Sales Forecasting Models and Applications

This assignment delves into the realm of sales forecasting models, examining both traditional and modern approaches. It specifically analyzes general sales forecast models used in automobile markets, drawing upon relevant research studies. The assignment also explores the influence of Artificial Intelligence (AI), particularly focusing on examples like FiveAl, on contemporary sales forecasting practices.

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QUALITATIVE SALES FORECASTING
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TABLE OF CONTENTS
1.0 Executive summary...............................................................................................................................3
2.0 Introduction...........................................................................................................................................4
3.0 Literature Review..................................................................................................................................4
3.1 Importance of qualitative sales forecasting for FiveAl......................................................................4
3.11 Understanding and managing cash flow......................................................................................5
3.12 Planning on procurement and production....................................................................................5
3.13 Revenue projection......................................................................................................................6
3.14 Supply chain efficiency...............................................................................................................6
3.15 Supplier and customer satisfaction...............................................................................................6
3.16 Enhancing flexibility...................................................................................................................7
3.2 Methods of producing qualitative sales forecast................................................................................7
3.21 Delphi method.............................................................................................................................8
3.22 Executive opinions.......................................................................................................................8
3.23 Salesforce polling........................................................................................................................9
3.24 Consumer surveys......................................................................................................................10
5. Conclusion.............................................................................................................................................10
6.0 References...........................................................................................................................................11
7.0 Appendix.............................................................................................................................................14
7.1 FiveAl sensor fusion cars.................................................................................................................14

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1.0 Executive summary
Qualitative forecasting is very important in businesses more so to startups. This report
highlights the importance of sales forecasting in a business environment. Some of the identified
benefits include; enhancing flexibility, revenue projection, planning for production and
procurement, enhancing supplier and customer satisfaction, and helps in improving efficiency in
service delivery. Moreover, achieving these important business processes is realizable by the
following methods of qualitative sales forecasting; Delph method, consumer surveys, salesforce
polling, and executive opinion. The report examines how FiveAl can successfully apply the
abovementioned strategies to overcome barriers associated with network marketing to grow the
business to every corner of the world.

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2.0 Introduction
When a start-up begins regular sales activities, it is of great importance to create periodic
sales forecasts. According to Currie and Rowley (2010), a sales forecast is the process of
projecting the future expected sales revenue for a specific period of time. It can be one month,
year, or even five years depending on the organizational goals and objectives. Hülsmann et al.
(2012) observes that a sales forecast is essential in understanding and managing sales activities,
and also in facilitating growth and development goals of the whole company. Moreover, sales
forecasts depend on capturing and analyzing important data about the startup's sales activities.
These data may include; expenses, closed deals, cold calling, and many others depending on the
level of the organization at hand (Chung, Niu and Sriskandarajah 2012). Sales forecasting in
business often uses qualitative and quantitative data to make projections for the business.
However, for this FiveAl’s case study, we are going to discuss the importance of qualitative
forecasting. Moreover, when marketing managers use methods that do not rely on data to help
make forecasts, then, the method adopted is referred to qualitative forecasting (Chung, Niu and
Sriskandarajah 2012). In most cases, making judgments of future sales and revenue prediction
usually depend on judgments and opinions.
3.0 Literature Review
3.1 Importance of qualitative sales forecasting for FiveAl
In every business, managers use sales forecasting results to inform and support their
decisions (Mentzer and Moon 2004). The owners of startups can often use sales forecasts to
determine the next investment direction and planning of a marketing campaign. Managers of
these startup businesses use opinions, experience, and judgments from sales staff and other

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sources such as network marketing agents to project how the future business will look like
(McCarthy and Golicic 2002). Above all, sales forecast can be very vital to businesses in the
following ways;
3.11 Understanding and managing cash flow
Sales forecasts help businesses to understand and manage their cash flows (Mentzer and
Moon 2004). Sales forecasting is very important as it helps startups to project their sales and
expenses at the same time. This helps caution the business against unnecessary expenditure
which might hurt the business in the long run. Surprisingly, many businesses have gone bankrupt
by failing to adequately plan for their cash flow and liquidity. Lack of forecasting would at times
makes businesses unable to meet their financial obligations despite engaging in the business
activity on a daily basis (McCarthy et al. 2006). Therefore, it is very crucial for FiveAl to make
calculated sales forecasting by recruiting more customers through network marketing while
managing expenses in the process. This will make sure that the company is stable and can
survive in the changing competitive business environment.
3.12 Planning on procurement and production
Sales forecasting assist startup businesses in planning their logistics capacity, production,
and procurements (Moon, Mentzer and Smith 2003). Startups commit many hours, resources for
business development activities just to drive up sales. It enables startups to come up with
strategies to recruit more distributors to drive up sales goals. In particular, through sales forecast
by FiveAl, the startup company is able to identify cities that can help them achieve development
objectives. More so, they can focus on cities with more population but are experiencing
challenges related to transport. Through network marketing, FiveAl can get more agents from
different cities to bring more people on board to embrace their business model. In this case,

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expenses will be cost incurred in paying recruiting agents and production is the turnover from
respective taxi operators. Balancing the two will ensure business sustainability and survival in
this competitive economy.
3.13 Revenue projection
Sales forecasting enable startups to develop medium and long-term revenue projection
(Byrne et al. 2011). Furthermore, investors in startups usually like to know and understand how
the plan for the business and how it will push up sales volume. When a business can present a
more accurate revenue forecast, potential investors will regard the business as credible as thus
give the necessary support. It is therefore important for businesses to take utmost care when
coming up with a sales forecast.
3.14 Supply chain efficiency
Managing a supply chain of a business can be very effective when sales forecast is
managed efficiently and economically (Davis and Mentzer 2007). In transport business, different
cultures have a variety of approaches on whom handle the system. As such, sales forecast will
be more effective if the management identifies this belief in the community. Moreover, taking a
network marketing approach for FiveAl products will ensure that the services reaches every
corner of the world in few years’ time. It will not only lead to an improvement in sales and
uptake but there will be a mutual relationship between the FiveAl business and the society.
Furthermore, such relationship is very important for the growth of any business.
3.15 Supplier and customer satisfaction
Smooth management and accurate predictions of a supply chain make it easy to sell a
business idea in a particular locality (Michael 2011). For example, FiveAl plans to reduce the
number of hours that people spend while stuck in traffic. Besides, the company products are cost

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effective, making it more affordable to the majority of users. Intrinsically, many people are
losing lives because of careless driving. FiveAl products meets the requirements of people by
providing cost effective products, which not only save lives but also reduces the number of hours
wasted in traffic jams.
3.16 Enhancing flexibility
Qualitative forecasting makes it favorable for the management to use judgment and
intuition of industry experts, sales professionals, and experienced managers (Winklhofer and
Diamantopoulos 2002). Therefore, it improves the quality of forecasts since data cannot capture
nuances that comes with several years of experience. Moreover, FiveAl has operated for less
than two years to rely more on quantitative data. Again, the new concept introduced by FiveAl is
one of a kind that has revolutionized the taxi business (O’Hear 2016). The flexibility to collect
valuable data from network agents can greatly push the growth of FiveAl. When the company
will consider network marketing strategy to reach more customers, then, it will work to stabilize
its operations in the long run and expand to every corner of the world. It is also evident that some
companies embracing the FiveAl idea are considering merger or acquisition. Therefore, with
thorough MLM, FiveAl will take over in most markets as it a developing brand with a global
coverage.
3.2 Methods of producing qualitative sales forecast
Sales forecasts are very integral in the budgeting process for a business. Sales forecasts
help in determining financing needs, cash requirements, required labor hours, inventory needs,
and volume of production (Armstrong 2001). However, FiveAl does not deal with inventory
since they have pushed to individual taxi owners. In addition, management of both public and

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private organizations operate under immense risk and uncertainty. As such, sales forecasting
plays important role in shaping daily and future investment decisions. In this context, FiveAl
must plan and make a budgetary allocation to facilitate the process of the network working. This
move will help in reducing risk in decision making. In particular, FiveAl can make qualitative
forecasts on judgment and opinion using the following approaches in the next six months;
consumer surveys, sales force polling, Delphi technique, and executive opinions.
3.21 Delphi method
This method involves a group of people where a panel of experts questions them
individually how they perceive future events of the existing business model (Chang and Wang
2006). The participating experts meet the participants individually to minimize the possibility of
reaching a consensus agreement which may arise from dominant personality factors. After the
individualized interviews, another outside party summarizes the forecasts and accompanying
arguments and then return to the experts together with additional questions. The process carries
on until they meet amicable consensus. Linstone and Turoff (2002), found out that this
qualitative method is beneficial and operational for long-term forecasting. The method seeks to
get individual opinions by the use of questionnaires as it eliminates debates or committee. It also
avoids peer influence which might compromise the outcome of the forecasts. For example,
FiveAl can seek the opinion from existing taxi experts in the new market they wish to venture.
These experts are interviewed separately. Then, the situation will be very clear on the possibility
for FiveAl to implement their plans or not. On the same platform (Landeta 2006). FiveAl
executives will realize the applicability of network marketing in the market.

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3.22 Executive opinions
The independent views of experts or executives from administrative, purchasing, finance,
sales, and production are put into considerations when generating sales forecast for the future or
in venturing into other markets. In most cases, this method at times seeks the help of quantitative
approaches such as trend extrapolation (Kahn 2002). Since there are representatives of FiveAl in
cities outside London, where they operate, they can work together with the local partners in
arriving at such decisions of projecting their growth. Besides, FiveAl can also seek the opinion
of the pioneers of the business in new cities to try and suggests ways through which the company
can use to expand its roots. In an open market, these local executives will make it easy for
network marketing to work since there will be a local individual pushing for the uptake of the
new product (Kahn 2010). Nevertheless, this approach is favorable for faster decision making,
without the need of elaborate statistics which at times requires expert interpretation.
3.23 Salesforce polling
Under this strategy, companies seek the opinion of the salespeople since they are
constantly interacting with the consumers in the people. It thrives on the premise that salespeople
are closest to customers and thus can have substantial insight concerning the condition of the
future market (Shim 2000). Average of their opinion is developed which forms the foundations
of future decisions. For the case of FiveAl, users of autonomous driving form the best sales force
polling team. In the process of delivering services to other potential customers, they can ask
them their opinions about FiveAl, specifically how they perceive its future in the transport
industry. The same effect can apply in MLM strategies, where the first recruits seek an opinion
of other people whether they can earn more income by selling the autonomous transportation
idea to other new customers.

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At the end of the day, opinions collected forms very valuable insights into current and
future decisions (Šečkute and Pabedinskaite 2003). This qualitative approach is simple to
understand and apply. Additionally, using specialized knowledge from those using the services
leads to making right decisions which can produce positive results. It is also easy to break down
the information by salesperson, customer, product, region which ultimately leads to effective
decisions.
3.24 Consumer surveys
Startup companies like FiveAl can conduct market surveys regarding their products on
their preferences and reasons behind them. Examinations may comprise of personal interviews,
questionnaires, or telephone contacts as a way of obtaining qualitative data. Further, it may
involve extensive statistical analysis to survey the results when testing the hypothesis regarding
consumer perception of their riding services (Šečkute and Pabedinskaite 2003). Intrinsically,
FiveAl came into the market to create convenience in pricing, time management, and
accessibility in the traditional taxi business. Therefore, getting consumer perception will help
them improve on some areas which may impact the business negatively.
5. Conclusion
Qualitative forecasting is very important in businesses more so startup as it helps in
enhancing flexibility, revenue projection, planning for production and procurement, enhancing
supplier and customer satisfaction, and helps in improving efficiency in service delivery.
Moreover, achieving these important business processes is realizable by the following methods
of qualitative sales forecasting; Delph, consumer surveys, salesforce polling, and executive
opinion. When FiveAl considers the abovementioned strategies, then, the company will

Qualitative Sales Forecasting 11
overcome barriers associated with network marketing to grow the business to every corner of the
world.
6.0 References
Armstrong, J.S. ed., 2001. Principles of forecasting: a handbook for researchers and
practitioners (Vol. 30). Springer Science & Business Media.
Byrne, T.M.M., Moon, M.A. and Mentzer, J.T., 2011. Motivating the industrial sales force in the
sales forecasting process. Industrial Marketing Management, 40(1), pp.128-138.
Currie, C.S. and Rowley, I.T., 2010. Consumer behavior and sales forecast accuracy: What's
going on and how should revenue managers respond. Journal of Revenue and Pricing
Management, 9(4), pp.374-376.
Chang, P.C. and Wang, Y.W., 2006. Fuzzy Delphi and back-propagation model for sales
forecasting in PCB industry. Expert systems with applications, 30(4), pp.715-726.
Chung, C., Niu, S.C. and Sriskandarajah, C., 2012. A Sales Forecast Model for Short‐Life‐Cycle
Products: New Releases at Blockbuster. Production and Operations Management, 21(5), pp.851-
873.
Davis, D.F. and Mentzer, J.T., 2007. Organizational factors in sales forecasting
management. International Journal of Forecasting, 23(3), pp.475-495.
FiveAl., 2017. Our technology. [Online] (updated 2017) Available at <http://www.five.ai/>
[Accessed Oct. 21, 2017]
Hülsmann, M., Borscheid, D., Friedrich, C.M. and Reith, D., 2012. General Sales Forecast
Models for Automobile Markets and their Analysis. Trans. MLDM, 5(2), pp.65-86.

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Kahn, K.B., 2002. An exploratory investigation of new product forecasting practices. Journal of
Product Innovation Management, 19(2), pp.133-143.
Kahn, K.B., 2010. New‐Product Forecasting. John Wiley & Sons, Ltd.
Landeta, J., 2006. Current validity of the Delphi method in social sciences. Technological
forecasting and social change, 73(5), pp.467-482.
Linstone, H.A. and Turoff, M., 2002. The Delphi method: Techniques and applications (Vol. 18).
Addison-Wesley Publishing Company, Advanced Book Program.
Michael, G.C., 2011. Sales forecasting. Marketing Classics Press.
Mentzer, J.T. and Moon, M.A., 2004. Sales forecasting management: a demand management
approach. Sage.
McCarthy, T.M., Davis, D.F., Golicic, S.L. and Mentzer, J.T., 2006. The evolution of sales
forecasting management: a 20‐year longitudinal study of forecasting practices. Journal of
Forecasting, 25(5), pp.303-324.
McCarthy, T.M. and Golicic, S.L., 2002. Implementing collaborative forecasting to improve
supply chain performance. International Journal of Physical Distribution & Logistics
Management, 32(6), pp.431-454.
Moon, M.A., Mentzer, J.T. and Smith, C.D., 2003. Conducting a sales forecasting
audit. International Journal of Forecasting, 19(1), pp.5-25.
O’Hear, S., 2016. FiveAl picks up $2.7 to build Al-driven software for autonomous vehicles.
[Online] (updated 2017) Available at <https://techcrunch.com/2016/07/12/fiveai/> [Accessed
Oct. 21, 2017]

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Šečkute, L. and Pabedinskaite, A., 2003. Application of forecasting methods in
business. Journal of Business Economics and Management, 4(2), pp.144-157.
Shim, J.K., 2000. Strategic business forecasting: the complete guide to forecasting real world
company performance. CRC Press.
Winklhofer, H.M. and Diamantopoulos, A., 2002. Managerial evaluation of sales forecasting
effectiveness: A MIMIC modeling approach. International Journal of Research in
Marketing, 19(2), pp.151-166.

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7.0 Appendix
7.1 FiveAl sensor fusion cars
Source: FiveAl

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