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How Do You Forecast Sales Growth?

August 24, 2020 DJ Team


Forecasting Sales Growth

Today's marketing professionals have a plethora of tools, techniques, and strategies available to them, but they're still missing the mark when it comes to their target audiences. As e-commerce becomes increasingly complex due to more and more businesses getting on the online bandwagon and growing consumer preference for online shopping, marketing efforts haven't quite kept pace. As online sales venues continue to diversify and expand, parsing through sales data and predicting consumer trends will become more cumbersome and complicated. Fortunately, DemandJump provides marketers with a powerful tool designed to take the guesswork out of digital marketing by taking a transparent approach that reveals the customer journey in greater detail. You'll also receive essential data concerning your competition such as how customers find them, what's driving their traffic, and how well their ads and content are performing. This allows you to draw comparisons to use in marketing strategies going forward and accurately report on your marketing attribution. Keep in mind that successful marketing involves always being one step ahead of the game. Here's what you need to know about demand forecasting models and how they work:


Demand Forecasting Models Overview

Demand forecasting is simply the act of predicting future sales by doing a detailed analysis of historical sales data. This provides business owners and managers with the information they need to make decisions on everything from inventory to outbound sales strategies. Demand forecasting models include quantitative approaches that utilize sophisticated data mining techniques, conjoint analysis, and discrete event simulation, as well as qualitative forecasting methods that use game theory, prediction markets, and simulated interaction.

How to Forecast Demand Growth Rate

Forecasting future demand is a complex, challenging process that includes a number of variables. The first step is to identify and set clear objectives and goals — without them, you'll be left with a hodgepodge of data that may or may not be applicable to your business. Ideally, forecasting methods should result in accurate predictions concerning customer purchasing patterns. After cohesive objectives have been set, the next step is to collect and record all pertinent data. The hard part comes next — measuring and analyzing the data in a way that provides a sales projection report that maps out a clear path to increasing sales.

How to Forecast Revenue Growth Rate

The most widely used, traditional sales forecasting method is to take the sales figure from the previous year and multiply it by a growth rate gleaned by historical performance of the product or service. This is classified as straight-line forecasting and is fairly simple to work out using a basic sales forecast calculator. Other commonly used sales forecasting methods include computing a moving average for a period of several months, figuring simple linear regressions, and multiple linear regressions. Simple linear regressions are used to analyze the relationship between variables for the purpose of making marketing predictions. Multiple linear regressions are used in instances when two or more independent variables are a part of the picture. Many companies use a combination of these strategies to determine a customized method of how to forecast sales growth.

What a Sales Projection Report Should Include

Sales projection reports are important because they determine the basis for determining future expenses such as staffing, production, and budgets. Companies usually have a sales projection report for each month of the coming year. Reports typically factor in variables such as seasonal projections, projected costs of the goods and services necessary to produce the product, projected costs of labor, and projected overall economic growth. Most businesses use some form of revenue forecast calculator as well as templates in order to help ensure optimal speed and accuracy.

The Importance of Algorithms in Computing Forecast Growth Rate

Algorithms are an essential component in crafting an efficient and effective marketing strategy because of the numerous variables involved in 21st-century e-commerce. Algorithms help determine the important characteristics and traits of members of the target audience so that companies can take a craft approach to market forecasting methods rather than simply aiming at the big picture and hoping something sticks. Algorithms simplify what can be an overwhelming process when it comes to answering the question of how to forecast revenue using historical data. Basically, algorithms take complex and vast sets of data and condense them to an actionable set of suggestions to follow moving forward.

As you can see, sales forecasting methods involve an abundance of serious time and effort. Fortunately, DemandJump uses state-of-the-art technology using a proven projected revenue formula to provide you with the information you need to develop a customized marketing plan using data from the past to promote the best possible performance in the future.

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