1. 1 Copyright © 2000 by Harcourt, Inc. All rights reserved. (1) A Developing Forecasts Appendix 5 Developing Forecasts

2. 1 Copyright © 2000 by Harcourt, Inc. All rights reserved. (2) A Forecast A forecast is a prediction for a future period.

3. 1 Copyright © 2000 by Harcourt, Inc. All rights reserved. (3) A Key Considerations in Developing Forecasts Development of Useful Forecasts What time periods should forecasts cover? What types of forecasts are needed? How often should the forecasts be prepared? What factors need to be evaluated in developing the forecasts? What data are available for developing the forecasts? Who will be involved in preparing the forecasts? How will the forecasts be used? What methods will be used to generate the forecasts? What can be done to improve the accuracy of the forecasts? Who will use the forecasts?

4. 1 Copyright © 2000 by Harcourt, Inc. All rights reserved. (4) A Forecasting by Sales Managers Forecasting by Sales Managers Types of Forecasts Market Potential –The best possible level of industry sales in a given geographic area for a specific time period Market Forecast –The expected level of industry sales given a specific industry strategy in a given geographic area for a specific time period Sales Potential –The best possible level of firm sales in a given geographic area for a specific time period Sales Forecast –The expected level of firm sales given a specific strategy in a given geographic area for a specific time period

5. 1 Copyright © 2000 by Harcourt, Inc. All rights reserved. (5) A Examples of Uses of Forecasts by Sales Managers Determining Sales Force Size Designing Territories Assigning Salespeople to Territories Allocating Sales Calls to Accounts Designing Compensation Programs Establishing Selling Budgets Establishing Sales Quotas Sales Forecast Market Potential Market Forecast Sales Potential Market Potential Sales Potential Sales Forecast Sales Management Decision Area Type of Forecast Normally Used

6. 1 Copyright © 2000 by Harcourt, Inc. All rights reserved. (6) A Forecasting Approaches Forecasting Approaches (Figure A.2) Factors Affecting Company’s Share of Total Industry Sales Forecast of General Economic and Business Conditions for the Country as a Whole Market Potential for Relevant Industry Sales Potential for Company as a Percentage of Industry Sales Company Sales Forecast Sales Managers’ Forecasts for Zones, Regions, Districts, Territories, and Accounts Top-Down Approach Company Sales Forecast Combined into District, Region, and Zone Forecasts Combined into Territory Forecasts Salespersons’ Forecasts of Accounts Bottom-Up Approach

7. 1 Copyright © 2000 by Harcourt, Inc. All rights reserved. (7) A Top-Down Approaches Company Forecasting Methods –Moving Averages –Exponential Smoothing –Decomposition Methods Trend Cycle Seasonal Erratic Events Breakdown Methods –Buying Power Index (BPI)

8. 1 Copyright © 2000 by Harcourt, Inc. All rights reserved. (8) A Sales & Marketing Management’s Buying Power Index (BPI) BPI = (5I +3P + 2R)/10 I = % of U.S. Disposable Income (economic factor) P = % of U.S. Population (demographic factor) R = % of U.S. Retail Sales (distribution factor) where: For Lafayette, LA I = 0.11% of U.S. Disposable Income P = 0.14% of U.S. Population R = 0.13% of U.S. Retail Sales BPI = ((5*.11)+(3*.14)+(2*.13))/10 BPI = 0.123% where: Estimate of Sales for Eating & Drinking Places in Lafayette, LA $243,842,859,000 * 0.00123 = $224,226,717

9. 1 Copyright © 2000 by Harcourt, Inc. All rights reserved. (9) A Bottom-Up Approaches Survey of Buyer Intentions Method Jury of Executive Opinion Method Delphi Method Sales Force Composite Method