1. Forecasting sales and Developing Budgets
Dr.Pusanisa Thechatakerng

2. Market Potential and Sales Potential (I)
The total expected sales of a given product or service
for the entire industry in a specific market over a state
of time (total industry concept)
Four elements:
The item being marketed (the product, service, idea, person or location)
Sales for the entire industry in dollars or product
A specific time period
A specific market delineated either geographically, by type of customer, or both.

3. Market Potential and Sales Potential (II)
The maximize share (or percentage) of market potential that an individual firm can reasonably expect to achieve
Company’s sales potential – specific the product, market, and time period
Ex. Budweiser brand accounted for 40% of the approximately 180 million barrels of beer consumed in the USA in 2004
- Budweiser beer’s sales potential is close to 40% of market in the coming year

4. Market Potential and Sales Potential (III)
An estimate of sales (in dollars) that an individual firm expects to achieve during a specified forthcoming time period, in a stated market, under a proposed marketing plan
Sales forecast
Less than the sales potential for many different reasons
Ex. 4ps < quality, financial problem

5. Estimating Market Potential and Sales Potential (I)
1. Market-factor Derivation
Market factor
An item or element in a market that causes the demand for a product or service or
Related to the demand
Ex. Bangkok’s population annual as a market factor underlying the demand for sandal. This element is related to the number of sandal that manufacturer can sell

6. Estimating Market Potential and Sales Potential (II)
Market-factor Derivation
Ex. Bangkok’s population annual as a market factor underlying the demand for sandal. This element is related to the number of sandal that manufacturer can sell. The sales potential for sandal as follows:
Estimate number of Bangkok’s pop = 4,000,000
Times: percent who buy sandal = x (33%)
Market potential ,350,000
Times: Potential market share = x (30%)
Sales potential ,000

7. Estimating Market Potential and Sales Potential (III)
2. Surveys of Buyer Intention for determining potential
Consists of contacting potential customer and questioning them about whether or not they would purchase the product or service at the price asked.
Ex. The manufacturer established that it would be satisfied if it sold 50,000 leather sandal pairs per year. Since the cost of the pair would be higher than that of plastic pair. The manufacturer want to know 2 things. First, how many people would buy product at retail price B.200? Second, What did customers think the price of such a product should be?

8. Estimating Market Potential and Sales Potential (IV)
Survey through personal interviews with 240 Bkkpop.
170 of 240 (approximately 71%) were interested in product.
They indicated that price should be B.130 to capture that size of market
The average (mean) price quoted (B.145) would eliminate half of respondents who showed interest in the product.
Still 10 people (4% of market) said they would be interested in purchasing the product at retail price B.200
Survey showed 1/3 of BKKpop purchase sandal

9. Estimating Market Potential and Sales Potential (V)
Estimate number of Bangkok’s pop = 4,000,000
Times: percent who buy sandal = x (33%)
Market potential ,350,000
Times: taking 4% of the result = x (4%)
Market potential for B.200 leather sandal = 52,800 pairs
>50,000 = o.k
Yes - based on information obtain directly from people
No – cost & time

10. Sales Forecasting Survey methods: Mathematical methods
Executive opinion
Sales force composite
Buyers’ intentions
Survey methods:
Moving average model
Exponential smoothing models
Regression models
Mathematical methods
“Must-do” calculations
Capacity-based calculations
Operational method

11. Source of sales forecast data
-Executive opinion
-Sales force composite
Executives & managers
Customers
Survey of buyer intention
-Moving average models
-Exponential smoothing
-Regression analysis
Historical data
-“Must-do” approach
-Capacity-based approached
-Test market
Company operation

12. Moving average method 1 120 - - 2 130 - - 3 110 360 120.00
Month
Actual sales
Total sales (3 months)
Forecast sales

13. Exponential Smoothing Models
Month
Actual sales
Total sales (month/s)
Forecast sales
1 x =
2 x =
3 (6) x =
P.S 6/710=118.33

14. Regression Analysis (sales trends into the future)
Sales (millions)
2010 forecast, 10 yrs base 35 30 25 20 15 10 5
2001 02 09 03 05 07 10 04

15. “Must-Do” Forecasts
Reasonable forecast is the sales that must be achieved for the firms to reach its break-even point.
Ex. One new service enterprise budgeted its total overhead costs at $165,000 for the first year. The entrepreneur desired a profit of $60,000, which would represent her salary. Thus, she projected sales at $225,000 for the year and proceeded to plan on that basis

16. Capacity-Based Forecasts
Ex. Restaurant 10 tables, each table for 4 people, only lunch 30 Baht/food with drink, open everyday
So 10x4 = 40 seat
40x30x365 = 438,000

17. Review the forecasting process (Method)
Use more than one method
Select the right method
Short period
Moving average models
Exponential smoothing models
Long period
Regression models

18. Problems (I)
Indicate what market factor or factors you would use to estimate the market potentials for each of the following products: McGraw-Hill economics textbooks, Chang Beer, 12 plus roll-on, Johnson baby powder, Nike sport shoe, MK Suki.

19. Problems (II)
In, general, how do sales forecast based on surveys differ from forecasts based on mathematic methods?

20. Problems (III)
Tiger company’s monthly sales; Months:January, February, March, April
Sales
Forecast sales force on May by using moving average method (3,2,1)

21. Problems (IV)
Tiger company’s monthly sales; Months:January, February, March
Sales
Forecast sales force on April by using exponential smoothing method (3,2,1)