which we define as a set of specified managerial actions to be undertaken to meet or exceed the sales forecast. Examples of plans include production plans, procure- ment plans, distribution plans, and financial plans. Both the sales forecast and the plans should be distinguished from the sales target, which we define as sales goals that are established to provide motivation for sales and marketing personnel.
Note that our definition of a sales forecast does not specify the technique (quan- titative or qualitative), does not specify who develops the forecast within the com- pany, nor does it include managerial plans. The reason for this is that many companies confuse the functions of forecasting, planning, and target-setting. Plans for the level of sales to be achieved should be based on the forecast of demand, but the two management functions should be kept separate. Similarly, target-setting should be done with a realistic assessment of expected future demand in mind, and this assessment comes from the sales forecast. In other words, the functions of planning and target-setting should be informed by forecasts of demand, but should not be confused with sales forecasting.
Note that these definitions imply different performance measures for sales fore- casts than for plans. Since the purpose of sales forecasting is to make projections of demand given a set of specified environmental assumptions, one of the key mea- sures of sales forecasting performance is accuracy of the forecast, and one of the key methods to explain variances in accuracy is how the environment varied from the one defined. This explanation is not intended to excuse forecast inaccuracy; rather it helps us understand the business environment and forecast more accurately in the future.