The ultimate guide to sales forecasting
In this unit, we’ll focus on some of the tools that are commonly utilised for exercising control and measurement over sales, such as the sales plan, sales budget and sales forecasts. This unit is designed to align closely with Chapter 16 of your suggested text.
Forecasting, as Jobber and Lancaster (2015) suggest, can take place in the short term, medium term and longer terms. The forecasting function also has a direct effect over other functional areas, including production, human resources, and purchasing, meaning that the decisions made by the person or unit who has responsibility for forecasting can have significant, organisation-wide implications. For example, the long-term forecast is of value to financial accountants in that they can provide for profit plans and income flows. They also need to make provision for capital items such as plant and machinery in order to replace existing capital and meet anticipated sales in the longer term.
The authors make a fundamental distinction between quantitative and qualitative techniques. In reality, sales managers may exercise judgment calls based on their experience and expertise — they may not have the time or resources to adopt more scientific approaches. However, as this chapter underlines, judgmental calls in under-resourced organisations can be made more rigorous and structured by adopting group decision making processes, such as the delphi method.
Budgets put limits on spending — they are thus a means of control (Jobber and Lancaster, 2015, pg. 458). The company can plan its profits based upon anticipated sales, minus the cost of achieving those sales (which is represented in the total budget for the organisation). The sales budget is the total revenue that is expected from all products sold.
Your suggested reading can help you to see how the sales budget is all-important because this can help the company see how much money is expected to come in from products and services sold. From the sales budget comes the sales department budget (or the total costs in administering the marketing function). The production budget covers all the costs involved in actually producing the products. The administrative budget covers all other costs such as personnel, finance, etc., and costs not directly attributable to production and selling (Jobber and Lancaster, 2015, p 461). If the sales budget is the sum of all the sales revenue coming in, then it’s the role of the sales manager to set quotas and targets for individuals or groups within the overall sales team. Monetary incentives may be linked to the attainment of quotas and may be used as a yardstick of achievement, which incentivises salespeople. How managers can get the best from their salesforce is a topic that we will explore further in the final unit of this module.
A Recipe for Sales Success
The discussion question for this unit is based on an adapted version of the practical exercise that appears on page 470 of your suggested text (Jobber and Lancaster, 2015).
Until Dr. Oetker entered the UK market with the launch of its flagship ‘Pizza Ristorante’ frozen pizza brand, few in Britain knew of the company that is one of Europe’s leading food manufacturers. So, who is Dr. Oetker?
A pharmacist from Bielefeld, Germany, Dr August Oetker founded the Oetker Group in 1891. Today the group has grown to become one of Germany’s largest family-owned companies, with an annual turnover of more than £3.5 billion. And the key to this success? A simple philosophy – that ‘Quality is the Best Recipe’, both in business and its products.
Pizza Ristorante was launched in Britain in 2002 and surprisingly was the first venture into the United Kingdom for this huge German food and beverage conglomerate. It promised an authentic pizzeria taste, and that’s exactly what consumers got. Pizza Ristorante was soon a huge success – research indicated that 76% of consumers preferred Pizza Ristorante to its competitors. It is now a well-established and thriving brand in the United Kingdom.
Dr. Oetker has plenty of experience when it comes to launching into new markets and is market leader in many of the 23 European countries in which its pizza brands are available. The company experienced similar success in the United Kingdom. In line with the company’s philosophy, Pizza Ristorante was prepared from the finest ingredients to satisfy consumer demand for a quality frozen product. In addition, the company always carefully considers the needs of the particular market it is entering and the nature of the competition.
In the case of the UK pizza market at the time of launch, the Thin and Crispy sector was dominated by own-label, and the company felt that the introduction of a branded product offering true quality at a competitive price could only add value. The aim was to stimulate a static market by encouraging consumers to revisit the frozen pizza category by sampling the uniquely authentic pizzeria taste Pizza Ristorante delivers.
Spurred on by the success of its pizza launch in Britain, Dr. Oetker has since introduced several more of its best-selling brands. For example, the company’s yoghurt and desserts brand ‘Onken’ is now established and doing well.
One of its latest UK ventures is the acquisition of the well-established SuperCook range of baking and cake decorating products. The company is now in the process of ‘marrying’ the Dr. Oetker and SuperCook brands, which will both be used on new packaging and promotional material.
Again, Dr. Oetker is very well established in this product area in other parts of Europe and particularly in its own country (Germany) where it has a long history of supplying baking products. As with its pizza launch there is no doubt that Dr. Oetker will invest substantial resources in developing its newly acquired brand and will, of course, once again bring its recipe for successful marketing.
However, the UK baking product market is renowned for its conservatism. British bakers don’t like their products to be messed around with and are inherently suspicious of new innovations, especially when these come from other parts of Europe. It is also recognised that a key task in the relaunch of the brand will be persuading UK retailers, and particularly the large grocery multiples, to continue to support the brand and allocate shelf space. An entirely new sales team is to be recruited and trained for this task, as effective selling is seen as being crucial to the success of the relaunch.
In a report in two sections:
- The marketing manager for the relaunch of the SuperCook range in the United Kingdom wants a system of forecasting that will provide as accurate a picture as possible of first year sales in order to satisfy demands from head office, who are sponsoring the launch of the relaunched brand. Advise this manager as to quantitative and qualitative systems of forecasting she might adopt.
- The marketing manager also wants the new salesforce to be incentivised to ensure a good product launch. She recognises the importance of the sales budget in planning. Advise this manager on the best way of setting sales quotas or targets for salespeople for the baking product brand and how these might be used as a yardstick when measuring achievement.
In total, you should write 500 words for this exercise.
Reading List
Jobber, D. and Lancaster, G. (2015) Selling and sales management. 10th edn. Pearson, chapter 16.
Frost, A. (2017) ‘The ultimate guide to sales forecasting’ Available at: https://blog.hubspot.com/sales/sales-forecasting (Links to an external site.)(Accessed: 6th November 2017)
Peavler, R. (2016) ‘The sales budget is central to effective business planning’ Available at: https://www.thebalance.com/the-sales-budget-an-example-393024 (Links to an external site.) (Accessed: 6th November 2017)
