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Sales forecasting in marketing is a core, very important activity for most marketers.
That’s because sales forecasting in marketing can help with revenue management, pricing strategy, inventory management, setting marketing budgets, clarifying marketing campaigns, and much more.
What is sales forecasting in marketing?
Sales forecasting is a well-known tool used in marketing to assess the potential performance of a product, service, or entire marketing campaign.
While sales forecasting is simple, that doesn't mean it’s easy.
Sales forecasting is a very valuable activity but it is very hard to do.
But it is totally doable for you.
I have long used these sales forecasting strategies regularly to manage multi-million dollar marketing departments tasked with launching new products, reinventing existing products, and forecasting future sales to existing customers.
And after you are done with this article you will learn some techniques so you can do sales forecasting on your own.
While your sales forecast might be a best guess, by using some basic tools and strategies you can get a very good idea of your future sales.
And it doesn't have to be complicated. The process can be very simple and serve as a very important activity.
First, know that there are many many ways to forecast your sales.
Sales forecasting is a well-known tool used in the marketing realm to assess the potential performance of a product, service, or entire marketing campaign.
This forecasting process utilizes data and analytics to estimate future sales activities and identify opportunities for success.
With use of this predictive analytics, businesses can measure, analyze, and optimize their sales or marketing efforts and therefore strive to reach a maximum ROI.
Let’s review some of the basic foundations of forecasting and then present a simple tool I often use, and you can too.
With the use of sales forecasting, companies and marketing departments can have better control of the success of their marketing and sales tactics and can make adjustments when needed.
When developing a sales forecast, it is important to consider the current industry trends, the size of the target audience, the projected response rate, and market competition.
This information is then used to determine product pricing, production costs, potential risks, and selling channels. With this groundwork in place, marketers can effectively develop an accurate sales forecast.
Here are 6 commonly used sales forecasting techniques used by fellow marketers:
For more information about these techniques and more, visit this help this resource:
Sales forecasting can be applied to various marketing initiatives, such as:
For instance, sales forecasting can be used to assess the effectiveness of a new advertising campaign by predicting the response rate of specific target audience segments.
Additionally, it provides a platform for understanding customer purchasing behaviors and how they would respond to changes in product pricing or promotional sales.
Here is a basic method for a time-series analysis.
The best case scenario for forecasting sales from a marketing campaign is analyzing the recent history of the sales from the advertising campaign(s) that you are currently running.
Here is the formula:
Yt+1 = Yt + Y t-1 + Y t-2 + Y t-3 + Y t-4 + Y t-5 + Y t-6 + Y t-7 / n
After you get a figure, which in this example, is an average of the last 7 days plus today's sales figures, the next step is very important and often overlooked.
Now is the time to ask yourself, “Does this sales forecast makes sense?
Compare the sales forecast to today's sales, yesterday's sales, and the sales of the same day last week (or a similar time frame for another comparison to ensure the forecast “makes sense”).
For example, if tomorrow’s forecast is $13,227.50 but the same day last week was just $6,500, does the forecast make sense?
In this scenario, it probably does not so you will need more information, such as to check with the sales team, check with advertising or get an update on the marketing campaigns for this particular time frame.
Then, it may make sense to do another forecasting method, such as by asking experts in your company, reviewing customer purchase metrics or revisiting some customer feedback to see what is going on in order to make better decisions.
As you see, the advantages of using sales forecasting in marketing are virtually endless.
Using our example of $13,228 sales forecast for tomorrow, you can see how this number will affect sales and customer support staffing needs, inventory requirements, marketing advertising budgets, customer fulfillment systems, and logistics.
If the actual sales are widely missed, and actions are taken on poor sales forecasting methods on a consistent basis, this will deeply affect company operations and will create an unsustainable corporate environment.
But the right sales forecast situations help a marketer truly help the company prepare and identify areas of weakness.
For example, when doing a forecast it is easier to identify if a particular marketing campaign is underperforming.
This can help the marketing team identify ways to increase results through better testing. Maybe it's a price point issue, a weak offer, the guarantee needs improving, or the social proof needs work.
Sales forecasting enables marketers to make smarter decisions and work more efficiently and effectively with their goals.
It can also give businesses a competitive edge by allowing them to capitalize on opportunities to increase sales and market share.
Sales forecasting is essential for marketers to plan and execute successful campaigns and promotions effectively -- enabling companies to make informed decisions and gain a better understanding of market trends and customer behaviors.
This predictive analytics tool helps marketers anticipate customer demands, maximize ROI, and increase sales performance and profits.
Take sales forecasting seriously and your career will be virtually unstoppable.