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Chapter Three “Customer Accommodation”

Chapter Three “Customer Accommodation”. Part Four “Forecasting” You will need to manually advance from slide-to-slide on this presentation. To follow are explanations of certain quantitative forecasting techniques used to predict future sales. No audio on this slide. Quantitative Methods.

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Chapter Three “Customer Accommodation”

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  1. Chapter Three“Customer Accommodation” Part Four “Forecasting” You will need to manually advance from slide-to-slide on this presentation.

  2. To follow are explanations of certain quantitative forecasting techniques used to predict future sales. No audio on this slide.

  3. Quantitative Methods • Continuity extrapolation: incremental dollar or percentage increase is carried forward to the next year.

  4. Quantitative Methods • Continuity extrapolation: incremental dollar or percentage increase is carried forward to the next year. Introduction Product Life Cycle Growth Maturity Decline

  5. Quantitative Methods (continued) • Time series analysis Sales = T x C x S x I Where: T = trends or long-run changes C = cyclical changes S = seasonal variations I = irregular or unexpected factors.

  6. Time Series Analysis Gasoline demand Time --Johnson, Kurtz, Scheuing 1994 “Sales Management”

  7. Time Series Analysis Cyclical changes Irregular or unexpected factors (political crisis) Gasoline demand Cyclical changes Seasonal variation (summer, winter) Cyclical changes (economy) Time --Johnson, Kurtz, Scheuing 1994 “Sales Management”

  8. Quantitative Methods (continued) • Moving average Year Sales 2-year 4-year forecast forecast 1 4200 -- --

  9. Quantitative Methods (continued) • Moving average Year Sales 2-year 4-year forecast forecast 1 4200 -- -- 2 4410 -- -- 3 4305 --

  10. Quantitative Methods (continued) • Moving average Year Sales 2-year 4-year forecast forecast 1 4200 -- -- 2 4410 -- -- 3 4322 4305 --

  11. Quantitative Methods (continued) • Moving average Year Sales 2-year 4-year forecast forecast 1 4200 -- -- 2 4410 -- -- 3 43224305 -- 4 4366 --

  12. Quantitative Methods (continued) • Moving average Year Sales 2-year 4-year forecast forecast 1 4200 -- -- 2 4410 -- -- 3 4322 4305 -- 4 41064366 --

  13. Quantitative Methods (continued) • Moving average Year Sales 2-year 4-year forecast forecast 1 4200 -- -- 2 4410 -- -- 3 43224305 -- 4 41064366 -- 5 4214

  14. Quantitative Methods (continued) • Moving average Year Sales 2-year 4-year forecast forecast 1 4200 -- -- 2 4410 -- -- 3 4322 4305 -- 4 4106 4366 -- 5 4214 4260

  15. Quantitative Methods (continued) • Moving average Year Sales 2-year 4-year forecast forecast 1 4200 -- -- 2 4410 -- -- 3 4322 4305 -- 4 4106 4366 -- 5 4214 4260

  16. Quantitative Methods (continued) • Exponential smoothing: (alpha)(this period sales) + (1-alpha)(this period forecast) = forecast for next period Alpha is any number between 0 and 1. The higher the alpha, the more weight to recent sales.

  17. Quantitative Methods (continued) • Moving average Year Sales 2-year 4-year forecast forecast 1 4200 - 2 4410 -- -- 3 4322 4305 -- 4 4106 4366 -- 5 4214 4260 All data contribute to forecast, but…. …higher alpha means later data has more influence or weight

  18. (alpha)(this period sales) + (1-alpha)(this period forecast) = forecast for next period

  19. (alpha)(this period sales) + (1-alpha)(this period forecast) = forecast for next period Year Sales Alpha Alpha Alpha =.2 .5 .8 • 4200 -- -- --

  20. (alpha)(this period sales) + (1-alpha)(this period forecast) = forecast for next period Year Sales Alpha Alpha Alpha =.2 .5 .8 • 4200 -- -- -- • 4200 4200 4200

  21. (alpha)(this period sales) + (1-alpha)(this period forecast) = forecast for next period Year Sales Alpha Alpha Alpha =.2 .5 .8 • 4200 -- -- -- • 44104200 4200 4200

  22. (alpha)(this period sales) + (1-alpha)(this period forecast) = forecast for next period Year Sales Alpha Alpha Alpha .2 .5 .8 • 4200 -- -- -- • 4410 4200 4200 4200 (.2)(4410) + (.8)(4200) = 4242 (alpha)(this period sales) + (1-alpha)(this period forecast) = forecast for next period

  23. (alpha)(this period sales) + (1-alpha)(this period forecast) = forecast for next period Year Sales Alpha Alpha Alpha .2 .5 .8 • 4200 -- -- -- • 4410 4200 4200 4200 (.5)(4410) + (.5)(4200) = 4305 (alpha)(this period sales) + (1-alpha)(this period forecast) = forecast for next period

  24. (alpha)(this period sales) + (1-alpha)(this period forecast) = forecast for next period Year Sales Alpha Alpha Alpha .2 .5 .8 • 4200 -- -- -- • 4410 4200 4200 4200 (.8)(4410) + (.2)(4200) = 4368 (alpha)(this period sales) + (1-alpha)(this period forecast) = forecast for next period

  25. (alpha)(this period sales) + (1-alpha)(this period forecast) = forecast for next period Year Sales Alpha Alpha Alpha .2 .5 .8 • 4200 -- -- -- • 4410 4200 4200 4200 • 4322 4242 4305 4368 (.2)(4322) + (.8)(4242) = 4258

  26. (alpha)(this period sales) + (1-alpha)(this period forecast) = forecast for next period Year Sales Alpha Alpha Alpha =.2 .5 .8 • 4200 -- -- -- • 4410 4200 4200 4200 • 4322 4242 4305 4368 • 4106 4258 4314 4331 • 4311 4228 4210 4151

  27. End of Program.

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