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Footnote: why sales forecasts miss the mark.

FOOTNOTE: WHY SALES FORECASTS MISS THE MARK While we're on the subject of mysterious mood swings in the marketplace, we thought it might be useful to take a peek at an example of sales data in a relatively raw, unprocessed form. The following graph tracks worldwide monthly unit sales of the PC version of WordPerfect 4.2 and 5.0 from January 1988 through last month, a time period that saw sales jump from an average of 56,000 units to more than 150,000 units:

The biggest sales spike on this trend line, of course, occurred right after the introduction of Version 5.0 in May 1988. Thereafter, however, the graph has steeper peaks and valleys than the Rocky Mountain ranges in WordPerfect Corp.'s own back yard. In theory, the sales line should be a lot smoother: WordPerfect is a cash-rich, privately held operation whose management has no incentive to stuff the reseller channel at the end of each quarter. Moreover, the company is large enough that distributor orders, favorable reviews, and major contracts shouldn't have much impact. Nevertheless, sales jump up and down, often by as much as 25% a month. (For the record, WordPerfect officials have no simple explanation for these fluctuations, either.)

This kind of pattern is particularly frustrating for anyone who has to make short-term projections of software sales. Sales managers, market researchers, and Wall Street analysts are all expected to come up with reasonably accurate estimates of what's likely to happen to monthly and quarterly sales--and often find that their best predictions don't even come close to the mark. The forecasting models aren't to blame; the problem is just that the real software marketplace is a lot more volatile and untidy than professional crystal-ball gazers like to believe.
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Copyright 1989, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:analysis of WordPerfect sales
Date:Oct 24, 1989
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