Sales and distribution

Sales Management

Prospecting and Pre-approach

Module Five

Learning Objectives

1. Explain strategic prospecting.2. Discuss why prospecting can be a

challenging task for a salesperson.3. Explain where salespeople find prospects.4. Understand the importance of gathering

and studying precall information.

Setting the Stage

1. What are the two categories Mike Ciccheto uses to organize his prospects?

2. Why does Mike categorize his prospects?

Using Questions to QualifyPotential Customers

Why Buyers Won’t See Salespeople

1. They may have never heard of the salesperson’s firm.

2. They may have no need; they just bought the product category.

3. The buyer may have their own deadlines on other issues.

4. Buyers are constantly getting calls from salespeople and do not have the time to see them all.

5. Gatekeepers in any organization screen their bosses’ calls and are often curt and even rude.

Prospecting

SalesLeads

Screening Procedures

for Qualifying Leads

Qualified Prospects

The process of identifying, qualifying, and prioritizing organizations and individuals that have the need for and potential to purchase the salesperson’s market offering of products and services.

Popular Prospecting Sources & Methods

External Sources– Referrals– Introductions– Community Contacts

(Centers of Influence)– Organizations– Non-competing

Salespeople– Visible Accounts

Personal Contact– Observation

– Cold Canvassing

– Trade Shows

– Bird Dogs (Spotters)

Internal Sources– Company Records– Lists and Directories– Advertising Inquiries– Telephone Inquiries– Mail Inquiries– Internet or World Wide

Web

Qualified Prospects . . .

Can benefit from the sales offering

Have the financial wherewithal to make the purchase

Play an important role in the purchase decision process

Qualified Prospects . . .

Are eligible to buy based on a fit within the selling strategy

Are reasonably accessible and willing to consider the sales offering

Can be added to the customer base at an acceptable level of profitability

VW cars

Importance of Effective Prospecting

OneCustomer

100 Leads

Suppose it takes 10 leads to generate one qualified prospect

And suppose it takes 10 qualified prospects to generate one customer

You would need 100 leads to generate one customer.

Importance of Effective Prospecting

OneCustomer

50 Leads

The better the lead generation method, the higher the proportion of qualified leads.

The more accurate the qualifying process, the higher the proportion of customers per qualified lead.

Improving the lead generation method so that 10 leads generates two qualified customers means you will need only 50 leads to generate one customer.

Gathering Precall Information:The Prospect

The prospect’s name and title

Correct spelling and pronunciation can be gathered by asking the receptionist or secretary or gatekeeper to verify information.


Is this prospect willing to take risks? Are they confident with their decision making?

May have to ask the prospect


Does the prospect have Does the prospect have hobbies or interests they are hobbies or interests they are proud of?proud of?

Observation of office.Observation of office.


What is the prospect’s personality type? Easy going? All business?

Observation and experience with buyer.

Gathering Precall Information:The Prospect’s Organization

What type of business are we dealing with?

Can be gathered from a directory and company web site.


To what market does the company sell?Who are its primary competitors?What does the company make & sell?

Annual reports and company web site.


Salesperson may have to ask for Salesperson may have to ask for this information.this information.

Who and how many vendors does the prospect presently buy from?How much and how long have they been purchasing from their supplier(s)? What challenges is the organization facing?

Organizational Strategiesand The Sales Function

Module Three

The Importance of TrustAn Expert’s Viewpoint:

Franciscan Estates consists of seven winery estates based Franciscan Estates consists of seven winery estates based in California. Using the traditional sales strategy of in California. Using the traditional sales strategy of working through distributors, the company had little working through distributors, the company had little information about product or customer sales beyond the information about product or customer sales beyond the distributor level. The company developed a customer distributor level. The company developed a customer relationship management (CRM) strategy to establish relationship management (CRM) strategy to establish different types of relationships with different customers at different types of relationships with different customers at different levels.different levels.

ActionAction

The Importance of TrustAn Expert’s Viewpoint:

The sales organization uses this information to The sales organization uses this information to strengthen relationships with existing accounts and to strengthen relationships with existing accounts and to prioritize sales efforts to existing and new customers . . . prioritize sales efforts to existing and new customers . . . . . . Franciscan Estates has used it CRM strategy and . . . Franciscan Estates has used it CRM strategy and technology to develop a competitive advantage for its technology to develop a competitive advantage for its marketing and selling efforts.marketing and selling efforts.

ResultResult

Corporate Corporate StrategyStrategy

Corporate MissionCorporate MissionSBU DefinitionSBU DefinitionSBU ObjectivesSBU Objectives

Corporate Corporate ManagementManagement

Sales Sales StrategyStrategy

Strategy TypesStrategy TypesStrategy ExecutionStrategy Execution

SBU SBU ManagementManagement

Strategy LevelStrategy Level Key Key Decision AreasDecision Areas

KeyKeyDecision MakersDecision Makers

Organizational Strategy Levels

Strategy LevelStrategy Level Key Key Decision AreasDecision Areas

KeyKeyDecision MakersDecision Makers

Marketing Marketing StrategyStrategy

Corporate Corporate ManagementManagement

Target Market SelectionTarget Market Selection

Marketing Mix Dev.Marketing Mix Dev.

Integrated Mkt Comm.Integrated Mkt Comm.

Business Business StrategyStrategy

SBU SBU ManagementManagement

Account Targeting StrategyAccount Targeting StrategySales Channel StrategySales Channel StrategyRelationship StrategyRelationship Strategy

Organizational Strategy Levels

Definition ofStrategic Business Units (SBUs)

Cravens (1991)Cravens (1991)

An SBU is a single product or brand, a line of An SBU is a single product or brand, a line of products, or a mix of related products that products, or a mix of related products that meets a common market need or a group of meets a common market need or a group of related needs, and the unit's management is related needs, and the unit's management is responsible for all (or most) of the basic responsible for all (or most) of the basic business functions."business functions."

Salary plus Salary plus incentiveincentive

Prospective and Prospective and new accountsnew accounts

Provide high Provide high service levels service levels particularly pre-particularly pre-sales servicesales service

Product/market Product/market feedbackfeedback

Build sales vol.Build sales vol.

Secure distrib.Secure distrib.

BuildBuild

SBU Objectives andthe Sales Organization

Compensation Compensation SystemSystem

Primary Primary Sales TasksSales Tasks

Sales Sales Organization Organization ObjectivesObjectives

Market Market Share Share

ObjectivesObjectives

Salary plus Salary plus commission commission or bonusor bonus

Call on targeted Call on targeted current accountscurrent accounts

Incr. service levels to Incr. service levels to current accountscurrent accounts

Call on new accountsCall on new accounts

Maintain sales vol.Maintain sales vol.

Consolidate Consolidate market position market position through through concentration on concentration on targeted segmentstargeted segments

Secure additional Secure additional outletsoutlets

HoldHold







Salary plus Salary plus bonusbonus

Service most Service most profitable accountsprofitable accounts

eliminate eliminate unprofitable unprofitable accountsaccounts

Reduce service Reduce service levelslevels

Reduce inventories Reduce inventories levelslevels

Reduce selling Reduce selling costscosts

Target profitable Target profitable accountsaccounts

HarvestHarvest







SalarySalaryDump inventoryDump inventory

Eliminate serviceEliminate service

Minimize selling Minimize selling costs and clear costs and clear out inventoryout inventory

Divest or Divest or LiquidateLiquidate







Business Strategy andthe Sales Function

• Low-cost supplier Pursue large customersPursue large customersMinimize costMinimize cost

Compete on priceCompete on priceSeek customers who are Seek customers who are

low price shopperslow price shoppers


• Low-cost supplier

• Differentiation

Compete on non-price Compete on non-price benefitsbenefits

Provide high quality Provide high quality customer servicecustomer service

Seek customers who are Seek customers who are not low price shoppersnot low price shoppers


• Low-cost supplier

• Differentiation

• Niche

Serve a distinct target Serve a distinct target market not served well by market not served well by

othersothersProvide high quality Provide high quality

customer servicecustomer serviceSeek customers who are Seek customers who are not low price shoppersnot low price shoppers

Marketing Strategy andthe Sales Function

Advantages+ Only promotional tool that consists of

personal communication between seller and buyer

+ More credible and has more impact

+ Better timing of message delivery

+ Ability to tailor message to buyer

+ Allows for sale to be closed

Disadvantage– High cost per contact

Personal Selling-Driven vs. Advertising-DrivenMarketing Communications Strategies

AdvertisingAdvertising

Personal SellingPersonal Selling

When Message Flexibility is ImportantWhen Message Flexibility is ImportantWhen Message Timing is ImportantWhen Message Timing is ImportantWhen Reaction Speed is ImportantWhen Reaction Speed is ImportantWhen Message Credibility is ImportantWhen Message Credibility is ImportantWhen Trying to Close the SaleWhen Trying to Close the Sale

When Low Cost per Contact is ImportantWhen Low Cost per Contact is ImportantWhen Repetitive Contact is ImportantWhen Repetitive Contact is ImportantWhen Control of Message is ImportantWhen Control of Message is ImportantWhen Audience is LargeWhen Audience is Large

Target Market Situations andPersonal Selling

Target Market:A definition of the specific market segment to be served

Personal Selling-Driven Promotional Strategies are appropriate when:

– The market consists of only a few buyers that tend to be concentrated in location

– The buyer needs a great deal of information– The purchase is important– The product is complex– Service after the sale is important

Integrated Marketing Communications

The strategic integration of multiple marketing The strategic integration of multiple marketing communications tools communicating a consistent message communications tools communicating a consistent message in the most effective and efficient manner.in the most effective and efficient manner.

BuyingBuyingSituationSituation

BuyingBuyingCenterCenter

OrganizationalOrganizational

Buyer BehaviorBuyer BehaviorAccountAccount

BuyingBuyingProcessProcess

BuyingBuyingNeedsNeeds

AccountAccount TargetingTargeting

StrategyStrategy

RelationshipRelationship

StrategyStrategy

SalespersonSalespersonSalesSales

StrategyStrategy

Sales ChannelSales Channel

StrategyStrategy

SellingSelling

StrategyStrategy

The Sales Strategy Framework

Business or Business or Industrial Industrial

OrganizationsOrganizations

Major CategoryMajor Category TypesTypes

UsersUsers: purchase products : purchase products and services to produce and services to produce other products and servicesother products and services

Organizational Buyer Behavior:Types of Organizations

Original Equipment Original Equipment Manufacturers (OEM)Manufacturers (OEM):: purchase products to purchase products to incorporate into productsincorporate into products

ResellersResellers: purchase : purchase products to sellproducts to sell

Government Government OrganizationsOrganizations

Major CategoryMajor Category TypesTypes

Federal, State, and Federal, State, and Local Government Local Government AgenciesAgencies

Organizational Buyer Behavior:Types of Organizations

Public and Public and Private InstitutionsPrivate InstitutionsInstitutionsInstitutions

Organizational Buyer Behavior: Buying Situations

Straight Rebuy Buying Situation– Routinized Response Behavior

Modified Rebuy Buying Situation– Limited Problem Solving

New Task Buying Situation– Extensive Problem Solving

Organizational Buyer Behavior: Buying Center

• Initiators• Users• Gatekeepers• Influencers• Deciders• Purchasers

Organizational Buyer Behavior:Buying Process

Phase 1: Recognize Problem/Need

Phase 2: Determine Item Specs/Quantity Needed

Phase 3: Specify Item Specs/Quantity Needed

Phase 4: Identify and Qualify Potential Sources

Phase 5: Acquire and Analyze Proposals

Phase 6: Evaluate Proposals/Select Suppliers

Phase 7: Selection of Order Routine

Phase 8: Performance Feedback/Evaluation

Control Cost in Product Control Cost in Product Use SituationUse SituationFew Breakdowns of ProductFew Breakdowns of ProductDependable Delivery for Dependable Delivery for Repeat PurchasesRepeat PurchasesAdequate Supply of Adequate Supply of ProductsProductsCost within Budget LimitsCost within Budget Limits

Want a Feeling of PowerWant a Feeling of Power

Seek Personal PleasureSeek Personal Pleasure

Desire Job SecurityDesire Job Security

Want to be Well LikedWant to be Well Liked

Want RespectWant Respect

Personal GoalsPersonal Goals Organizational GoalsOrganizational Goals

Personal and Organizational Needs

Sales Strategy:Account-Targeting Strategy

The classification of accounts withina target market into categories forthe purpose of developing strategic approaches for selling to each account or account group.

Sales Strategy:Relationship Strategy

A determination of the type of relationship to be developed with different account groups.

TransactionTransaction SolutionsSolutions PartnershipPartnership CollaborativeCollaborative

Characteristics of Relationship Strategies

GoalGoal Sell ProductsSell Products Add ValueAdd Value

Time Time FrameFrame

ShortShort LongLong

OfferingOffering StandardizedStandardized CustomizedCustomized

Number of Number of CustomersCustomers ManyMany FewFew

Sales Strategy: Selling Strategy

Ensuring that accounts receive selling effort coverage in an effective and efficient manner.

Matching Selling andRelationship Strategies

TransactionTransaction

SolutionsSolutions

PartnershipPartnership

CollaborativeCollaborative

CommitmentCommitment

Cost Cost to to

ServeServe

HighHigh

HighHigh

LowLow

Sales Strategy: Sales Channel Strategy

The planned selling approach for each relationship strategy.

– The Internet– Industrial Distributors– Independent Representatives– Team Selling– Telemartketing– Trade Shows

Sales Strategy: The Internet

• Increase Reach• Gather Information about Customers• Showcase New Products• Conduct Surveys• Enhance Corporate Image• Obtain Feedback• Service Existing Customers

Sales Channel Strategy:Industrial Distributors

• Have Their Own Sales Force• May Represent One Manufacturer;

Several Non-competing Manufacturers; Several Competing Manufacturers

• Normally Carry Inventory

Sales Strategy: Independent or Manufacturers’

Reps

• Sell complimentary products from non-competing manufacturers.

• Do Not Normally Carry Inventory• Paid for Performance• Reduced Control over Selling Effort• Reduced Access to Customer Information

Sales Strategy: Team Selling

Three Selling Situations– New Task Selling– Modified Resell Selling Situation– Routine Resell Selling Situation

Two Types of Team Selling– Multilevel Selling– Major Account Selling

Sales Strategy: Telemarketing

May replace field sales force for certain accounts

When integrated with field sales force, activities include:

– Prospecting, Qualifying Leads, Conducting Surveys– Taking Orders, Checking on Order Status, Handling

Order Problems– Following Up for Repeat Business

Sales Strategy: Trade Shows

• Generate Leads• Test Market New Products• Introduce New Products• Close Sales• Gather Competitive Information• Service Existing Customers• Enhance Corporate Image

Determining size of sales force

Done

Affordability method

• The company recruit only that many number of sale person that the company can afford.

• Most easiest process.

• Use by the small organization.

Work load method

1. Classify customers –present+ prospective into sales volume categories

2. Decide on the length of time per sales call and desired call frequencies on each class

3. Calculate the total work load in covering the entire market

4. Determine the total work time available per sales person

Number of Sales person recruit by the company depending up on the amount of work or activities they have to perform.

5. Divide the total work time available per sales person by task

6.Calculate the total number of sales people needed

Example

• No of customers-1000

Class A large – 100 accounts

Class B medium- 300

Class C small -- 500

Step 2

• Allocate time

Class A – 60 minutes/52 calls -52hrs

Class B - 30 minutes/24calls -12hours

Class C – 15minutes/12calls-3hours/year

Step 3

• Total work load covering entire market

Class A – 100 x 52 -5200

Class B – 300X12 -3600

Class C- 500X3 -1500

Total -10300

Step4

• Total work time available per sales person

40 hrs per week for 48 weeks –1920 hours/year

Step 5

• Divide the work time by task

Selling task 50%--- 960

Non selling task 20%--384

Traveling 30% --576

Total 1920

Step 6

• Number of sales persons

10300/960

=11 sales people

Sales Potential method

• N= S(1+T )/P

• N=no of sales personnel

• S= forecasted sales volume

• P- Estimated sales productivity per sales Person

• T = Allowance for sales force turnover

example

• Estimated forecast – 1000000

• Sales productivity- 100000

• Sales person turnover-10percent

• N --- (1000000/100000) * (1+0.1)

= 10*1.1 = 11 sales personnel

Incremental method

• Net profits will increase when additional sales personnel are added if the incremental sales revenues exceed the incremental costs involved.

• Here we look at the net profit contribution resulting from additional sales person

Steps

• Calculate the gross margin of the sales people ( incremental)

• Calculate for each addition the net profit contribution for each addition to find out the right mix

Motivation and Reward System Management

Module Eight

Motivation and RewardsAn Expert’s Viewpoint:

Optimus Solutions has a substantial motivation and reward Optimus Solutions has a substantial motivation and reward system. The sales reps receive a 10% - 25% commission system. The sales reps receive a 10% - 25% commission on every dollar of on every dollar of profitprofit they generate. The more profit they generate. The more profit sales reps generate, the more they earn. In addition, any sales reps generate, the more they earn. In addition, any rep that reaches an aggressive, yet obtainable, annual rep that reaches an aggressive, yet obtainable, annual sales goal of $1 million during a 12-month period receives sales goal of $1 million during a 12-month period receives a one-year lease on a Porsche 911. a one-year lease on a Porsche 911.

ActionAction

Motivation and RewardsAn Expert’s Viewpoint:

The company’s system for motivating and rewarding its The company’s system for motivating and rewarding its salespeople has been very successful. Five people salespeople has been very successful. Five people qualified for the Porsche in 2000, and eight qualified in qualified for the Porsche in 2000, and eight qualified in 2001. The company has grown to more than $100 2001. The company has grown to more than $100 million in revenues in just four yearsmillion in revenues in just four years

ResultResult

Motivation

The force within us that activates our behavior. It The force within us that activates our behavior. It is a function of three distinct components, is a function of three distinct components, Intensity, Direction, and Persistence.Intensity, Direction, and Persistence.

IntensityIntensity PersistencePersistenceDirectionDirection

MotivationMotivationMotivationMotivation

Motivation - Intensity

Intensity refers to the amount of mental and Intensity refers to the amount of mental and physical effort put forth by the salesperson.physical effort put forth by the salesperson.

PersistencePersistenceDirectionDirection


IntensityIntensity

Motivation - Direction

The extent to which an individual determines and The extent to which an individual determines and chooses efforts focused on a particular goal.chooses efforts focused on a particular goal.



Motivation - Persistence

The extent to which the goal-directed effort is The extent to which the goal-directed effort is put forth over time.put forth over time.



MotivationMotivation

Motivation: Intrinsic vs. Extrinsic

When rewards such as pay

and formal recognition act as motivators

When doing When doing the job is the job is inherently inherently motivatingmotivating

IntrinsicIntrinsic ExtrinsicExtrinsic

Noncompensation rewards:

Those beneficial factors related to the work situation and well-being of each salesperson.

Two Basic Categories of Rewards

Compensation rewards:Compensation rewards:

Those given in return for acceptable performance or Those given in return for acceptable performance or effort. They can include nonfinancial compensation.effort. They can include nonfinancial compensation.

Optimal Sales Force Reward System

1. Provides an acceptable ratio of costs and sales force output in volume, profit, or other objectives

2. Encourages specific activities consistent with the firm's overall, marketing, and sales force objectives and strategies

3. Attracts and retains competent salespeople, thereby enhancing long-term customer relationships

4. Allows the kind of adjustments that facilitate administration of the reward system.

Types of Sales Force Rewards

MotivationMotivation

IntrinsicIntrinsic ExtrinsicExtrinsic

PayPay

PromotionPromotion

Sense of Sense of AccomplishmentAccomplishment

Personal Growth Personal Growth OpportunitiesOpportunities RecognitionRecognition

Job securityJob security

Financial Compensation:Straight Salary

Advantages- Salaries are simple to administer- Planned earnings are easy to project.- Salaries can provide control over salespeople’s

activities, and reassignments are less of a problem.- Salaries are useful when substantial development

work is required.

Disadvantages- Salaries offer little incentive for better performance.- Salary compression could cause perceptions of

inequity among experiences salespeople.- Salaries represent fixed overhead.

Financial Compensation:Straight Commission

Advantages- Income is linked directly to desired results.- Straight commission plans offer cost-control

benefits.

Disadvantages- Straight commission plans contribute little to

company loyalty.- Problems may also arise if commissions are not

limited by an earnings cap.

Straight Commission: Plan Variations

1. Commission base — volume or profitability

2. Commission rate — constant, progressive, or a combination

3. Commission splits — between two or more salespeople or between salespeople and the employer

4. Commission payout event — when the order is confirmed, shipped, billed, paid for, or some combination of these events

Straight Commission: Rates

Constant rates:– Rates that remain unchanged over the pay period.

Pay is linked directly to performance.

Progressive rates:– Rates that increase as salespeople reach pre-

specified targets.

Regressive rates:– Rates that decline at some predetermined point.

Financial Compensation:Performance Bonuses

Advantages- Organization can direct emphasis to what it

considers important in the sales area.- Bonuses are particularly useful for tying rewards to

accomplishment of objectives.

Disadvantages- It may be difficult to determine a formula for

calculating bonus achievement if the objective is expressed in subjective terms.

- If salespeople do not fully support the established objective, they may not exert additional effort to accomplish the goal.

Financial Compensation:Combination Plans

Advantages- Combination pay plans are flexible.- They are also useful when the skill levels of the

salesforce vary.- Combination pay plans are attractive to high-

potential but unproven candidates for sales jobs.

Disadvantages- Combination pay plans are more complex and

difficult to administer.- A common criticism of combination pay plans is that

they tend to produce too many salesforce objectives.

Nonfinancial Compensation

Opportunity for Promotion:– The ability to move up in an organization along

one or more career paths

Sense of Accomplishment:– The internal sense of satisfaction from

successful performance– Sales managers should facilitate salespeople’s

ability to feel this a sense of accomplishment

Nonfinancial Compensation

Opportunity for Personal Growth:– Access to programs that allow for personal

development (e.g., tuition reimbursement, leadership development seminars)

Recognition:– The informal or formal acknowledgement of a

desired accomplishment

Job Security:– A sense of being a desired employee that comes

from consistent exceptional performance

Sales Expenses

1.1. A definition of which expenses are reimbursableA definition of which expenses are reimbursable

2.2. The establishment of expense budgetsThe establishment of expense budgets

3.3. The use of allowances for certain expendituresThe use of allowances for certain expenditures

4.4. Documentation of expenses to be reimbursedDocumentation of expenses to be reimbursed

Controls used in the sales expense Controls used in the sales expense reimbursement process include:reimbursement process include:

Additional Issues in Managing Salesforce Reward Systems

• Sales Contests• Equal Pay• Team Compensation• Global Considerations• Changing the Reward System

Sales Contests:Recommended Guidelines

1.1. Minimize potential motivation and morale problems Minimize potential motivation and morale problems by allowing multiple winners. Salespeople should by allowing multiple winners. Salespeople should compete against individual goals and be declared compete against individual goals and be declared winners if those goals are met.winners if those goals are met.

2.2. Recognize that contests will concentrate efforts in Recognize that contests will concentrate efforts in specific areas, often at the temporary neglect of other specific areas, often at the temporary neglect of other areas. Plan accordingly.areas. Plan accordingly.

Sales Contests:Recommended Guidelines

3.3. Consider the positive effects of including nonselling Consider the positive effects of including nonselling personnel in sales contests.personnel in sales contests.

4.4. Use variety as a basic element of sales contests. Use variety as a basic element of sales contests. Vary timing, duration, themes, and rewards.Vary timing, duration, themes, and rewards.

5.5. Ensure that sales contest objectives are clear, Ensure that sales contest objectives are clear, realistically attainable, and quantifiable to allow realistically attainable, and quantifiable to allow performance assessment.performance assessment.

Guidelines for Motivating and Rewarding Salespeople

1. Recruit and select salespeople whose personal motives match the requirements and rewards of the job.

2. Attempt to incorporate the individual needs of salespeople into motivational programs.

3. Use job design and redesign as motivational tools

Guidelines for Motivating and Rewarding Salespeople

4. Provide adequate job information and assure proper skill development for the sales force.

5. Concentrate on building the self-esteem of salespeople.

6. Take a proactive approach to seeking out motivational problems and sources of frustration in the salesforce.

Controlling the sales effort

Tools used

• Sales Budget

• Quotas

• Sales Territories

• Sales control and cost analysis

Sales Budget

Purposes

• Mechanism of control• Composite of sales expense & profit goals serves

as yardstick • Master standard against which performance is

measured

• Instrument of planning• Complex sequence of planning decisions• Show how sales volume and net profit objectives

are reached.• Requires alternative sales plans

Sales budget-form and content

• Statement of projected sales revenues and selling expenses

• Break down to regions, products or units.

Sales budget

• Obtaining optimum net profit for the forecast sales volume.]

• Short term and long term goals are taken into consideration.

• Selling expenses--- volume of performance of activity X cost of performing a measurable unit of the activity

• For estimating cost, standard cost is taken into consideration.

• Other methods are used like simply adding up the expenses and divide the number of units sold gives the average cost.

• Use past data to find the percentage relationship

Budgetary procedure

• Begins with the sales department.

• Planning styles• Top down

» Management sets the objectives

• Bottom up.» Department prepares the tentative objectives and

plans

How it is done

• The lowest level- profit center estimates the sales volume & expenses + district contribution to overhead

• Includes rent, secretarial cost and other operating expenses

• This is submitted to the next level and finally added up to form company budget

• Detailed plan of action is submitted to justify the budget

• Each managers will argue for his share in the budget .

• The amount of money finally allocated will depend on the value of the individual proposals.

Using budget for control

• Budget progress report card

• Shows the performance variance

quotas

quotas

• Quotas are quantitative objectives assigned to sales organisational units.– Provide quantitative performance standards

– Product /territory/ channel/customer etc

– To obtain tighter sales and expense control– Reimburse expenses upto a certain percentage of sales

volume

– To motivate desired performance

• There has to be an integration between sales quota, sales forecast and sales budget.

Type of quotas

• Sales volume quotas• Oldest and most common type• Set for geographical areas, product lines marketing channels

or combination of these• In units or revenues or points

– Procedure • Sales volume quota derived from territory sales potentials• Derived from total market estimate• Based on past experience• Executive judgement• Related to compensation plan

Types

• Budget quotas• Control expenses, gross margin or net profit• To make it clear that volume alone is not enough • Profitability is the key

– Expense quotas– Gross margin or net profit quotas

– When product line contains high and low margin items

• Activity quotas• Non selling activities

Administering quota system

• Accurate fair and attainable

• Secure sales person’s acceptance– Participation– Inform the sales persons– Continuous control

Sales territories

Territories

• Grouping of customers and prospects assigned to individual sales person– Provide proper market coverage– Control selling expenses– Assist evaluating sales personnel– Contribute morale– coordination of sales and other marketing

activities

Procedure

• Selecting a basic geographical unit– District, pincodes, panchayats ,villages etc

• Determining the sales potential present in each control unit

• Combining control units into tentative territories

• Adjusting for differences in coverage difficulty and redistricting tentative territories– Determine no,size of customers,prospects– Estimate time required for each sales call– Determine length of time between calls– Decide call frequencies– Calculate no of calls possible within a period– Adjust with call frequency and customers– Check with sales personnel

Assigning sales persons

• Assign each salesperson to territories where his relative contribution to profit is highest

• Routing

• Scheduling

Setting personal selling objectives

Types of objectives

• To do the entire selling job• To service the existing accounts• To search out and obtain new customers• To secure and maintain customers cooperation in

stocking and promoting a product line• To keep the customer informed on changes in the

product line or other aspects of marketing strategy• To assist customers in selling• To provide technical advice and assistance to

consumers

Types of objectives

• To assist with the training of middlemen’s sales personnel

• To collect and report market information of interest and use to company management.

Quanitative objectives• To capture and retain certain market share.• To obtain sales volume in ways that contribute to

profitability.• To obtain some number of new accounts of given types• To keep personal selling expenses within limits• To secure targeted percentages of certain accounts

business.

Analyzing Market potential

• Market identification• Who buys the product?• Who uses the product?• Who are the prospective buyers and users?• Market motivation• How best to present the product in sales talks• The relative effectiveness of different selling

appeals• The relative appropriateness of various promotional

methods.

Sales Potential and Sales Forecasting

• Sales Forecast – Estimates maximum possible sales opportunities present in a particular market segment open to a specific company during a stated time period

Forecast objectives

Determine dependent and independent variables

Develop forecast procedures

Select forecast analysis method

Comprehend total forecast procedure Collect collate

dataPresent all assumptions

Make and finalize forecast

Evaluate performance

Forecasting Process

Forecasting Methods

Quantitative Qualitative

Qualitative

Experts opinion

Survey of buyers intentions

Sales force composite

Delphi Technique

Historical Analogy

Quantitative

Test Marketing Naïve Method Trend Method Moving Average Regression Exponential Smothing

Naïve Method

• Next year’s sales = This year’s Sales * This year’s Sales

-----------------------------

Last Year’s Sales

Moving Averages

• a+ b+ c b+c+d

------------, -------------

3 3

Exponential Smoothing

• Next years sales = a ( this year’s sales ) + (1-a)( This year’s forecast)

• a is the smoothing constant usually between 0.1 and 0.5

• Larger the factor , more sensitive the forecasting values will be to past data ( recent changes in sales)

• This year sales – 50000

• This year forecast – 40000

• a = 0.2

• Next year sales = .2*50000 + 0.8 * 40000 = 42000

Sales and distribution

Documents

precall information

customer sales

traditional sales strategy

prospectthe prospects

prospects organizationto

prospects organizationwho

little information

proportion of qualified