8/3/2019 SLS 5 SFC & S Qta
1/28
Sales Management
Managing Sales Information
and Forecasting
8/3/2019 SLS 5 SFC & S Qta
2/28
Sales Management
Managing sales information
Sales information is like circulatory system in the body
Helps organizations to plan and make appropriate
Business decisions
Helps Sales Managers analyze current market situationand Sales Persons performance
To build customer data base, reward system by HR andforecasting
Most important use of sales information is - forecastMarket demand
8/3/2019 SLS 5 SFC & S Qta
3/28
Sales Forecast
Sales Forecast is an estimate of sales
during a specific future period which
assumes a particular state ofuncontrollable and competitive forces
8/3/2019 SLS 5 SFC & S Qta
4/28
Factors influencing Sales Forecast
General Economic conditions (Inflation, deflation): Athrough knowledge of economic, political conditions help tobuild forecast more effectively
Consumers: Age, sex, habits and trend influence sales
Industrial behaviour: Competition, industrial unrest, Govtcontrol
Change within the firm : Policy changes
Period:
8/3/2019 SLS 5 SFC & S Qta
5/28
Importance of forecasting
Success of business depends on how forecasting is done
Supply & value chain management depend on demand pattern
Procurement can be canalized as per demand
Raw material & inventory control during production process
If forecast is not proper High inventory, increased cost of product
Low inventory- short supply, loss of revenue/customer
8/3/2019 SLS 5 SFC & S Qta
6/28
Importance of forecasting
It is a gear by which all other activities are controlled
Forward planner for al other requirements(Raw Material,financial needs, labour)
Advertisement programs are beneficially adjusted
Indicator for financial requirements
Helps in allocation and reallocation of sales territories
8/3/2019 SLS 5 SFC & S Qta
7/28
Forecasting Approach
Top-down / break down approach Company SF
(based on secondary data) forecast
broken down into region, district, territory Regional / Zonal
Bottom up / build up approach Area / Branch
(based on primary data) area or branch
Manager asking its SPs to estimate or Sales FC offorecast sales in their respective territory individual
customer
8/3/2019 SLS 5 SFC & S Qta
8/28
Forecasting Process
Determine objective ( Rs.sales / Units sales)
Determine dependable variable (unit / value) andindependent variable (market factors)
Forecasting procedures and methods for analyzing
sales based on assumptions
Experts opinion
Delphi method
Qualitative method SF composite methodSurvey of buyers intentions
Test Marketing
8/3/2019 SLS 5 SFC & S Qta
9/28
Forecasting Process
Experts opinion:
Getting views of top executives of the company regardingfuture sales based on judgment, intuition & experience
Advantages: quick, easy & less expensive. OK for small/medium firms
Disadvantages: unscientific, subjective,
Delphi method:
Panel of experts from within and outside the organization.
Coordinator conduct the procedure
Advantages: Objective, useful for new products
Disadvantages: difficult to get experts, long time to come to consensus
8/3/2019 SLS 5 SFC & S Qta
10/28
Forecasting Process
SF composite method:
Sales people estimate ( bottom up approach)Advantages: SP is close to customers & Market and has better insight
Disadvantages: SP not trained, may underestimate demand to get reward
Survey of buyers intentionsMarket research of existing & potential customers about their
likely purchase0.0 0.20 0.40 0.60 0.80 1.0
Not at all slight possiblty fair possiblty good possiblty high possiblty certain
Advantages: useful for industrial, consumer durable, & new product
Disadvantages: Not accurate, uncertainty
8/3/2019 SLS 5 SFC & S Qta
11/28
Forecasting Process
Test Marketing :
For a new product where no historical data or estimatingsales for established product in a new territory
Full blown Test Marketing : choosing a few (2-6) representative cities
with full promotion campaign
Controlled Test Marketing: select panel of stores at specified
geographical location and measure the sales of new product
Advantages: useful for new or modified product. Gives a fair idea ifcompany should go ahead with national-wide launch
disadvantages: Information may leak to competition. If purchase period
Is long, it is difficult for company to wait to measure test results
8/3/2019 SLS 5 SFC & S Qta
12/28
Forecasting Process
Moving Average
Exponential smoothingQuantitative methods Decomposition
Nave / Ratio method
Regression Analysis
8/3/2019 SLS 5 SFC & S Qta
13/28
Forecasting Process
Moving Average: Actual sales for past 3 6 years
No of years ( 3 6 years)Sls Period Sls Vol Sls for 3 yrs 3 yrs moving Av
1 200
2 250
3 300 750/3 250
4 250 900/3 300
5 450 1100 / 3 366
6 370 1170 / 3 390
7 ? = 390
Or 1+2+3 2+3+4 3+4+5 4+5+6
3 3 3 3
Advantages : simple, easy to calculate, short term / medium term FC
Disadvantages : unable to predict downturn, upturn in market.
Historical data required. Long term FC not accurate
8/3/2019 SLS 5 SFC & S Qta
14/28
Forecasting Process
Decomposition Method
Previous years sales broken down into 4 major componentsTrend: Growth of 3% due to technical development
Erratic events: 5% drop due to terror activities
Cycle: 10% reduction due to recession in demand
Seasonal: 15% up due to festive season in 3rd quarter2010 Sales = 900 Cr. Trend 3% ( 900x1.03) = 927
Erratic events 5% ( 924x0.95) = 880
Cycle 10% ( 886x 0.90) = 792
Seasonal 15% for 3 months ( 792/12=66 per month)
66 X 9 + 66 X 1.15 X 3 = 822
Sales forecast for 2011 = 822 cr.
Advantages: Takes into consideration all external / internal variables
Disadvantages: Historical data not considered. Complex statistical method
8/3/2019 SLS 5 SFC & S Qta
15/28
Forecasting Process
Nave method:
What happened in the immediate past will continue
to happen in the immediate future
SF for next yr = actual sls for this yr x actual sls this yr
actual sls last yr
Advantages: simple to calculate, less data required, good
for short term FC
Disadvantages: not good for long term FC, fluctuation not
considered
8/3/2019 SLS 5 SFC & S Qta
16/28
Forecasting ProcessRegression Analysis:
Statistical FC method to predict salesCompany identifies cause & effect relationship between
company sales and the independent variable(or factors) which
influence sales ( price, promotion, population
Advantages: High FC accuracy, Objective , can predict companys turning point
Disadvantages: Complex, expensive, time consuming, software package essential
Promo expenditure
Linear Positive
relationshipLinear negative
relationship
Curvilinear
relationship
Price Sales calls
sales sales sales
8/3/2019 SLS 5 SFC & S Qta
17/28
Forecasting Process
Exponential smoothing method:
Closely related to moving average of all past data.The sales in certain period influence sales forecast more than
sales in other period. More weight-age given to recent data
High value for more recent period ( 0.8 )
Low value for earlier period ( 0.2 )
Advantages: simple to operate, useful data when sales data has trend orseasonal pattern, immediate response to upturn /downturn in sales
Disadvantages: smoothing constant is somewhat arbitrary, long term and
new product FC are not possible
8/3/2019 SLS 5 SFC & S Qta
18/28
Sales Management
Management of sales Quota
8/3/2019 SLS 5 SFC & S Qta
19/28
Sales Quota ( Target)
Estimated or predetermined volume(physical units) or value ( Rupee) of salesexpected to be achieved by sales forceover a given period of time
8/3/2019 SLS 5 SFC & S Qta
20/28
Quotas ( Targets )
Sales assignments or goals to be achieved in a specificperiod of time
Managerial device for defining & stimulating sls efforts
Expectation of top management expressed in volumeor value for a specific future period
Companys expected market share assigned to SP in
each territory. branch, distributor, selling agent, dealer
Develop plans convert objective into targetsimplement plans evaluate results
8/3/2019 SLS 5 SFC & S Qta
21/28
Quotas ( Targets )
Objectives
To maximize sales in physical & in monitory terms
To facilitate distribution of sales to various market segmentsand territories
To ensure systematic and rational physical distribution ofProducts
To make the best use of available sales force by fixing salesquotas in accordance with efficiency and experience of salesforce
8/3/2019 SLS 5 SFC & S Qta
22/28
Quotas ( Targets )
Factors determining sales quotas
Past sales Potential of Market Production capacity
Advertising and sales promotion Product development Level of competition Living standard of customers
Sales forecast ( future prospects) Sales policy( discount, extension of credit policy, salescontests
8/3/2019 SLS 5 SFC & S Qta
23/28
Importance of sales Quotas
Motivate Sales people- link with reward systemFeedback on their performance thro achievmt of Quota
Help weaker ones to pay attention to knowlge & skills
Learn from high performers the basic elements
There is no specific formula available in target setting
To be drawn from the market, taking into prevailingconditions in each territory based on SMART concept
8/3/2019 SLS 5 SFC & S Qta
24/28
Procedure for setting Targets
One to one discussion between Sales Manager & SP
Fill in individual goal setting form
Conferencing with each Sales Person/group andcreate a win - win situation
Types of sales QuotasSales volume quota- quantity & time frame(mthly, quarterly, annual)
Points quota : set points & SP achieves through different products
Sales budget quota: sales volume + control expenses, margin / profit
Sales activity quota: sales + non selling activity
Combination quota: Target + customer + activity ( call to prospects,product demonstration etc. )
8/3/2019 SLS 5 SFC & S Qta
25/28
Method of setting Quotas
Based on sales forecast: Total forecast break itdown to territory
Based on past experience: average of previous
year and add arbitrary percentage
Executive judgment : Sales Manager relies onPast experience to make future predictions
Sales people judgment : SPs familiar with marketset their own quota
8/3/2019 SLS 5 SFC & S Qta
26/28
Advantages of sales quota
Evaluation of sales performance( actual vs achievement)
Locate weak and underdeveloped area
Control device activities of SP
Effective compensation plan
For conducting sales contest
Controlling selling cost
Source of motivation
Maximization of sales and profit
8/3/2019 SLS 5 SFC & S Qta
27/28
Disadvantages of sales quota
Based on arbitrary estimate and past experience-misleading
Danger of ineffectiveness HO person fixes withoutKnowing territory problems ( demotivates sales person)
Unattainable high quota SP likely to give up
Short supply, too low quota Loss of interest due to loss ofIncentive
Danger of increasing bad debts- liberal terms, sales creditetc put pressure on business
8/3/2019 SLS 5 SFC & S Qta
28/28
Sales Management
Class Assignment:
TATA Nano - forecast