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3.3.1 Quantitative sales forecasting - Coggle Diagram
3.3.1 Quantitative sales forecasting
Moving averages
a quantitative method used to identify underlying trends in a set of raw data
How to calculate moving averages
add several months worth of raw data
calculate the average for those months and centring that figure on the middle period
Forecasting using extrapolation
predicting the future by assuming past trends will continue
time series data
a series of figures covering an extended period of time
Extrapolation: predicting by projecting past trends into the future
Scatter graphs (Correlation)
when there's a link between sales and another variable, the relationship can be used to forecast sales if the other variable is controllable or predictable
Links such as
sales and advertising expenditure
sales and temperature
sales and the number of stores open
sales and the level of staff bonuses available
Limitations of quantitative sales forecasting techniques
future may not be like the past
changes on external impacts = possible significant impact on sales
external events = unpredictable e.g. changes in FTPs or new entrants
quality of forecast can be questioned by the ability of forecaster to interpret data used to generate forecast
decision making - whether a trend could continue or dip - in the long term or short term
in correlation - understanding which variables to pair up and then exploring the causality if any involved