Transformation of customer information into sales knowledge

Group members

Zumair zahid

Sana akbar

Saba sheikh

Key elements• Knowledge gather by firms sales forces • Sales forecasting• Ethics in sales management• Forecasting process• Forecasting techniques• Limitation of forecasting• Guidelines for forecasting

Knowledge generated by the firm sales force

• Customer knowledge competence

• Customer data integration

• Data mart

• Manufacturing

• Product development

• Finance and accounting

• Marketing

• Sales management

• Human resources

Sales forecasting

• Market potential

• Sales potential

• Sales forecast

• Derived demand

• Elasticity

• Inelastic demand

Ethics in sales management

• An educated guess!!

• Sales forecast effects

• Sales forecast influencing suppliers forecast and stock prices

Ethics in sales

• Wrong forecast to increase sales

• A few examples

• Mattel booking tentative orders

• Enron’s spiral downward for continued growth

• And an unknown company taking fake orders

factor Influence potential

Economy Economic influences can make market potential greater or smaller; e.g china’s increased manufacturing base

Technology New technology can create substitute products, e.g new drilling technology

Legal & regulatory

Laws can make products illegal; increase the costs associated with the product

Social factor Changes in fashions & trends affect demand. E.g trans fat

Demographic trends

Demographic trends can shift demand. E.g baby boomers

Factors that affect market potential

Forecasting process

Look at the market place:Economic, technological, government & legal, social & demographic factors

Estimate the market potential for industry

External info •Customer & distributor surveys

•Market research conducted by other firms

•Government-generated info related to economy

•Experts’ opinions

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

Forecasting process

Forecast sales by product, territory, customer type, and time period

Make a company wide sales forecast for the period

Set quotas for individual territories & regions for the period

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

Forecasting methods

• Many different statistical tools are there to measure forecast:• Time series techniques also known as naïve forecast• determining the rate sales have grown in the past and using that to

estimate future sales• 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.

Forecasting Methods

• 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

Response models

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

MARKET TEST

• A market test is an experiment in which a company launches an offering in a limited market in order to learn how the market will react to the product.

• DRAWBACKS: Alert your competitors to the new offering. They can then undertake actions like price

cuts…

JUDGMENT TECHNIQUES

Some techniques involve judgments by someone of the actual forecast and considered as JUDGEMENT TECHNIQUES.

Judgment techniques include:Executive opinionsExpert opinionsCustomer and channel surveysSales force composite

EXECUTIVE OPINION

It is simply the best-guess estimates of a company’s executives.

DISADVANTAGES:Opinions are possibly biased.Factors within the organization can also lead to judgmental bias.

EXPERT OPINION

Expert opinion is as similar as Executive Opinion. The difference is that the expert is usually someone outside of the company.

In many cases, expert opinions along with executive opinions are used as a combination to forecast sales.

As a sole method of forecasting, expert opinions are not always useful.

Customer AND CHANNEL SURVEYS

In some markets, including CRM software market, research companies ask customers how much they plan to spend in the coming year on certain products. They are costly as well.

Channel surveys are much more similar, manufacturers ask their distributors or retailers how much they expect to sell.

SALES FORCE COMPOSITE

In this method, we ask members of our sales force what they think they can sell. Though sales people are often not aware of the company’s plans to introduce new products, promotions or new pricing strategies.

A more common approach is to use sale force composites for shorter-range forecasts. Companies use other methods to forecast sales for longer-range forecasts.

LIMITATIONS OF FORECASTING

Data QualityRapid ChangeLength of The HorizonTime and Cost

DATA QUALITY

• One major factor affecting forecasting accuracy is the quality of data used to forecast. If the customer data set does not combine all locations of customers together, then the estimates of market segments could be way off. CDI is important for data quality.

RAPID CHANGE

• The best forecasts are usually those that include as much information as possible. That means using as many methods as possible and creating multiple forecasts for multiple conditions.

LENGTH OF THE HORIZON

• The longer the forecasting horizon is, the less accurate the forecast is likely to be. The same is true for sales executives, accurately estimating next week’s sales might be relatively easy but accurately estimating sales for the next five years is much more difficult.

TIME AND COST

• Forecasting takes time. The longer it takes to get a forecast, the less you have to act on that information. Forecasting also costs money.

GUIDELINES FOR FORECASTING

Forecasting is not an exact science. There are guidelines that can improve the quality of forecast. Following are some guidelines:

USE MULTIPLE METHODS:

One way to achieve more accurate forecasts is to use multiple methods. The first time a manager creates a forecast, it might be wrong but the second time, it will likely be accurate because the second time you do anything, you usually do it better than the first time.

PICK THE RIGHT METHODS FOR YOUR BUSINESS:

Picking the right method for the business is so much important.

USE AS MUCH INFORMATION AS YOU CAN

Use as much information as you can to generate forecasts. Using more information results in a more accurate final forecast.

PLAN FOR MULTIPLE SCENARIOS:

We should plan for multiple scenarios in order to cater changing environmental factors. So that you can adjust your sales estimates based on what actually happens.

TRACK YOUR PROGRESS AND ADJUST THE FORECAST:

As time goes on, forecasts should be adjusted to reflect reality.