Part Six: Measurement, Analysis, and Knowledge Management Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall. 13-1

Part Six: Measurement, Analysis, and Knowledge Management

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.13-1

Sales Management: Shaping Future Sales Leaders

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.13-2Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Turning Customer Information into Sales Knowledge

Chapter 13


Learning Objectives

Identify the major elements of customer data integration

Explain how documented, accessible customer information benefits a firm’s various functional groups

Create sales forecasts using the various types of forecasting methods prominently implemented in sales settings


Forecasting Demand

Overestimating Leads to investing in manufacturing and distribution

assets the firm won’t need Example: Caterpillar construction equipment

Underestimating If manufacturing isn’t making enough of the product to

meet demand, door is open for competitors to launch “copycat” products and steal market share

Example: IBM Thinkpad laptop computers



Knowledge Generated by the Sales Force


Customer Data Integration (CDI) Process

Customer knowledge competence: ability to gather, analyze, and utilize customer knowledge effectively at the organizational level

Customer data integration (CDI): technical process of gathering data and making it useful and available

Customer Data Integration Process

Acquire the DataSales dataMarket researchService data

Make the Data UsableFormat, clean, and merge data

Make the Data AvailableVia data marts, analytical software

Use the DataCreate forecastsBuild sales plansCreate pricingCreate marketing plans


Sales-Generated Knowledge: Manufacturing & Product Development

Manufacturing may rely on orders, subsequently manufacture product (furniture) May stockpile products until they’re sold Forecasts important either way

Reps know what their customers are asking for, provide R&D with recommendations for new products or different features Reps are often the first

to run across competitors’ new products

Can provide insight into what customers are willing to pay for


Sales-Generated Knowledge: Finance/Accounting & Marketing

Credit policies affect reps Loose policies = more sales, more

bad debts Tight policies = fewer sales, fewer

bad debts Reps can provide info so credit

policies are competitive Competition pricing, market

conditions, etc.

Reps contribute information before and after marketing campaigns Info before can help design good campaign

Info during helps determine if campaign is working Key term: any increase in sales due to a campaign is called lift


Sales-Generated Knowledge:Sales Management & Human Resources

Info about ease of selling product can lead to decisions Training What products are emphasized Push for price cuts, product enhancements How many reps to hire

Rep info can impact hiring plans Ensure enough employees at the right time Bad sales may = hiring more reps to improve sales, or

perhaps hiring freeze, possibly downsizing



Sales Forecasting


Estimates Used in Sales Forecasting

SalesForecast / Quota

Based on estimate of market and sales potential, create sales forecast of either revenue or units the firm expects to sell

Allocate revenue or units to individual reps as sales quotas

SalesPotential

Maximum market share the company can reasonably expect to achieve

Typically represented as a percentage of a market’s total sales

MarketPotential

Total, industry-wide sales expected for a product category for a period of time

What can reasonably be sold by all companies in a market


Market Potential, Sales Potential, Sales Forecast, and Sample Sales Quota


Estimating Market Potential

Derived demand: demand for a product is created by (or derived from) demand for a product further down the supply chain Can cause wide swings in demand for a product


Factors Affecting Demand

Elasticity

Inelastic demand: there are few or no substitutes and people have to have it, no matter the price

Demand does not change if price changes

Laws & Regulations

Can increase costs associated with products and impose tariffs and trade restrictions on them

Social Factors

General fashions and trends within a society

Example: laptop colors Example: avoiding products from

country with reputation for failing to monitor quality

Demographic Trends

Example: generational differences Example: low birth rate = smaller

market for baby-related products


Ethics in Sales Management

Sales forecasts have a cascading effect

Forecasts influence forecasts of suppliers

Forecasts influence stock price

Scandals: booking false sales to increase stock price Mattel (tentative orders as confirmed sales) Enron (forecasts of continued growth) Anonymous company (place fake orders, then cancel)


How External Factors Can Affect Market Potential


The Forecasting Process

Economic factors Technological

factors Government &

legal factors Social &

demographic factors

ExternalCustomer & distributor surveysMarket research conducted by other firmsGovernment-generated info related to economyExperts’ opinions

Look at the Marketplace

Estimate the Market Potential for the Industry

Look at Sales Potential: Gather Internal and External Info

InternalInfo generated by quantitative methods using sales dataSales mgrs’ estimate for their teamReps’ estimates of their salesExecutives’ opinionsFirm’s plans


The Forecasting Process

ExternalCustomer & distributor surveysMarket research conducted by other firmsGovernment-generated info related to economyExperts’ opinions

Look at Sales Potential: Gather Internal and External Info

InternalInfo generated by quantitative methods using sales dataSales mgrs’ estimate for their teamReps’ estimates of their salesExecutives’ opinionsFirm’s plans

Company-Wide Sales Forecast

Set Quotas for the Period

Forecast Sales

By product By territory By customer

type By time

period

For individual territories

For regions


Is Forecasting Easy?

70% of sales organizations have CRM systems

60% of sales leaders want to improve forecasting processes

50% have difficulty adjusting to market changes

49% have difficulty identifying best sales practices and sharing those

Problem isn’t availability of data – but of understanding!

Source: Jim Dickie, “Analyzing the Sales Process,” CRM Magazine, Oct. 2007, p. 10


Forecasting Methods: Time Series Techniques, Trend Analysis

Group of statistical methods used to examine sales patterns over time

Trend analysis (naïve forecast): determining the rate sales have grown in the past and using that to estimate future sales Can be useful when changes in a market are few and not

very dramatic

Adjustments Moving average: rate of change for past few periods is

averaged Exponential smoothing: type of moving average that puts

more emphasis on the most recent period.


Example of Trend Forecasts and Adjustments


Forecasting Methods: Time Series Techniques, Correlational Analysis

Correlational analysis: form of trend analysis, forecasts are based on trends of other variables Leading indicator: variable that happens before sales

of the company’s product (housing starts) Regression analysis: includes a number of variables;

influence of each variable is estimated and weighted, and effects are summed to provide a single estimate of sales

Consumer spending correlates: variables that predict how much consumers will spend overall (Consumer Confidence Index)

Business spending correlates: variables useful to business in correlational analysis (NAICS)

Survey of Buying Power Estimates

Population by city

Retail sales By city Type of store Type of product

Effective buying income (spending money)

Annual projections and 5-year trends


Available from Nielsen Business Media, through Sales & Marketing Management


Other Forecasting Models

Response models: sophisticated statistical models that examine how customers respond to sales and marketing strategies

Market test: response model that’s especially useful when firms are trying to figure out how well a new product or service is likely to be accepted Company launches in a limited market to learn how the

market will react to the product, demand is extrapolated to full market


Other Forecasting Techniques

Judgment techniques: involve judgments by someone of the actual forecast

Executive opinion: best-guess estimates of a company’s executives

Expert opinion: similar to executive opinion except that expert is usually outside of the company

Customer (and channel) surveys: ask customers (or distributors and retailers) how much they plan to spend

Sales force composite: ask members of sales force what they think they can sell


Self-Assessment Library

Go to http://www.prenhall.com/sal/ Access code came with your book

Click the following Assessments

I. What About Me?A. Personality Insights

5. How Well Do I Handle Ambiguity?


Limitations of Forecasting

Length ofHorizon

The longer the forecasting horizon is, the less accurate the forecast is likely to be

RapidChange

Don’t place too much emphasis on one forecast or one method

Likelihood of an accurate forecast is diminished, particularly if conditions are changing rapidly

DataQuality

“How many do you hope to sell?” vs. “How many will you sell?”

Customer data integration is important

Time andCost

Window of opportunity The longer it takes to get a forecast, the less time

you have to act on info before the forecasting period has passed and conditions change again


Guidelines for Forecasting

Use multiple methods1

Pick the right method for your business2

Use as much info as you can3

Plan for multiple scenarios4

Track your progress and adjust the forecast5

Discussion Question (#6)

For the following products and services, what factor(s) would you use to estimate market potential?a) Campbell’s Soup

b) Fossil watches

c) Pontiac sports cars

d) Bose Wave radios

e) Viagra

f) Calvin Klein men’s suits


Discussion Question (#7)

You just took over as the chief sales officer of Lombardi Trophy Co., a company you’ve worked at for almost 20 years

You know the firm’s sales forecasts are inaccurate because the company has annually added 20% to the quotas assigned to the firm’s salespeople, which collectively they have always met or exceeded

But you need an accurate forecast for various purposes, including budgeting

How would you change the situation so you get accurate forecasts?



Sales Manager’s Workshop

Your boss, regional VP, sends email

Revenue is down 10% this month, which is a poor way to start the quarter

I’d like a forecast from each of you (sales managers)

We’ll discuss Friday on conference call

Using Aplicor data set, create three different forecasts using different methods

Combine them into one brief PowerPoint presentation


Caselet 13.1: Englander Container

Mfgs cardboard shipping boxes for moving and shipping companies

Also sells direct to companies that ship their own products (Procter & Gamble)

Sales figures are provided in textbook

Secured contract to provide containers for US government, can bid on special packaging for military

Currently has $100 million in 4 bids on military contracts to be decided in Q1 next year

Expect to bid on $300 million more decided later in year


Caselet 13.1 (continued): Questions

1. Use two different trend analysis methods and determine how much the company will sell next year. How confident are you that this is an accurate

forecast? What additional information or methods would you

like to incorporate in your forecast?

2. Assume that the company is manufacturing at 90 percent of its capacity in order to meet its current sales levels. If it wins every U.S. government contract it’s bid on,

what impact will that have?


Caselet 13.2: Freud Testing Services

Psychological profile testing for new B2B sales hires

Claims tests are accurate 90% of time

Sells through 22 independent distributors, retail tests for $95/person Sales / distributor range from $10,000 to $100,000 Average sales / distributor ~$22,000 Total sales ~$4 million annually

Owner wants to grow business another $1 million in 2 years

How? Adapting tests for retail salespeople? Different languages / different countries? Additional distributors?


Caselet 13.2 (continued): Questions

1. George Shannon, FTS owner, has called you and asked how to determine potential of each market

2. In a perfect world, how would you answer George?

3. Assuming George had no cash to spend, how would your answer change?

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Part Six: Measurement, Analysis, and Knowledge Management Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall. 13-1