6.1.5

Quantitative Sales Forecasting

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Quantitative Sales Forecasting

Quantitative sales forecasting helps businesses predict future sales based on historical data.

Time-series analysis

Time-series analysis

  • Time-series analysis refers to the use of past data and trends to forecast and predict future trends.
  • Time-series analysis allows businesses to use moving average calculations to forecast future sales based on historical data.
Moving average calculation

Moving average calculation

  • Three period moving averages allow a business to use three sets of (usually annual) data to calculate an average for future predictions.
    • Three period moving averages reduce the impact of a single anomaly on future predictions as an average from three years is calculated.
  • Four quarter moving averages allow a business to use data from four quarters (three month periods) to calculate an average sales figure.
    • Four quarter moving averages increase calculation accuracy because they minimise the impact of unusual or seasonal sales figures.
Correlations

Correlations

  • Correlations can be used by marketing departments to examine the relationship between two variables.
  • Scatter graphs can be used to show correlation and allow businesses to extrapolate data. Extrapolation involves using past data trends to predict future performance.
Types of correlations

Types of correlations

  • Positive correlation occurs when an increase in one variable results in an increase in the other variable.
    • For example, if increasing advertising spending results in an increase in sales, there is a positive correlation and a business is likely to raise its advertising budget.
  • Negative correlation occurs when an increase in one variable results in a decrease in the other variable.
    • For example, if increasing advertising spending results in a decrease in sales, there is a negative correlation, and a business is unlikely to raise its advertising budget.
  • There is no correlation if a relationship between two variables cannot be determined.
Graphs

Graphs

  • A line of best fit can be used on scatter graphs to represent data and identify the general relationship between plotted points of data.
    • For example, if the temperature increases, total customer spending on ice cream may increase.
    • This is a positive correlation and the general trend can be highlighted using a line of best fit.
Disadvantages of quantitative techniques

Disadvantages of quantitative techniques

  • Changes in the external environment (political, environmental, social, technological, legal and economic) can impact the business’ future performance.
    • This is not reflected in the past performance data which is used to extrapolate.
  • Changes in the internal environment (culture, leadership, financial performance) can impact the business’ future performance.
  • Quantitative sales forecasting can be time-consuming and complex.
Jump to other topics
1

Exploring Business

1.1

Features of Business Organisations

1.1.1Sole Traders & Partnerships1.1.2Private & Public Limited Companies1.1.3Types of Liability & Not-For-Profits1.1.4Purposes of Businesses1.1.5Purposes of Businesses 21.1.6The Different Economic Sectors1.1.7Multinational Companies1.1.8Stakeholders1.1.9Influence of Stakeholders
1.2

Organisation of Businesses

1.2.1Organisational Structure1.2.2Types of Organisational Structures1.2.3Business Aims & Objectives1.2.4Business Aims1.2.5Business Objectives
1.3

Business Environment

1.3.1External Influences1.3.2Political & Legal Change1.3.3Economic Environment1.3.4Social & Technological Environment1.3.5Lifestyle & Technological Environment1.3.6Corporate Social Responsibility1.3.7The Competitive Environment1.3.8Innovation1.3.9Risk & Uncertainty1.3.10Porter's Five Forces1.3.11SWOT Analysis
2

Marketing Campaigns

2.1

Marketing

2.1.1Setting Marketing Objectives2.1.2Customer Needs2.1.3The Market2.1.4Competition & The Market2.1.5Consumer Behaviour2.1.6Market Research2.1.7Forms of Market Research2.1.8Market Segmentation2.1.9Cultural & Social Factors in Marketing2.1.10Promotional Decisions 32.1.11Pricing Strategies
2.2

Marketing Mix

2.2.1Marketing Mix2.2.2Product Life Cycle2.2.3Pricing Decisions & Price Skimming2.2.4Pricing Decisions & Price Penetration2.2.5Promotional Decisions2.2.6Promotional Decisions 22.2.7Promotional Decisions 32.2.8Market Mapping
3

Business Finance

3.1

Sources of Finance

3.1.1Internal Finance3.1.2External Finance3.1.3External Finance 23.1.4Sources of Business Finance
3.2

Financial Planning

3.2.1Revenue3.2.2Costs3.2.3Cash & Cash Flow3.2.4Cash & Cash Flow 23.2.5Break-Even Analysis3.2.6Profits
3.3

Financial Statements

3.3.1Balance Sheets3.3.2Income Statements3.3.3Liquidity
4

International Business

4.1

Globalisation

4.1.1Growing Economies4.1.2Specialisation & Trade
4.2

International Business

4.2.1Internationalisation4.2.2International Trade4.2.3MNCS4.2.4Conditions that Prompt Trade4.2.5Assessment of a Country
4.3

International Economic Environment

4.3.1Globalisation4.3.2Factors Contributing to Globalisation4.3.3Protectionism4.3.4The EU & the WTO4.3.5Trading Blocs
4.4

Factors Affecting International Business

4.4.1Global Competitiveness4.4.2Ethics of Global Business4.4.3Controlling MNCs4.4.4Cultural & Social Factors in Marketing
5

Principles of Management

5.1

Management & Leadership

5.1.1Managers5.1.2Management Theories5.1.3Managing Organisational Culture5.1.4Management Style
5.2

Theories of Motivation

5.2.1Motivating & Engaging Employees5.2.2Taylor's Theory5.2.3Mayo's Theory5.2.4Maslow's Theory5.2.5Herzberg's Theory
5.3

Managing Change

5.3.1Change5.3.2Key Factors in Change5.3.3Scenario Planning5.3.4Managing Change5.3.5Managing Strategic Implementation
6

Business Decision Making

6.1

Business Principles & Practices

6.1.1Influences in External Environments6.1.2Product Decisions6.1.3Competitive Environment6.1.4Corporate Strategy6.1.5Quantitative Sales Forecasting6.1.6Legislation
6.2

Quality Management

6.2.1Importance of Quality6.2.2Measuring Quality6.2.3Total Quality Management6.2.4Evaluating TQM
6.3

Human Resources

6.3.1Contracts6.3.2Recruitment6.3.3Training a Workforce
6.4

Documents & Business Decisions

6.4.1Sales Forecasts6.4.2Managing Strategic Implementation6.4.3Problems with Strategy

Practice questions on Quantitative Sales Forecasting

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  1. 1
    What is the advantage of a three-period moving average?Multiple choice
  2. 2
    What type of graphs shows correlation and allow businesses to extrapolate data?Multiple choice
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Corporate Strategy

Legislation