Module 3 • Sales forecasting


cyclical variation – these variations usually do not occur on a regular basis and predicting their occurrence is difficult.


Seasonal variations are regular, last for one year or less, for example the sales of ice cream will increase during summer.


Random variation is the effect of statistically unexplained occurrences such as unusual weather, strikes, fires, etc.


A number of methods can be used that consist of models for analysing time series data and forecasting on the basis of an identified or assumed pattern. These methods vary in complexity from those which utilise only a simple form of trend projection, to others using sophisticated, computerised models to analyse and project cyclical and seasonal variations.


5.5 Users’ expectations


Also referred to as buyer’s intentions, this method relies on answers from the actual users/ customers regarding their intent to buy the product during the forecasting time period. Businesses can interview samples of customers or have focus groups in order to establish their projected requirements for the product. This will then become the forecast. It is mostly used with industrial products.


Advantages • Forecast is determined by the actual product users. • Forecast is relatively fast and inexpensive when only a few customers are involved. • Useful in forecasting new-to-the-market products. • Management can get direct feedback of the thinking of the people in the market. • Detailed product usage information can be obtained (can be very useful during strategic marketing planning).


Disadvantages • Technique becomes expensive and time-consuming in markets where users are numerous or not easily located, for example in the Karoo.


• Buyers’ intentions can be inaccurate; for example, what people say they are going to buy and what they actually do buy may differ drastically.


• Forecast depends on the judgement and co-operation of the product users, some of whom may be uninformed and uncooperative.


• The demand for industrial goods are often subject to multiple effects because the demand for industrial goods is derived from the demand for consumer products, a demand which can change dramatically.


VIDEO: New smartphone product testing: http://www.youtube.com/watch?v=p8A4yqN4_9A


This video is an example of where they test new products that are not yet on the market (in this case various smartphones) and ask the potential users for their opinions on the phones. By gathering this information, the manufacturers can establish whether the product will be a success and sales will do well (forecast) or whether they need to make changes to the product.


5.6 Indicators


Often certain factors relate to the sales or costs associated with a product, but their impact only occurs after some period of time. A leading economic indicator is an economic factor that changes and thereafter the economy follows a trend.


This method, however, is complicated and single indicators are not adequate to make a forecast. 31


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