Sales forecasting methods are essential to predict future sales. Businesses apply these methods to gain clear insights to product demand. These insights enables business owners to plan production and sales strategies accordingly. Moreover, forecasting offers sufficient information about seasonality, changes in economy and pricing activities of competitors. Using different sales forecasting methods, these factors improve the sales process. Rather than doing analyst training online, this post describes the sales forecasting methods to help you make the most of your business information.
A statistical sales forecasting method, decomposition breaks down historical sales data to discover underlying factors affecting sales. This method considers four important factors like product’s trend component, general economic cycles, seasonality and irregular occurrences to deliver accurate forecasts. Furthermore, it allows users to increase or decrease focus on different components according to market and economic conditions. Most importantly, this fairly simple sales forecasting method can be used to derive daily or weekly forecasts.
Jury Of Executive Opinion
One of the oldest sales forecasting methods, jury of executive opinion offers quick sales predictions based on recent sales history. This forecasting technique is applied by a committee of most experienced and knowledgeable sales executives. After undergoing executive team building, they analyze sales figures, making estimates about future sales. All in all, jury of executive opinion is a simple sales forecasting technique appropriate for small businesses with limited resources.
Test Marketing Result
Businesses planning to launch a new product or enter a new market can use test marketing result method. There are many features and benefits to this particular model. In order to apply this sales forecasting technique, products are launched in a limited geographic location. Over a certain period of time, sales data is collected from that location to be analyzed. Since the sales forecast is based on actual market responses, the results are much more accurate.
Market Factor Analysis
The market factor analysis method is used to evaluate all possible market related variables that affects sales. This technique examines several factors including the number of prospective buyers, competitors, frequency of use and necessity. Furthermore, factors like buying habits and disposal income are analyzed. Once the evaluation is completed, this sales forecasting method predicts future sales in correlation with market variables. Above all, a market factor analysis predicts demand to provide valuable forecasts for production requirements.
Another time tested sales forecasting method, Historical Method combines quantitative analysis and statistical approach to offer reliable forecasts. This method uses past sales records to predict future sales figures. Furthermore, it evaluates a long time trend, cyclical changes, seasonal variations and irregular variation analysis. Surely, the historical sales forecasting method offers objective forecasts by using only existing data.
What Does Good Sales Forecasting Require?
If you want to make use of any of the sales forecasting methods listed above, you need to first understand the behavior of your customers. What makes your customers decide to buy something? What is their thought process behind their decision making? Knowing the answers to these questions will help you to create an accurate sales forecast. Making use of customer management software is only half the battle. Be sure to know your customers if you want to make the most of sales forecasting strategies.
While selecting a sales forecasting method, you should first consider the purpose it will serve. Since forecasting techniques vary in cost, keep your budget in mind while choosing one. Next, check what variables are used by each method to predict future sales and enhance forecast accuracy. Of course, using the right sales forecasting methods allows businesses to plan future activities to drive sales growth.
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