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Assess the usefulness of sales forecasting to a health and fitness club, such as Virgin Active - Edexcel - A-Level Business - Question 1 - 2017 - Paper 3
Question 1
Assess the usefulness of sales forecasting to a health and fitness club, such as Virgin Active. Sales forecasting is a projection of achievable sales revenue, based... show full transcript
Worked Solution & Example Answer:Assess the usefulness of sales forecasting to a health and fitness club, such as Virgin Active - Edexcel - A-Level Business - Question 1 - 2017 - Paper 3
Step 1
Sales forecasting is a projection
Answer
Sales forecasting is integral for health and fitness clubs as it provides a structured estimate of achievable revenue, leveraging historical sales data, market trends, and consumer preferences. By analyzing past performance, clubs like Virgin Active can devise effective strategies to improve member engagement and optimize resources.
Step 2
Limitations of sales forecasting
Answer
Sales forecasts come with inherent limitations, particularly in the dynamic fitness market. Changes in consumer preferences, competition entry or exit, and unexpected product developments can substantially impact accuracy. For instance, if a new gym opens nearby, it could divert potential members, thus affecting forecasts.
Step 3
The impact of lack of past data
Answer
If a club, such as a new Virgin Active in a chain of 96, lacks historical data, it must make assumptions based on market research. The lack of empirical data means projections might rely heavily on guesswork, potentially leading to gross inaccuracies when predicting membership behaviors and revenue.
Step 4
Challenges with forecasting accuracy
Answer
Forecasts may struggle to predict member behavior accurately. For instance, external factors like a significant health alert can lead to reduced attendance, and events such as equipment failures can deter future memberships, thereby making sales projections unreliable.
Step 5
Economic uncertainty and demand
Answer
Economic conditions further complicate sales forecasting, especially in discretionary spending markets such as health clubs. Fluctuating consumer incomes can directly affect membership numbers, with historical data reflecting variations (e.g., memberships growing from 8.28 million in 2013-14 to 9.50 million in 2016-17).