Once marketers have estimated company demand, their next task is to choose a level of marketing effort. The chosen level will produce an expected level of sales.
■ The company sales forecast is the expected level of company sales based on a chosen marketing plan and an assumed marketing environment.
The company sales forecast is represented graphically with company sales on the vertical axis and company marketing effort on the horizontal axis, as in Figure 1-13. Too often the sequential relationship between the company forecast and the company marketing plan is confused. One frequently hears that the company should develop its marketing plan on the basis of its sales forecast. This forecast-to-plan sequence is valid if "forecast" means an estimate of national economic activity or if company demand is nonexpansible. The sequence is not valid, however, where market demand is expansible or where "forecast" means an estimate of company sales. The company sales forecast does not establish a basis for deciding what to spend on marketing. On the contrary, the sales forecast is the result of an assumed marketing expenditure plan. Two other concepts are worth mentioning in relation to the company sales forecast.
■ A sales quota is the sales goal set for a product line, company division, or sales representative. It is primarily a managerial device for defining and stimulating sales effort.
Management sets sales quotas on the basis of the company sales forecast and the psy- Gathering Information chology of stimulating its achievement. Generally, sales quotas are set slightly higher and Measuring than estimated sales to stretch the sales force's effort. Market Demand
■ A sales budget is a conservative estimate of the expected volume of sales and is used primarily for making current purchasing, production, and cashflow decisions.
The sales budget considers the sales forecast and the need to avoid excessive risk. Sales budgets are generally set slightly lower than the sales forecast.
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