What is Sales Forecasting? Explain various methods of sales forecasting. How the right technique of sales forecasting is selected.

Ans.
Sales Forecasting means to predict the future expected sales of the product in the market on the basis of previous sales and prevailing market conditions. It is the central part of the strategic planning process. It may be either short-run to decide the various production schedules or long-run to plan the expansion of the plant.

Sales Forecast literally means sales predictions. Any industry needs to predict future sales time to time to plan their production of a particular model or for unit expansion and for many more factors. Sales Forecasting can be done by different methods depending on the factors that can affect sales volume.

 Top-Down Approach : This approach is also been called as breaking down approach. In this approach, sales forecast is being done at corporate level or at strategic business unit level. Steps followed in this approach are as follows:

1. This approach starts with a forecast of general economic conditions. It includes a forecast of gross national product along with projection of consumer and wholesale price index, interest rates, unemployment level, government expenditures, etc.

2. Estimate the industry’s total market potential for a product category.

3. Determine the current market share of the company.

4. Forecast sales for the product.

5. Use the sales forecast for operational planning and budgeting.

 Bottom-Up Approach : This approach is also known as build up approach. In this approach it is simply asked from the sales people what they are expected to sell in the coming period or even they can do the customer survey to know what they are expected to buy. Then these forecasts for different sales people are summed up to give the complete sales forecast. Usually a buying –