Marketing Management 3(2+1)

Lesson 24 : Demand Measurement And Forecasting

Sales Forecasting, The Starting Point Of All Activities

Sales forecasting helps the firm to decide which products are to be continued, which ones are to be dropped, which ones are to be added and which need modification. It becomes a basis for setting and maintaining a manufacture schedule. It determines company’s business and marketing plans forming the backbone of marketing.

The Importance of Sales Forecasting

Sales forecasting is a self-assessment tool for a company. It analyzes the pulse of the business. It can make the difference between just surviving and being highly successful in business. It provides not only information regard­ing sales, but informs customers' tastes, preferences and needs. It is a vital cornerstone of a company's budget. The future direction of the company may rest on the accuracy of your sales forecasting. The entire marketing mix, i.e. product, price, promotion, and distribution, revolves around the sales forecast. It helps in understanding the employment levels required- Promotional mix and Investment in production capacity required.

Industrial Goods:-
The industry products sales forecast is influenced by

1. company’s forecast
2. Industry forecast
3. National economic forecast
4. world economic forecast.

Period Range of Demand/Sales Forecasts
A sales forecast need to be performed on a regular basis. It is often advised to conduct monthly during the first year and quarterly later on. A forecast conducted very often gives a better chance of taking care of the extreme variations in the sales. One can group demand forecasts into three types on the basis of time frame of the forecast.

1. Short-range forecast
2. Long-range forecast
3. Perspective planning forecast

Short-range forecast helps in the year-to-year business/marketing planning. They are fewer than three months. They help in decisions about planning, scheduling, inventory and staffing in production and other logistic activities
Long -range forecast facilitates investment decision at the time of starting a new industrial unit or while attempting expansion or diversification. Demand forecasting for a longer ­term, say, five to ten years will be essential for investment decisions.
A still longer-term forecast, say for 15 or 20 years are normally used for the purpose of perspective planning