The Strategic Role of Information in Sales

Management

Sales & Distribution

Management

Marketing 3345

Information Drives Management Decision Making and Planning

Sales forecasts Territory estimates Quotas Sales force size Sales territory design

Market Opportunity Analysis

Market potential –estimate of possible sales of a commodity, a group of commodities, or a service for an entire industry in a market during a stated period under ideal conditions

Sales potential – the portion of the market potential that the firm can expect to reasonably achieve

Sales forecast – an estimate of the dollar or unit sales for a specified future period

Sales quotas – sales goals assigned to a marketing unit for use in managing sales efforts

Sales budget

Production budget

Direct labor materialsand overhead budgets

Cost of goods sold budget

Budgeted profit and lossstatement

Sales andadministrativeexpense budget

Revenue budget

Sales forecasts

Impact of Sales Forecasts on Budgeting

PercentagePercentage of of Firms Percentage of Firms that That Use Firms No

Methods Use Regularly Occasionally Longer Used

Subjective Sales force composite 44.8% 17.2% 13.4% Jury of executive opinion 37.3 22.4 8.2 Intention to buy survey 16.4 10.4 18.7Extrapolation Naïve 30.6 20.1 9.0 Moving Average 20.9 10.4 15.7 Percent rate of change 19.4 13.4 14.2 Leading indicators 18.7 17.2 11.2 Unit rate of change 15.7 9.7 18.7 Exponential smoothing 11.2 11.9 19.4 Line extension 6.0 13.4 20.9Quantitative Multiple regressing 12.7 9.0 20.9 Econometric 11.9 9.0 19.4 Simple regression 6.0 13.4 20.1 Box-Jenkins 3.7 5.2 26.9

Utilization of Sales Forecasting Methods of 134 Firms

S&MM, February 2006

Choosing a Forecasting Method

Which forecasting method should be used and how accurate is the forecast likely to be?

In general, the various forecast comparisons suggest that no method remains superior under all conditions.

Good forecasters apply multiple forecasting methods to the problem

Scenario planning prepares a series of “what-if” questions and produces possible outcomes

Developing Territory Estimates

Territory estimates effect: The design of sales territories Procedures for identifying potential customers The establishment of sales quotas Compensation and its subcomponents The evaluation of salesperson performance

Planning Tools

North American Industry Classification System (NAICS)

Developed by the US Bureau of the Census, organizes the reporting of business information

Each industry in the US is assigned a two-digit number

Buying Power Index (BPI) Generated and published by Sales Marketing

Management Magazine, considers income, population and retail sales

Most useful with low-priced convenience goods

Sales Quotas

Goals assigned to salespeople Apply to specific periods and may be expressed

in dollars or physical units Tool for sales managers’ planning and

controlling field selling activities and results Benchmark for evaluating sales effectiveness Motivate sales people

Characteristics of a Good Quota

Attainable Easy to understand Complete Timely

Determining Sales Force Size

Salespeople are among the most productive assets of a company, and they are also among the most expensive!

How can an optimal sales force be established?

Breakdown method:

Number of salespersonnel needed =

Sales Volume

Productivity

Determining Sales Force Size

Workload method uses the buildup method to estimate the work required to serve the entire market

Incremental method suggests that sales representatives should be added as long as the incremental profit produce by their addition exceeds the incremental cost

Territory design – “The Build Up Approach”