POSTGRADUATE DIPLOMA IN MARKETING AND MANAGEMENT

Level
2. HIGHER DIPLOMA IN
SALES AND MARKETING


































Module

5 MANAGING MARKETING INFORMATION
SYSTEMS

Managing Marketing Information Systems



Content


1 Forecasting 3

Sales forecasting and budgeting 3
Level of forecasting 6

2 Financial Analysis and Tools 21

Managerial accounting an overview 21
Roles of managerial accounting 22
Major themes in managerial 27
Cost management systems 33
Importance of identifying relevant cost benefits 40
Illustration of cost volume 62
Role of computerized models and electronic spreadsheet 78
Role of accounting products costs in pricing 92
Determining the markup 95
Target costing 102
Purpose of budgeting systems 104
Types of budgets 105
Controlling cost 147
The Structure of the business sheet 172
Control accounts 188

3 Marketing Research 198

The marketing information systems 198
Marketing research 201
The components of modern marketing information systems 215

4 Information Systems and Technology 237

Direct marketing 237
How direct marketing can change markets? 238
Telemarketing 242









Module 5 Managing Marketing Information Systems 1 Forecasting





SALES FORECASTING AND BUDGETING





Purpose

It is utmost importance that the sales manager has some idea of what will
happen in the future in order that plans can be made in advance. There
would otherwise be no point in planning. Many sales managers do not
recognize that sales forecasting is their responsibility and leave such
matters to accountants, who need the forecast in order that they can
prepare budgets (dealt with later). Sales managers do not always see the
immediate need for forecasting and feel that selling is a more urgent task.
Indeed, the task of forecasting by the sales manager is often delayed until
the last minute and a hastily put together estimation with no scientific
base, little more that an educated guess, is the end result. The folly of
such an attitude is examined during this chapter.

When one is in producer's market - similar to the situations in the
immediate post-war years there is less of a need for forecasting as the
market takes up all one's production: it is less a matter of selling and
more a matter of allowing customers to purchase. However, in a buyer's
market the situation is different. The consequences or over-production is
unsold stock which is costly of borrowing the last until of revenue, comes
from the bank overdraft, which is at least base rate of borrowing plus 1 or
2 per cent. It can therefore be seen that over-production and holding stock
can be costly. Conversely, underproduction can be detrimental as sales
opportunities might be missed due to long delivery times and business pass
to a competitor that can offer quicker delivery.


Thus the purpose of the sales forecast is to plan ahead and go about
achieving forecasted sales in what management considers to be the most
effective manner. It is again emphasized that the sales manager is the
person who should be responsible for this task. The accountant is not in a
position to know whether the market is about to rise or fall; all that can
be done is to extrapolate from previous sales, estimate the general trend
and make a forecast based on this.

The sales manager is the person who should know which way the market is
moving, and it is negation of a major sales activity if the task of
forecasting is left to the accountant. In addition, the sales forecasting
procedure must be taken seriously because from it stems business planning.
If the forecast is flawed then business plans will also be incorrect.

Planning

It has been established that planning stems from the forecast and the
purpose of planning is to allocate resources in such a manner as to achieve
these anticipated sales.

A company can forecast sales either by forecasting market sales (call
market forecasting) and then determining what share of this will accrue to
the company or by forecasting the company's sales directly. The point is
that planners are only interested in forecasts when the forecast comes
down to individual product in the company. We now examine the capability
and usefulness of the short-, medium- and long-term forecasts in so far as
company planners are concerned and look at each from individual company
departmental viewpoints.


Module 5 Managing Marketing Information Systems 1 Forecasting

1. Short-term forecasts: These are usually for periods up to three months
ahead and are really of use for tactical matters such as production
planning. The general trend of sales is less important here than short-
term fluctuations.


2. Medium-term forecasts: These have direct implications for planners. They
are of most importance in the area of business budgeting, the starting
point for which is the sales forecast. Thus if the sales forecast is
incorrect, then the entire budget is incorrect. If the forecast is over-
optimistic, then the company will have unsold stocks, which must be
financed out of working capital. If the forecast is pessimistic, then the
firm may miss out on marketing opportunities because it is not.

In addition to the functions already mentioned under of the three-year
types of forecast, other functions can be directly and indirectly affected
in their planning considerations and a result of the sales forecast. Such
functions include the following:

1. It has been mentioned that production needs to know about sales
forecasts so that they can arrange production planning. There will also
need to be close and speedily liaison between production and sales to
determine customer's priorities in the short term. Production also needs
long term forecasts so that capital plant decisions can be made in order
to meet anticipated sales.


2. Purchasing usually receives its cue to purchase from production via
purchase requisitions or bills of material. However, in the case of
strategic materials of long-delivery items it is useful for purchasing to
have some advance warning of likely impending material or component
purchases in order that they can be better plan their purchases. Such
advance warning will also enable purchasing to purchase more effectively
from a price and delivery viewpoint.


3. Human resource management is interested in the sales forecast from the
manpowered planning viewpoint.


4. It has already been mentioned that the financial and, more specifically,
costing functions need the medium-term forecast to budget. The long-term
forecast is of value to financial accountants in that they can provide
for long-range profits plans and income flows. They need to make
provision for capital items such as plant and machinery needed in order
to replace old plant and machinery and to meet anticipated sales in the
longer term.


5. Research and development (R&D) will need forecasts, although their needs
will be more concerned with technological matters and not with actual
projected sales figures. They will want to know the expected life of
existing products and what likely changes will have made to their
function and design in order to keep them competitive.
Market Research reports will be of use to R&D in that they will be able
to design and develop products suited to the marketplace. Such a view
reflects a marketing oriented approach to customer requirements. Here
reports from salespeople in the field concerning both the company's and
competitors' products will be useful in building up a general picture;
such information will be collated and collected by the marketing research
function.

6. Marketing needs the sales forecast so that sales strategies and
promotional plans can be formulated in order to achieve the forecasted
sales. Such plans strategies might include the recruitment of additional
sales personnel.



Module 5 Managing Marketing Information Systems 1 Forecasting





Figure 1. A conceptually based model of judgmental forecasting



Task environment





















A useful model, proposed by Hogarth, involved three interactive forecasting
components: the person performing the task of forecasting; the actions that
are a consequence of that persons judgments; the ultimate outcome of that
judgment. This model is shown in figure 1.

The individual making the forecast is represented in the scheme in terms of
beliefs relating to the forecasting task. This judgment relates to
acquiring and processing information and the output from this information.
This is then translated into action, which are the sales forecast. The
outcome refers to action that along with external factors then produces the
final forecast. Feedback as the forecast becomes reality.

It can thus be seen that an accurate forecast is important because all
functions base their plans on such forecasts. The short-, medium-, and long-
term forecasts all have relevance to some business function and, in the
absence of reasonably accurate forecasting where such plans are not based
on a solid foundation, they will have to be modified later as sales turn
out to be different to those predicated in the sales forecast.

Now that the purpose of sales forecasting has been established, together
with its role as a precursor to all planning activity, we can look at the
different types of forecasting technique, bearing in mind that such
forecasting is the responsibil