Advanced b2b sales forecasting in Mexico

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foreign [Music] so I welcome you all to the class of business to business marketing and today we are going to talk about a new unit so which is a demand forecasting now what is forecasting you know and why forecasting is important I think you know it is very simple to understand that a good forecast can be very helpful for the company to ah in the growth of the company and if it is a poor forecasting then you know it may result in serious losses to any company now be it a b to b b two c doesn't matter the challenge with B2B is more in the sense because it is due to the characteristics of the product right in the B2B Market forecasting becomes such little challenging why one simple reason is you know ah that B2B Market the products ah have a you know derived demand so derived demand means when we say suppose let us say a ah a when a car sells right so there are so many parts which are attached to the car right now those products will only sell if there is a sales of cars right so the car it is dependent on the sales of cars and so this kind of you know ah joint demand having a you know derived demand approach ah makes B2B forecasting slightly ah complicated for example let us say now the manufacturer of a tube let us say medicine you know tube now how many should I produce if a B2B marketer the B2B marketer obviously his role is to produce the B to the tube right and then that tube may be used by a pharmaceutical company to sell its medicine now the question here is how many uh how much of sales is the pharmaceutical company having right or it's making so that will decide how many tubes will it demand and thus how many tubes should the company that means the uh the producer B2B company should produce right so the B2B demand is directly somewhere related with the demand from the consumer end how much of consumer demand is there that will have a reflection on what kind of a demand forecasting will the B2B marketer do ok now forecasting is predicting the future right now sometimes we look at the future and we try to determine what will happen to me right for example in the last few years we had a tough time when kobit was there and the demand for products was coming down like anything now that not only resulted in the so you know demand for all kinds of products and services so as consumer demand for products decreased that had a direct impact on the business marketers who were building B2B products so that also ah had a great impact and the amount of uncertainty that revolves in the market is sincerely is is very high right so if you see new technologies coming up you know new substitutes coming up in the market so how would a company so uncertainty can be for the industry uncertainty can be for the company so for example if the industry let's say finds that a new technology is coming into place so the industry might get affected on the whole on the other hand it could be individual firm right so the individual firm can get affected by its competitors you know the substitutes right whatever can come so that can also impact the companies so demand forecasting is the process of understanding and predicting this consumer demand the customer demand and how the question is then that means if if we are going to predict the customer demand and the consumer Behavior the patterns are all changing with time right so people in the market they're they're buying Behavior everything is changing so in such a situation how difficult it is to predict the future right that is what ah we are going to discuss in this forecasting unit for cases of forecasting now Steve Baumer who was the CEO of Microsoft he made a prediction about Apple iPhones and he said Apple iPhone is the most expensive phone in the world and it doesn't appeal to business customers because it doesn't have a keyboard which makes it not a very good email machine right now just imagine today Apple we all know is the is the largest one of the largest selling you know companies ah you know phones and iPhone has a great very huge demand and this company is has become the most Innovative and the best company in the world right so a man like Steve bomber who was heading Microsoft now could even predict what would be the future of of iPhone right let's take a few more examples in the 60s you know the U.S ah you know the business week one of the popular magazines said that Japanese cars in the US would not succeed they would fail what did they say with over 50 foreign cars already on sale here the Japanese Auto industry isn't likely to carve out a Big Slice of the U.S market and we all know what happened then right Japanese car makers they invaded the U.S market and they you know increase their you know sales tremendously another interesting you know prediction or you know forecasting was by you know Daryl uh januk so what did he say this is a movie producer who said on the future of televisions and he said television won't last because people will soon get tired of staring at a plywood box every night and he said this to 20th Century Fox in 1946 and then what happened today I think in almost every home we have at least one television or even more than that right the last and very interesting is a university professor on the you know said something on the demand for overnight parcel delivery what is quotation quote was he said the concept is interesting he told it to his student the concept is interesting and well formed but in order to earn a better you know earn a better grade than C that means C is a very poor grade right A B C so C is not a good grade he said if you want to earn a better grade than C then the idea must be feasible this was in response to Fred Smith's University you know uh professor you know Fred Smith actually happens to be if you don't know uh Fred Smith was the founder of FedEx right so it was uh his proposal right ah his uh you know one of his academic work in which he had made this proposal of reliable overnight delivery service and you know Smith later found ah FedEx we and he created history or after that so sometimes you know people who are into education who have a knowledge and who are from the industry who have very you know clear uh idea about the market they do tremendous errors in forecasting so forecasting is not that easy it's a challenge but then we have to somewhere you know try to control it otherwise what will happen we will be playing on gut feeling that is like a taking a chance which can be very dangerous for a company so this is a case now if you see every day Amazon right is one of the most popular brands in the world easily one of the most popular brands so this retailer has ah moved from becoming only a retail company to today it has become a data management company right it has a huge amount of data right if I'm not wrong it's all almost the highest amount of data it stores with it so ah it has various Services now imagine a fresh Amazon Kindle Amazon Prime and many more right Amazon you know web services so what exactly do this you know does this company do and we are not talking about its as Amazon as a retailer but we talk about is AWS right so if you see AWS which is Amazon web services they serve they provide services to almost many companies like me show more quality swiggy Axiom Telecom affordable tools.com so they work as Consulting partners for them and they help them in you know understanding the demand forecasting for these companies ok and this is not all this is just a small you know you know number of customers from AWS so this is this actual list may be very very huge so what is Amazon doing here imagine what is Amazon doing in this case now Amazon is helping these companies in creating ah you know forecasting models so forecasting is the answer for what Amazon is doing right forecasting for this web-based businesses so how does Amazon do that so let's see this now Amazon if you see has historical data so it takes from the sales web traffics inventory ah you know numbers cash flow exact or etcetera all this data so they have this data and then they collect data like for example holidays product descriptions promotions they try to use this data together and they uploaded the historical and related data to the Amazon forecast so a company suppose for example whatever data it has got let's say we take the case of Michelle now Misha will upload their historical data into the Amazon web services in the cloud and then Amazon will help them in forecasting so imagine forecast automatically inspects the data identifies the key attributes and selects right algorithms needing for needed for forecasting then it trains and optimizes your custom model so whatever model the companies are following at this moment Amazon will try to improve upon that and then as an output they give you the customized forecasting model right so Amazon generates this customized forecasting model so the output can be you know visualized in a console or it can be in the CSV format so you can you know collect this output and use it for your decision making process so this service that Amazon is giving has been helpful to several companies around the globe including retailers pharmaceutical industry fmcg companies what not right and anybody who is on the web they are finding it extremely useful ok so I am not promoting for Amazon but Amazon is doing it right so let's see the clear definition of forecasting now forecasting is a technique that uses historical data as inputs to make you know informed estimates that are predicted in determining the future Trends so where is the future Trend moving how ah what is the new trend in the market what consumers are demanding and what do they expect from the marketer so forecasting helps us to give that idea OK and so a poor forecasting will obviously be dangerous and a good forecasting will reduce the sun certainty and give us a direction to move now some examples for forecasting which how forecasting helps is finding the profitability so we can you know ah forecast what would be the next year's profitability for the company now how are we doing it depending on several attributes several variables we will decide to how much of profit the can the company make demand forecast is something that is extremely crucial to any company so any company that manufactures something or the other right would like to know what kind of demand it will generate in the next coming for the annual year now here forecasting becomes very important because it can you can use your past data for example last five years data 10 years data 20 years data and then maybe you know the recent data is always better so you can take and try to extrapolate into the future you what next would be the demand for the coming year so by understanding this kind of data that is you know that this kind of demand the company can ah ingly try to you know create an infrastructure supply chain ah you know mechanism so that in the uh in the right moment they have the adequate necessary things okay it also helps to determine the inventory forecast so how much of each raw material that is required to produce the output how much it is there with us and how much would be required so that inventory forecast is ah done by In This forecasting process and web traffic forecast is how many people would for example like visit my site how many of them would be what time of the day they would visit which gender would be more visiting my let's say a website what kind of uh you know events are important for the the customers the potential customers so every small detailed information it helps us to understand the future right so so that is web traffic forecasting is also important and this has become very relevant it today is world and especially for markets which are like B2B markets where it has become important to understand that what kind of uh you know traffic come to my website and how do they how much time they spend what kind of activities do they do on the website so every information becomes very important so that engagement and all things are very important for the marketer to understand that demand forecasting is a tool used for predicting future demand as I said right based on the past demand information so here you can see for example January February March April May June July August and here we want to know what is the let us say demand that would be ah you know in the last month so from taking these values maybe we can determine right okay the the value the next the demand for the last month could be somewhere here okay so this is just an you know example right so demand forecasting is done through this way the question is you know demand for products and services is usually uncertain now that word uncertain is a very keyword so forecasting is used for you know strategic planning ah Finance and Accounting budgets uh production and operation marketing everywhere so since this uncertainty is prevalent in the market and we don't know how people would behave what would be in demand what products will come into the market because you know trying to understand the market trying to understand what the competitors are doing how much of r d is being done what new products might be coming up in the future and what effect that will have on my products all these are the uncertainties always prevalent in the market how sensitive are people to prices right if I change the price what will impact ah what impact will make on my product demand all these important points so uh a proper Force forecasting is used for strategic planning as it is mentioned here so the company can decide what can be the future strategies for example you see if a company wants to invest in a new plant which is a 10 year old ah let us say at least a 10 year time period they have to think right and suppose they realize that they are not able to estimate the demand properly how and what ground can they invest in the company's capacity expansion so that is a challenge they cannot do it so that is where you know ah forecasting is very helpful and if you don't have let us say you do not have the necessary infrastructure and suddenly the market is a demand then you may miss out you cannot participate in the market demand so that's a loss the company will have to bear so that is why if you have forecasted well then it can be highly beneficial so similarly Finance and Accounting budget how much of money has to be you know kept for promotion how much for capacity expansion how much for product r d all this has to be ah is very helpful similarly in our production and operation as I said and marketing so understanding the consumer Behavior what kind of Behavioral changes consumers are going through what demands might come into the in the future so all these are the different uh Necessities that are the you know important points that forecasting helps us to achieve okay what are the key issues in forecasting so when you are doing forecasting as we have said you are trying to reduce the uncertainty if I say in a simple term forecasting is a method if I have to Define forecasting is a method of reducing the uncertainty and giving it a Direction so a forecast is L only as good as the information included in the forecast which is the past data right so a future forecast will be dependent on the past ah data that is available to here right history is not a perfect predictor of the future sometimes let us say in the past you must have seen certain companies have not performed well for a lot of long time period let us say the chemical industry in India was going through a lull period for a long period of time but in the last if you see from 2000 and you know 10 onwards 10 11 or let us say last decade chemical companies have exceedingly performed have done extremely well right and you can see so many different chemical companies who have performed extremely you know well in the market so history may not be a perfect predictor but then you can't even ignore history because obviously history we take the value from the of the past from history only so forecasting is based on assumption that the past predicts the future and when forecasting think you know carefully whether or not the past is strongly related to what you expect to see in the future now for example now after kovid you see many companies for example India has started its ah you know Drive ON Semiconductor development right now that was unheard of in India but now the world saw that dependence on China is becoming a major issue right at least in the Covenant times they found that so they needed a one plus strategy you know besides China another Market that could support them so now taking this Advantage India is now planning to have its own you know ah obviously semiconductor industry so now they have you know there is one Foxconn ah has tied up with vedanta and now they are planning to set up many more players might come obviously this is a very huge Capital expenses if you know intensive industry so it's not easy but still there would be many players would show interest even the tatas had shown interest to be in this business but slowly we will find that right now let's see now this is a small example so can you see this for example these are the data of different months so the sales of Audi right has been given so can we predict from here what would be the sales of July can we predict for by looking ignore this part just look at this data so by looking at this data can I predict the data for the month of July yes I can OK if I have this data can I predict the sales of Audi another version by looking at the sales of this version this this this version maybe maybe I can it depends on what kind of similarity is prevalent in these two models if the similarity in the model similarity in the model right and in the model and similarity in the market they are ah you know catering to maybe I can at least if I have no data it is at least better to have some data right maybe it is partially correct but at least we are better off in a position when we have no data right so it helps us to understand the market sensitizes us so can we print the new model based on the data in the table maybe we need to consider how much of the two markets have in common ok so what makes a good forecast first of all it should be Timely right forecasting is only helpful if you have in the right time after the time has passed by if you get a good forecasting report it's of no use it should be accurate as possible as accurate so nobody is claiming here that it can be hundred percent accurate because you are dealing with a real life situation so at least if you are close even 60 percent is not bad because you are much ahead than twenty percent or thirty percent it should be reliable the data has to be reliable and it should be in meaningful units if you if you give a forecasted ah you know value what units you are using you should be very clear you should not be using something which makes it complicated or unnecessarily not readable or understandable you should be presented in writing also right and the method should be easy to use and understand in most cases so if these are some of the things that you need to keep in mind while making a good forecast what are the basically types of forecasting methods we use two methods one is the qualitative method and the quantity method so the quantitative method ah depends on data and analytical techniques so we will see that and the qualitative methods basically live on subjective opinions from experts and you know kind of people who are who know the subject uh and their and they have worked in the field so if you look at you know quantitative forecasting methods there are some methods like Trend projection regression analysis correlation analysis input output analysis and some economic econometric models OK basically we largely look at historical methods weighted moving smoothing exponential kind of methods integration correlation so all these are different methods which are used by marketers to forecast the future ok so ah quantity method methods have their own Advantage but again they can go wrong because as we said sometimes the past doesn't exactly determine the future because in between something may might have happened in the environment or in the political geopolitical scenario or something so it's difficult so to ah work upon that what we do is we may use a qualitative forecasting method which is for example like Delphi technique panel consensus historical analogy Salesforce composite and marketing research market research techniques so by using these kind of techniques what the researcher or the company manager can do is they can understand that what changes have happened which mathematically it is difficult to place or understand it because you might not be having any tangible value for that but some subjective knowledge of people or experts in the field can be brought into this and that can be utilized to balance out the you know uncertainties that has recently happened for example now if you look at only data so maybe the if and you don't take into account the covet situation or the you know recession that has had happened in the past if you do not consider this then you would look you would feel that as if the data has suddenly plunged so you have to understand if it has plunged why it has plunged and will this scenario stay for more time or it will go away so this will be actually helpful and this can be only you know understood by speaking to experts from the field or taking a survey of people who are relevant to us so with all this you know kind of methods a company can easily a forecast okay what it can do in the future right so in the next class we will continue in detail about this qualitative and quantitative methods of forecasting ah till then take care and thank you very much oh [Music]