Definition: Sales Forecasting is the projection of customer demand for the goods and services over a period of time. In other words, it is the process that involves the estimation of sales in a physical unit that a company expects within a plan period.
There are a variety of methods available to the firm for forecasting sales or demand of a company; these are listed below:
- Jury Method
- Survey of Expert’s Opinions
- Delphi Method
- Sales Force Composite Method
- End-use Method
- Market Share Method
- Substitution Method
- Market Test
- Analytical and Statistical Methods
- Market Survey Method
The future is uncertain, and the sales cannot be predicted with certainty, and hence the management must study the following factors that influence the sales forecast:
- The general economic conditions Viz inflation and a recession that has a considerable impact on the sales. The manager must study thoroughly about the political, economic, social, technological changes to forecast sales more accurately. Here, the past market trends, consumer’s preferences, national income, disposable personal income, etc. must be considered before projecting the sales for the successive period.
- The demographics of consumers such as age, sex, education, occupation, income, etc. must be given due consideration before projecting the demand for certain goods and services. The social groups such as family or peers also influence the purchase behavior of an individual. Thus, all these factors must be studied carefully before estimating the sales for a given period.
- There are several competitors in the market that deals in similar kinds of products and services. Thus, the marketing team must study their pricing strategy, product design, technological improvements, promotional schemes, advertising campaign, etc. very carefully so as to meet the competition. Also, the firm must keep a close watch on the new entrant, who can alter the market share of the existing firms significantly.
- The changes within the firm can also affect the sales. Such as changes in the advertising campaigns, promotional schemes and pricing policy can bring a significant change in the sales figure. Thus, the management is required to study every change in relation to its effect on the overall sales of the firm.
Thus, the sales forecasting is a backbone of marketing that provides not only the sales figure but also helps the management to identify the customer’s needs, tastes, and preferences. It also helps in exploring the market opportunities that could be matched with the company’s marketing efforts.