Notes On Methods Of Sales Forecasting:

       To arrive at an accurate conclusion, different methods have been adopted to forecast sales on the basis of definite facts and figures. They are as follows:

1. Direct or Bottom up Method:

       Under this method, the different departmental heads and their subordinates collects informations on different aspects of productions, sales, finances etc. These informations are later combined together and become a data for the company as a whole.

       The greatest advantage of this method is that it increases the responsibility of the departmental heads for implementing the forecast. While the disadvantage is that it may not have full control and coordination over the activities of different departments.

2. Indirect or Top-Down Method:

       Under this method, the estimates of the industries as a whole are taken into one. The departmental heads and the subordinates are not expected to collect the informations for forecasting. The responsibilities of successful forecasting lies with the top executives.

       The main advantage of this method is that the top management may have full control over forecasting and the disadvantage is that the departmental heads that are fully responsible for forecasting are not involved.

3. Historical or Past Sales Method:

       Past data and informations on productions, sales, purchases, capital needs etc are compiled and tabulated so that decisions on future trend may be arrived.

       The advantage of this method is that it enables the management to know about not only the future trend but also trade cycle. And the disadvantage of this method is that sometimes difficulty mat arise in getting the necessary informations and data.

4. Deductive Method:

       Under this method, the forecasters believe that the old data becomes obsolete after the lapse of a certain period. They therefore lay greater emphasis on the current data available in the organisation.

       The main advantage of this method is that it is more dynamic in nature because it keeps pace with the changing conditions and the disadvantage of this method is that it depends on the efficiency and experience of the forecaster.

5. Joint Opinion Method:

       Under this method, forecasting is done in consultation with the person who are directly concerned with the problems. Such persons are high ranking executives and may be from different fields such as productions, sales, advertising etc.

       The main advantage of this method is that it is economical and is easy to understand. But the disadvantage of this method is that it might be wrong as it might become a guess work.

6. Poll of Sales Force Method:

       Under this method, each and every individual salesman is asked to forecast the sales of his own territory. The individual forecast of respective salesman are collected are collected, scrutinized and discussed at the executive level.

       The main advantage of this method is that the sales forecast may be more reliable as they are made by the personnel who are in close touch with the sales field.

7. Statistical Method:

       In recent years various types of sales forecasting based on statistical ad quantitative techniques have been developed. They are:

a. Trend and Cycle Method:

       This method advocates that the past trend will be continued

b. Correlation Method:

       This method correlates between sales and other area.

       The main advantage of this method is that it is more accurate and less time consuming. While the disadvantage of this method is that factors like consumers preferences and behavior cannot be expressed in statistical terms.