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The Exceedra


From total volume forecasting to ‘One Number’

Ensuring no potential revenue is left on the proverbial table during the sales forecasting process.

Sales volume forecasting is no longer a matter of ‘same as last year with adjustments for Easter’ based on set promotional programs.  As a result of COVID and shifting consumer and retailer behaviors, promotional programs are changing and that means promotional sales lift forecasting likewise needs to be reviewed as an input into total volume planning.

There are a number of steps to this.

First up is the need to review sales baseline assumptions. Simple measures in the past have included calculating weekly sales averages prior to promotional periods and adjusting for seasonality. Enterprise systems can help with a more detailed dataset going back years to review multiple non-promotional periods to set a robust baseline. True baselines need to be established by channel and customer, not just at the macro level.

Once the sales baseline is established the historic promotional lifts achieved can be analyzed, with seasonality taken into account by reviewing similar promotional time periods in previous years. Adding the promotion duration, typically expressed in week numbers, allows for linear regression analysis to look at trends.

Using an enterprise system then allows you to add different features to the data to enable micro analysis. These might include category features, product identifiers and channel and store types. True promotional uplifts capture also takes into account aspects such as promotion mechanics, pantry loading and forward buying, price elasticity, pre and post promotion volume dips, and cannibalization of your company’s products as well as those of competitors.

Once you’re at this point, IBP (Integrated Business Planning) components can be included. Beyond historic performance and the planned promotional program, this can include inputs from annual operating plans, joint business planning with customers, price changes, and likely omnichannel instore KPI compliance as well as an allowance for external factors both planned and unforeseen, such as extreme weather events.

Having arrived then at an accurate financial forecast, a final step is to employ a ‘one number’ approach combining the financial forecast, the integrated demand and supply plans, and the ‘bottom up’ channel and customer plans. This involves rolling up retailer trading terms, fees and allowances so they can be managed as one lump sum but allowing for the ability to pull them apart if you have an issue with a customer’s promotion compliance and want to withhold a trading term payment.

Allowing for these multiple levels of forecasting and planning with robust micro inclusions thus minimizes the amount of revenue that may be left on the table.

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