous months budgets and forecast next Activity based budgeting: individual activity examined and budgeted to make full budget Sales Budgets – Cost Elements Selling expense budget: sales expenses and training, salaries and commission Advertising budget Percentage of last year’s sales Parity with competitors: percentage of larger manufacturer Affordable method: allocated to advertising Objective and task method: to achieve marketing objective, how much? Return on investment method Incremental method Administrative budget: expenditure in running the sales office such as marketing research, sales administration expenses Budgetary Process ANY QUESTIONS?