Case Study 1-1
Revision a Sales Force Approach
Points that helped the decision-making process
Underestimated sales by 21% and 16% in the past two years
David helped create forecasts for a couple of other companies so he should be well
versed in this
They have not tried a mathematical forecasting method before
In the past only top management was concerned with forecasting
Many sales reps prefer the intuition models and customer input
Questions. Assume that in 2017, Andros will spend $1.1 million on advertising, sell its
products for an average of $3,300, and that there will be 36.0 thousand housing starts. Run
a multiple regression analysis. What is the 2017 sales forecast using this approach? Show
the regression equation.
Constant = -398558.33 Coefficient1 (Advertising) = 368.75 Coefficient2 (HousingStarts) =
11089.84 Coefficient3 (Price) = 1602.08
Sales = -398558.33 + 368.75 * 1.1 + 11089.84 * 36.0 + 1602.08 * 3300 Sales = $7,772,694.33
The 2017 sales forecast using this multiple regression approach is $7,772,694.33.
Describe the advantages and disadvantages associated with both the old and the new
approach to sales forecasting. Discuss the accuracy of both approaches.
The advantage of the old approach to sales forecasting is that sales reps like this method.
They can use their own intuition and customers' input for what they believe they will buy in the
next year. Using this method does not involve complicated math, which the sales reps do not
want to spend extra time doing, and the company's higher-ups have always liked it. One major
disadvantage to this method is that it has been very inaccurate in the past two years. This has
caused them to miss out on many sales opportunities. This method is very inaccurate as it is
completely based on guesses and intuition from previous years. It is completely based on guesses
and intuition from previous years. The newly proposed method is much more accurate as it uses
mathematical multiple regression analysis that calculates a very specific number used in previous
years. This tool should be very accurate. Sales representatives do not wish to have to learn the
new math and do not wish to spend time learning how to use this tool.
Based on your analysis, which approach do you recommend? Explain.
Based on the analysis, I would use the new sales forecasting method, because, in previous
years, the forecast has been off costing them some sales they could have otherwise had. It won't
hurt to test out this method to see if it is more accurate as they have lost a lot of money in the
previous years. Testing this out could lead them to make more money in the future.