Appendix 5 Developing Forecasts

1. Appendix 5Developing Forecasts

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

3. Development of Useful Forecasts What types of forecasts are needed? What time periods should forecasts cover? What factors need to be evaluated in developing the forecasts? How often should the forecasts be prepared? What data are available for developing the forecasts? Who will be involved in preparing the forecasts? What methods will be used to generate the forecasts? How will the forecasts be used? What can be done to improve the accuracy of the forecasts? Who will use the forecasts? Key Considerations in Developing Forecasts

4. Forecasting by Sales ManagersTypes of Forecasts • Market Potential • The best possible level of industry sales in a given geographic area for a specific time period • Market Forecast • The expected level of industry sales given a specific industry strategy in a given geographic area for a specific time period • Sales Potential • The best possible level of firm sales in a given geographic area for a specific time period • Sales Forecast • The expected level of firm sales given a specific strategy in a given geographic area for a specific time period

5. Determining Sales Force Size Designing Territories Assigning Salespeople to Territories Allocating Sales Calls to Accounts Designing Compensation Programs Establishing Selling Budgets Establishing Sales Quotas Sales Forecast Market Potential Market Forecast Sales Potential Market Potential Sales Potential Sales Forecast Sales Forecast Sales Forecast Sales Forecast Examples of Uses of Forecasts by Sales Managers Sales Management Decision Area Type of Forecast Normally Used

6. Top-Down Approach Bottom-Up Approach Forecast of General Economic and Business Conditions for the Country as a Whole Sales Managers’ Forecasts for Zones, Regions, Districts, Territories, and Accounts Combined into District, Region, and Zone Forecasts Salespersons’ Forecasts of Accounts Combined into Territory Forecasts Company Sales Forecast Company Sales Forecast Market Potential for Relevant Industry Factors Affecting Company’s Share of Total Industry Sales Sales Potential for Company as a Percentage of Industry Sales Forecasting Approaches(Figure A.2)

7. Top-Down Approaches • Company Forecasting Methods • Moving Averages • Exponential Smoothing • Decomposition Methods • Trend • Cycle • Seasonal • Erratic Events • Breakdown Methods • Buying Power Index (BPI)

8. For Lafayette, LA BPI = (5I +3P + 2R)/10 where: where: 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% I = % of U.S. Disposable Income (economic factor) P = % of U.S. Population (demographic factor) R = % of U.S. Retail Sales (distribution factor) Sales & Marketing Management’sBuying Power Index (BPI) 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 Method • Jury of Executive Opinion Method • Delphi Method • Sales Force Composite Method