In practically every decision they make, executives today contemplate some kind of sales forecasting. Sound estimates of demands as well as trends are no longer merely luxury items but rather a necessity as these allow managers are to cope with seasonality, sudden changes in demand levels, price-cutting manoeuvres of the competition, strikes, and large swings of the economy.
Sales forecasting can help them deal with these challenges but it can help them more if they have a sound knowledge of the general principles of forecasting, what the process can and cannot do for them currently as well as which techniques are suited to their needs.
The Two Different Sales Forecasting Techniques
Quantitative sales forecasting necessitates hard data as well as number-crunching, while qualitative sales forecasting relies more on educated estimates and expert opinions. Making use of a combination of both of these methods in order to estimate your sales, revenue, production as well as expenses will assist you with creating more accurate plans to guide the organisation.
How Do Quantitative Sales Forecasting Techniques Work?
Quantitative sales forecasts often make use of historical data, such as previous sales and revenue figures, production and financial reports in addition to website traffic statistics. Examining seasonal sales data, for example, can help you with planning the following year’s production and labour needs based on the previous year’s monthly or quarterly figures.
Quantitative sales forecasting also makes use of projections that are based on statistical modelling, trend analyses or other information from expert sources such as government agencies, trade associations as well academic institutions.
Where Do Qualitative Sales Forecasting Techniques Come From?
Qualitative sales forecasting techniques come from the experience and instincts of experienced business experts. These sales forecasting techniques aren’t just guesses. They include interpretation of data in addition to the professional expertise you’ve developed over time on the job.
For instance, if you want qualitative information for projecting sales for the year, you might want to estimate the impact of a new ad campaign or promotion which your company is planning, look at the effects that new technologies could have on consumer purchasing and take into account recent social fads and trends.
You might forecast demand by holding focus groups of customers to discuss and gauge their reactions to several new product features your company is considering.
This is just a high-level overview of what is entailed in sales forecasting.
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