1. Appendix 4 Developing Forecasts

2. Forecast A forecast is a prediction for a future period.

3. 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. Forecasting by Sales Managers Types of Forecasts Market PotentialMarket Potential –The best possible level of industry sales in a given geographic area for a specific time period Market ForecastMarket Forecast –The expected level of industry sales given a specific industry strategy in a given geographic area for a specific time period Sales PotentialSales Potential –The best possible level of firm sales in a given geographic area for a specific time period Sales ForecastSales Forecast –The expected level of firm sales given a specific strategy in a given geographic area for a specific time period

5. Examples of Uses of Forecasts by Sales Managers Determining Salesforce SizeDetermining Salesforce Size Designing TerritoriesDesigning Territories Assigning Salespeople to TerritoriesAssigning Salespeople to Territories Allocating Sales Calls to AccountsAllocating Sales Calls to Accounts Designing Compensation ProgramsDesigning Compensation Programs Establishing Selling BudgetsEstablishing Selling Budgets Establishing Sales QuotasEstablishing 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. Forecasting Approaches 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. Top-Down Approaches Company Forecasting MethodsCompany Forecasting Methods –Moving Averages –Exponential Smoothing –Decomposition Methods TrendTrend CycleCycle SeasonalSeasonal Erratic EventsErratic Events Breakdown MethodsBreakdown Methods –Buying Power Index (BPI)

8. 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. Bottom-Up Approaches Survey of Buyer Intentions MethodSurvey of Buyer Intentions Method Jury of Executive Opinion MethodJury of Executive Opinion Method Delphi MethodDelphi Method Salesforce Composite MethodSalesforce Composite Method