sales budgeting forecasting

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  • 8/13/2019 Sales Budgeting Forecasting

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    Sales Budgeting andForecasting

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    Definition Sales Budget

    (a) Revenue goals

    (b) Expense ceilings.

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    Sales Budget- Basic Approaches

    Top-down

    approach.

    Bottom-up

    approach.

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    Features & Objectives of

    Sales Budget

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    Sample Sales Budget

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    Factors Influencing Sales

    Budget Market size

    Companys intention to curb selling

    expenses.

    Companys financial resources.

    Market potential.

    Sales potential.

    Production efficiency.

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    Steps in Determining Sales

    Budget

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    Methods of Determining Sales

    Budgets Percentage of Sales Method.

    Competitive parity method.

    Objectives and task method.

    What you can afford method.

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    Percentage of Sales Method

    Advantages Simple and easy to calculate.

    Maintains balance between revenues and

    selling expenses. Effective for stable marketing environment.

    Disadvantages Lacks logic.

    Percentages are subject to approximation.

    Not applicable for new products.

    Suicidal for fluctuating market situations.

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    Competitive Parity Method

    Advantages Comparatively a safe practice.

    Reflects the collective wisdom of the

    industry. Prevents marketing warfare.

    Disadvantages Less practical as sales objectives and

    problems of companies are different.

    No assurance that competitors spending

    policy is correct.

    Inability to reach target customers

    meaningfully. 10

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    Objectives and Task Method

    Advantages Element of realism.

    Flexible.

    Periodic review of budgets possible. Disadvantages

    Sales mangers need to posses sufficient

    knowledge and wisdom.

    Difficulty in understanding major sales

    objectives.

    Ignores past sales, forecasted sales and

    competitors budgets.

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    What You Can Afford Method.

    Capacity to spend decides thebudget.

    Advantages Simple, safe and flexible.

    Disadvantages Lacks planning process.

    Arbitrary discretion in deciding budget

    levels.

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    Sales Forecasting

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    Objectives of Sales

    Forecasting To decide on sales quotas and

    territories.

    To determine sales budget.

    To attain proper control of inventories.

    To set up performance standards.

    To identify sales opportunities.

    To research out sales and market

    potentials of the firm.

    To gather idea of the image of the

    firm. 14

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    Factors Influencing Sales

    Forecasting Fluctuations in business environment.

    Future state of the economy.

    Political conditions of a nation.

    Market characteristics.

    Situational factors.

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    Importance of Sales

    Forecasting

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    Approaches of Sales Forecasting Top-down

    Approach

    Bottom-up

    Approach

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    Methods of Sales

    Forecasting Qualitative

    Jury of Executive

    opinions.

    Delphi techniques. Sales force

    composite.

    Survey of buyers

    intentions.

    Quantitative

    Moving average

    method.

    Exponentialsmoothing.

    Regression

    analysis.

    Time seriesanalysis.

    Econometric

    models.

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