Distinguish and bring out the major differences between sales planning and sales forecasting.

Distinguish and bring out the major differences between sales planning and sales forecasting. Why and when firms should undertake sales forecasting task. Explain citing two examples.


Differences between Sales Planning and Sales Forecasting
Sales Planning is an integral part of the overall Sales Department; let us try to understand the concept of Sales Management in brief. The concept and the role of Sales Management has been evolving over the years.
There was a time when selling the goods was no problem at all. Orders for goods produced, were always on hand even before the goods were actively produced. The problem was to produce enough goods so as to meet the demand of nereby customers. Maximum time of the management was devoted to manufacturing problems, while selling and marketing were handled on a part-time basis.
With the increase in production and setting-up of large-scale organisations, the problems of market expansion started cropping-up. Total production of goods went so high that nereby customers could not absorb the goods produced, but even under such circumstances other departments took precedence over Sales Management.
The other department which were preferred over Sales Management, were manufacturing and financial department. It was after these departments were set-up that the Sales Management came into being.
As the companies, business and market expansion increased, the distance between its customers and the company also went on increasing. It was here that the problem of communication with its customers, on a regular basis, came up. This function of communication and other aspects of marketing therefore was also assigned to Sales Management.
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Interestingly, as more and more goods were produced, the differentiation between the similar goods of different manufacturers started becoming more and more difficult. Thus a need for the specialised job functions of advertising, promotion, marketing research etc. was felt. Though initially all these functions (now assigned to of marketing Management) were assigned to Sales Management, later on separate specialised functional departments for these functions were created and grouped under the Marketing Manager rather than a Sales Manager.
Thus, we can very well infer, that the meaning of Sales Management has been undergoing a change over the years. Initially it meant the market expansion and the management of sales force. Later on all the marketing activities like advertising, sales promotion, marketing research, pricing etc. were also assigned to it. But still later the term Marketing Management was used to define the broader Concept and the term Sales Management was defined as "Planning, Direction, and control of personal selling, including recruiting, selecting, equipping, assigning, routing, supervising, paying and motivating the sales force. "When looked from the top and given an overall view, the Sales Management is responsible for organising the sales process, both within and outside the companies. Inside the organization, it builds an informal organisation structure, which ensures effective communication not, only inside the sales department but also in its relations with other organisational units. And outside the company, the Sales Management has to service as the company's representatives above, the Sales Management is responsible for some other important functions too. Some of these functions are important in making some key marketing decisions such as budgeting deciding the objective, sales force size, territories etc. .
Sales forecast:
A sales forecast predicts the value of sales over a period of time. It becomes the basis of marketing mix and sales planning.
A short-term sales forecast (say for a period one year) when linked to the sale budget helps in the preparation of an overall budget for the firm as a whole. The short-term sales forecast in effect also provides the essential financial dimension to sales in terms of expected sale revenue and their sources.
A long-term sales forecast (say for a period of 5 years or so) on the other hand, focuses on capital budgeting needs and process of the firm. It provides for changing the marketing strategy of the firm, if needed, and includes reference to emerging product market needs, new market segments to be catered, review of distribution network and promotional programmes, organisation of salesforce, and marketing set up. The long-term sales forecast triggers the task of aligning the production, procurement, financial and other functional needs of the firm with the finalized sales forecast.
The rapid developments in computer hardware and software has made it possible for managers to make sophisticated forecasts with the help of computers. The greatest advantage of this is that managers can introduce subjective inputs into the forecast and immediately test their effects.
Specifically, the last few years have seen sophisticated forecasting models being rewritten using Spread Sheet software programmes for personal computers. Lotus 1 -2-3 and Microcast programmes are now available at reasonably affordable prices. Developments in the computer field especially in computer artificial intelligence systems have also enabled the development of expert systems models i.e., the model that the experts use in making a decision. These are of great us"e when judgement is an important part of the forecast. In future, we are going to see greater use of computers in sales forecasting in India.
In order to achieve forecasted sales and planned profits, a certain level of sales inputs are a must. The required sales inputs when expressed 'in monetary term result in the preparation of the sales budget. Since the sales inputs have to be deployed in anticipation of the sales results which may not be achieved on the expected lined suggest caution to be exercised while expending the sales budget.
Profitable marketing suggests a break up of the sales budget on product-wise, territory sales wise and time-period-wise in the first instance. The second basic requirement relates to close monitoring of the actual sales against the targets on a continuing basis.
The thumb rule is that not more than 40 per cane of the sales budget should be spent in the first six months of the budget year. The underlying logic is that since a sales forecast is based on assumption sales efforts should be spent in conjunction with the culmination of reality as assumed.
The dynamic nature of the market, therefore, requires that the managers must feel the pulse of the market particularly with regard to customer behaviour, competitors plans and reactions as well as the way the market environment unfolds itself. In case the market reality is markedly different form the forecasted one a thorough probe and necessary modification may be required in the deployment of sales inputs budget and even in the profit plan.
In a nutshell, sales forecasting should be treated as a dynamic activity particularly in relation to the sales budget and profit plan of the firm. For, if forecasting is not practised as a dynamic activity then there may be little to regulate the continued use of sales budget and erosion of profitability. It is important, therefore, to use simple yet comprehensive sales information formats to monitor the market and conduct sales analysis at a regular periodicity.