2. Chapter Three “Customer Accommodation” Part Four “Forecasting” You will need to manually advance from slide-to-slide on this presentation.

3. To follow are explanations of certain quantitative forecasting techniques used to predict future sales. No audio on this slide.

4. Quantitative Methods Continuity extrapolation: incremental dollar or percentage increase is carried forward to the next year.

5. Quantitative Methods Continuity extrapolation: incremental dollar or percentage increase is carried forward to the next year. Growth Maturity Decline Introduction Product Life Cycle

6. Quantitative Methods (continued) Time series analysis Sales = T x C x S x I Where: T = trends or long-run changes C = cyclical changes S = seasonal variations I = irregular or unexpected factors.

7. Gasoline demand Time Series Analysis Time --Johnson, Kurtz, Scheuing 1994 “Sales Management”

8. Gasoline demand Time Series Analysis Time Cyclical changes Cyclical changes (economy) Cyclical changes Seasonal variation (summer, winter) Irregular or unexpected factors (political crisis) --Johnson, Kurtz, Scheuing 1994 “Sales Management”

9. Quantitative Methods (continued) Moving average YearSales2-year4-yearforecast 14200----

10. Quantitative Methods (continued) Moving average YearSales2-year4-year forecastforecast 1 4200---- 24410---- 3 4305--

11. Quantitative Methods (continued) Moving average YearSales2-year4-yearforecast 14200---- 24410---- 34322 4305--

12. Quantitative Methods (continued) Moving average YearSales2-year4-yearforecast 14200---- 24410---- 34322 4305-- 4 4366--

13. Quantitative Methods (continued) Moving average YearSales2-year4-yearforecast 14200---- 24410---- 34322 4305-- 44106 4366--

14. Quantitative Methods (continued) Moving average YearSales2-year4-yearforecast 14200---- 24410---- 34322 4305-- 44106 4366-- 54214

15. Quantitative Methods (continued) Moving average YearSales2-year4-yearforecast 14200---- 24410---- 34322 4305-- 44106 4366-- 542144260

16. Quantitative Methods (continued) Moving average YearSales2-year4-yearforecast 14200---- 24410---- 34322 4305-- 44106 4366-- 542144260

17. Quantitative Methods (continued) Exponential smoothing: (alpha)(this period sales) + (1-alpha)(this period forecast) = forecast for next period Alpha is any number between 0 and 1. The higher the alpha, the more weight to recent sales.

18. Quantitative Methods (continued) Moving average YearSales2-year4-yearforecast 14200- 24410---- 34322 4305-- 44106 4366-- 542144260 …higher alpha means later data has more influence or weight All data contribute to forecast, but….

19. (alpha)(this period sales) + (1-alpha)(this period forecast) = forecast for next period

20. YearSalesAlphaAlphaAlpha =.2.5.8 1 4200 ------

21. (alpha)(this period sales) + (1-alpha)(this period forecast) = forecast for next period YearSalesAlphaAlphaAlpha =.2.5.8 14200 ------ 2 420042004200

22. (alpha)(this period sales) + (1-alpha)(this period forecast) = forecast for next period YearSalesAlphaAlphaAlpha =.2.5.8 14200------ 24410420042004200

23. (alpha)(this period sales) + (1-alpha)(this period forecast) = forecast for next period YearSalesAlphaAlphaAlpha.2.5.8 14200 ------ 24410420042004200 (.2)(4410) + (.8)(4200) = 4242 (alpha)(this period sales) + (1-alpha)(this period forecast) = forecast for next period

24. YearSalesAlphaAlphaAlpha.2.5.8 14200------ 24410420042004200 (.5)(4410) + (.5)(4200) = 4305 (alpha)(this period sales) + (1-alpha)(this period forecast) = forecast for next period

25. YearSalesAlphaAlphaAlpha.2.5.8 14200------ 24410420042004200 (.8)(4410) + (.2)(4200) = 4368 (alpha)(this period sales) + (1-alpha)(this period forecast) = forecast for next period

26. YearSalesAlphaAlphaAlpha.2.5.8 14200------ 24410420042004200 34322424243054368 (.2)(4322) + (.8)(4242) = 4258

27. (alpha)(this period sales) + (1-alpha)(this period forecast) = forecast for next period YearSalesAlphaAlphaAlpha =.2.5.8 14200------ 24410420042004200 34322424243054368 44106425843144322 54311422842104157

28. End of Program.