SALES FORECASTING for BBA students of bengaluru north university

includes product and also packaging includes production

1. SALES FORECASTING Unit 2

2. Meaning Sales forecasting is the process of estimating a company’s sales revenue for a specific time period – commonly a month, quarter, or year. A sales forecast is prediction of how much a company will sell in the future.

3. Definition William Lazer:  “Sales forecasting is the focus of integrative planning”. Philip Kotler:  “The Company Forecast is the expected level of company sales based on a chosen marketing plan and assumed marketing environment”.

4. Sales Forecasting Important For Business Strategic decision making Resource allocation Budgeting and goal setting Proactive problem solving

5. METHODS OF SALES FORECASTING

6. 1. Trend Analysis It is one of the sales forecast methodology that analyses various trends on seasonality, geography, target audience, etc. for revenue projection and tracking any potential performance changes. It gives companies insights into long and short-term performance. The trend analysis is more commonly used in the retail or wholesale sector where the company’s commercial success depends on its ability to maintain optimal inventory using inventory management software. 2. Regression Analysis Companies use regression analysis   sales forecast methodology to understand the impact of a sales technique on sales performance. It is more helpful when the organization needs a granular view of its sales efforts & identifies the internal and external factors affecting those. The regression technique is a trusted approach used by insurance companies in estimating metrics such as the credit health of policyholders or the possible number of claims that may arise in a given period. 3. Time Series Analysis Time Series Analysis is another popular sales forecast methodology that uses data from various intervals or time frames to track changes that happened over time. Businesses can use data visualization to analyse seasonal trends and understand the factors causing them. Time series analysis is widely used in different sectors to predict sales patterns over seasons, cycles, and trends. The sequence of various points plays a critical role in the Time Series Analysis methodology .

7. 4. Causal Analysis As the name suggests, the causal method assesses and predicts the outcome of a market fluctuation on a company’s profit. This sales forecast methodology starts by analysing the current state of the market and identifies the factors that can change future trends. This sales forecast methodology takes into consideration how specific factors affect the demand for a company’s products & services and thus impact sales. It is an important method that studies the relativeness among different market variables and demand for the product. 5. Length of Sales Cycle Analysis This sales forecast methodology uses historical sales cycle data to predict the outcome of a sales effort, like the previous purchasing behavior of the customer. Accurately predicting the sales cycle can benefit both the sales representative and the customer. Since the method uses objective information like customer segmentation, product popularity, customer lifetime value, and geographic locations, you can observe the sales more accurately. 6. Intuitive Method As the name suggests is loosely based on asking the salesperson about the prospect. Some managers follow the intuitive strategy as it gives them a first-hand account of the source closest to the customer. However, on the flip side, you may receive a generous estimate. Businesses use the intuitive sales forecast methodology if they feel analysing historical data will not provide accurate results. It does not take the internal and external factors into consideration. 7. Multivariable Method The multivariable sales forecast methodology is an advanced and sophisticated method of estimating sales that involves evaluating multiple associated variables. It uses predictive analysis that involves customer demographics, seasonality, economic indicators, marketing campaigns, product launches, competitor activities, etc. This sales forecast methodology considers multiple data points such as the length of your sales cycle, the type of opportunity, and so on.

8. Sales Forecast in Five Steps 1 . Analyse Historical Data These days, businesses use dedicated BI tools for analysing historical data. They provide an excellent baseline for determining future sales goals. Gather data on the previous year’s data from the sales management. Once you have the information, calculate the sales rate to calculate sales per period. It will form the basis for future predictions. 2. Refine Forecast After establishing the historical sales rate, you may modify the number based on any changes you foresee that will impact your sales values. These factors can be changes in product price, expected growth/decline in customer base, and inclusion of new channels or product verticals. 3. Anticipate Market Trends You can’t accurately forecast sales unless you analyse the market trends and measure elasticity of demand. You must reflect on all the market trends to modify the number of your sales forecast, like any competitor going public, launching a new product, or planning expansion. 4. Monitor Competitors It’s a common practice among companies to monitor competitors’ products, campaigns, and growth models that can impact sales projections through ERP implementation. This should include monitoring the major players as well as new entrants in the market to identify potential implications for your business. 5. Implement Changes Once you have evaluated all the factors and quantified the events in your projection, you can implement changes in your plan. Listing all the factors that can impact your sales when you go to the market gives you a granular view of the market conditions.

9. Product A product may be defined as a set of tangible, intangible and associate attributes capable of being exchanged for a value with the ability to satisfy consumers and business needs.  It is anything that can be offered to a market to satisfy the needs or wants of the customer. The products that are marketed include physical goods, services, experiences, events, person, place, properties, organization, information and ideas.

10. Definition The term ‘product’ in the following manner: Philip Kotler:  “A product is anything that can be offered to a market for attention, acquisition, use or consumption. It includes physical objects, services, personalities, place, organizations and ideas.” Alderson:  “A product is a bundle of utilities consisting of various features and accompanying services.”

11. Characteristics of Products Tangibility :  Products can be physical goods like smartphones, cars, or clothing. They are tangible and can be touched, felt, or seen. Intangibility:  Services, on the other hand, are intangible products. They include things like education, healthcare, consulting, and entertainment, which are experiences or performances rather than physical items. Durability:  Some products are durable and have a longer lifespan, like appliances or furniture. Others, like perishable goods such as food or consumables, have a shorter lifespan.

12. Classifications Of A Product

13. Classification of products on the basis of Durability & tangibility Non-durable goods These are tangible goods that are low priced and normally consumed in one or few uses everyday or anytime of the day such as soaps, biscuits, shampoos, deodorants, etc.  As these goods are consume quickly and purchased frequently, the appropriate strategy is to make them available in many locations, charge only a small mark up and advertise heavily to induce trial and build preference. Durable goods These are also tangible goods that remain in use months after months and year after year. Normally, they require more personal selling and service, guarantee, higher margin, etc. For example: couches or chairs, vacuum cleaners, washing machines, etc. Services These are intangible, inseparable, variable and perishable products. As a result, they normally require more quality control, supplier creditability and adaptability. Example- hair cut, legal advices, appliance repair, financing, etc.

14. Classification of products on the basis of Uses In this part, the goods or services can be classified into two broad categories viz.  Consumer goods and Industrial goods. Consumer goods classification These are meant for use of consumption by ultimate consumers for the satisfaction of their needs and wants. According to American Marketing Association (AMA), “Consumer products are those products which are used by ultimate consumers in their original form without commercial processing.” These are classified into following ways:

15. Convenience goods These are those products which a consumer purchases frequently, immediately and with minimum efforts from convenient locations. For example, tooth paste, bread, newspaper, cigarette, match box, medicine, soap, cold drinks, grocery items, etc. Shopping goods These are those goods where consumers devote considerable time in making selections before they buy. On the basis of durability, suitability, quality price and style, the selection and purchasing of the goods takes place. For example, household furniture, automobiles, refrigerators, sewing machines, jewelleries, clothing, used cars; arid major appliance, etc. Specialty goods These goods possess unique characteristics and brand identification for which a sufficient number of buyers are willing to make a special purchasing effort. For example, stereo components, photographic equipment, men’s suits, shoes, goggles, mobile phones, cloth material, etc. Unsought goods These are those goods which the consumer does not know about or does not normally think of buying. These goods require advertising and personal-selling support. For example, smoke detectors, kitchen exhaust fans like electric chimneys, etc. The classic examples of known but unsought goods are life insurance, cemetery plots, gravestones and encyclopaedias, reference books, etc.

16. Industrial goods classification These are those goods that are meant for use in making other products or for rendering a service in the operation of business organization. According to American Marketing Association (AMA), “Industrial goods are those goods which are designed to be sold primarily for use in producing other goods or rendering services.” These are classified into following ways:

17. Raw Material (are also known as feedstock or unprocessed material) These are basic industrial materials that are used to produce goods, finished products, energy, or intermediate materials, which are feedstock for future finished products. They are divided into following parts: Natural products:  Minerals, land, and products of the forests and the seas. Agricultural products:  wheat, cotton, tobacco, fruits, live-stocks, etc. Animal products:  Eggs, raw milk, etc. The demand for raw material depends upon the demand of finished goods. These are usually graded for standardized quality. Fabricating material and parts These are partial or complete manufactured goods that are used without any substantial change in their form and become a part of the finished goods. For example, electric motors, batteries, automobile parts, spark plugs, tyres and tubes, components of electrical appliances, etc. These products are directly supplied to the industrial users.

18. Installation Installations have long life and are expensive major equipment of an industrial user. They are usually bought directly from the producers with the capital sale preceded by long negotiation period. For example, heavy machinery, diesel engines, trucks, factory sites and production lines. Accessory equipment These are those industrial goods which are usually less expensive and have short life than installation. They are required for manufacture of final products though they don’t form part of finished products. Example, Portable factory equipment and tools (hand tools, fork lift trucks) and office equipment (personal computers, desktops, etc ).  They are highly standardized instruments. Operating supplies Operating supplies are short-lived and low priced items usually purchased with a minimum of effort. They are the ‘convenience goods’ of industries. They do not have a significant impact on the long run profitability of an organization. Supplies include floor wax, lubricating oils, heating fuel and office stationary like pins, pens, pencils, papers, etc. Operating supplies do not become a part of finished product.

19. NEW PRODUCT DEVELOPMENT Meaning: New Product Development (NPD) refers to the process of delivering a new product, service, idea, or technology to the market. The process usually follows a structured approach that involves several stages, from ideation and concept development to market research, product launch, and post-launch evaluation.

20. 7 Stages of New Product Development Process Creating novel products and services often involves navigating through a landscape of uncertainty. Nonetheless, adhering to the structured New Product Development process can empower businesses to attain clarity and assurance regarding their initiatives. 1. Idea generation 2. Idea screening 3. Concept development and testing 4. Marketing strategy 5. Prototyping 6. Market testing 7. Commercialization

21. 1. Idea generation Whether a lightbulb went off in the shower or you’ve arrived at a new product concept after years of research, every product development project starts with a great idea. 2. Idea screening But is it a good idea? Before you launch into full-scale product development, conduct due diligence to ensure your idea has legs. You may have more than one idea for the direction a new product could take, or multiple product ideas. In this stage of the product development life cycle, analyse your ideas for viability. This often involves some preliminary market research. 3. Concept development and testing During these early stages, it’s time to put your idea to the test. Typically this means finding a focus group to present ideas to, then gathering feedback. Throughout this process, you may present multiple ideas and various features, iterating on those ideas and features until you’ve arrived at a plan that feels solid.

22. 4. Marketing strategy Before you even begin to build, another essential component of your research should be market research. Who do you envision as the target market for your product? Does that market or audience exist? How many people fall into the category, and what messaging might appeal to them? The answers to these questions will ultimately inform a business analysis, where you determine whether there is a market to make this a viable product idea that can actually be successful. 5. Prototyping The very first usable iteration of a product is the prototype. This is a significant step in the process because it’s the first time potential users can hold your product “in their hands” and try it. Whether your product is a digital app or a physical device, the prototype represents the first opportunity to try it in action. 6. Market testing Once you have a prototype, you can conduct more comprehensive market testing. This is a trial run of your product to evaluate its performance and catch any bugs and errors. Often, product developers will send new products through at least one round of beta testing or concept testing—a stage in which potential users get their hands on a product before it’s available to the public. These early users get a first look at a new product in exchange for feedback and metrics that help improve the final release. 7. Commercialization And now we are at the final stage: commercialization of the product. The product is released into the wild, with a product marketing strategy in place to give it the best possible shot at success. At this stage, keep an eye out for solid case studies that show off your product’s capabilities and could be presented to the public. 

23. Stages of Product Life Cycle Every product has a life cycle, running from product development until it is taken off the market. By studying product life cycle  (PLC) stages, companies try to predict the progression of products in the market. With thorough PLC analysis, companies can increase their product's shelf life by making proactive, required adjustments to survive competition, market changes, or disruptive technologies. Generally , a product life cycle consists of product development, market introduction, growth, saturation, and decline.

24. 1. Introduction At the Introduction stage, the product comes to the market, and the business looks to get a foothold by: Establishing branding and assuring the market of the quality of the new product. An initial low pricing policy to get into the market, though with little competition, price may be high initially to recoup development costs. Selection of a distribution model to get the product onto the market. Promotion of the product by aiming it at specific target groups. 2. Growth After a successful Introduction comes the Growth stage. This will accelerate developments at the first stage by: Maintaining the quality of the product and adding any extra services or support that become obvious during Introduction. Keeping the price at a good level to maintain sales growth. Increasing distribution and sourcing new, faster ways of getting the product onto the shelves. Marketing campaigns aimed at a broader audience and at growing market share for the product.

25. 3 . Maturity With growth established, Maturity is the next stage of the life cycle. The business deals with this by: Adding features that will differentiate the product from competitors. Cutting price to counter competition. Revising distribution channels and, in retail, using incentives to encourage stores to stock the original product in preference to newcomers. New promotions that aim to show differences between products. 4. Decline When the Decline begins, the business will consider: Keeping the product on the market but adding or removing features or finding new uses for it. Reducing costs and production and keeping it for a niche segment. Discontinuing the product or selling the production rights to another company.

26. The meaning of a product line A product line refers to a group of related products under a brand. Generally, companies extend their offerings by introducing similar products, hoping that consumers are likely to purchase new products from familiar brands. As consumers are familiar with existing products of a specific brand, they are more likely to try out new products from the same brand rather than choosing a new brand.

27. The purposes of a product line include: Maintaining consistent expectations between product types to create better user experiences and protect the brand name Reaching significantly different market segments and buyer personalities to increase sales Leveraging the familiarity and loyalty of a familiar brand name, especially when the company's name isn't well-known Maximizing a company's reach into multiple sectors with products that offer similar benefits and features, with a variety of price points and channels

28. Diversified Products Product diversification refers to the strategic expansion of a company’s product offerings to encompass a wider range of products or services. This approach aims to minimize risk by reducing dependency on a single product and tapping into new markets to drive growth.

29. Undiversified Products An undiversified portfolio is one that is heavily concentrated in  a single asset class , industry, or even  a single stock . While it may seem tempting to invest all your money into  a single stock  that you believe will skyrocket in value, this approach can be incredibly risky.

30. Product Mix Decisions Product decisions are decisions about a company's product or service to meet customer demand and ensure business success. Product quality, feature, and design are product attribute decisions. Product attributes, branding, packaging, labelling, and support services are individual product decisions.

31. Branding Branding is the process of creating the brand identity of a company. This process also delivers materials that support the brand, like a logo, tagline, visual design, or tone of voice.

32. PACKAGING P ackaging refers to designing and developing the wrapping material or container around a product that helps to Identify and differentiate the product in the market, Transport and distribute the product, Store the product, Promote the product, Use the product properly . UNIT 2 COMPLETED