The Strategic Role of Information in Sales Management Sales & Distribution Management Marketing 3345.

The Strategic Role of The Strategic Role of Information in Sales Information in Sales

ManagementManagement

Sales & DistributionSales & Distribution

Management Management

Marketing 3345Marketing 3345

Information Drives Management Information Drives Management Decision Making and PlanningDecision Making and Planning

Sales forecastsSales forecasts Territory estimatesTerritory estimates QuotasQuotas Sales force sizeSales force size Sales territory designSales territory design

Market Opportunity AnalysisMarket Opportunity Analysis

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

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

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

Sales quotasSales quotas – sales goals assigned to a – sales goals assigned to a marketing unit for use in managing sales effortsmarketing 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 BudgetingImpact 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 2008

Choosing a Forecasting MethodChoosing a Forecasting Method

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

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

Good forecasters apply multiple forecasting Good forecasters apply multiple forecasting methods to the problemmethods to the problem

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

Developing Territory Estimates Developing Territory Estimates

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

Planning ToolsPlanning Tools

North American Industry Classification System North American Industry Classification System (NAICS)(NAICS) Developed by the US Bureau of the Census, Developed by the US Bureau of the Census,

organizes the reporting of business informationorganizes the reporting of business information Each industry in the US is assigned a two-digit Each industry in the US is assigned a two-digit

numbernumber Buying Power Index (BPI)Buying Power Index (BPI)

Generated and published by Sales Marketing Generated and published by Sales Marketing Management Magazine, considers income, population Management Magazine, considers income, population and retail salesand retail sales

Most useful with low-priced convenience goodsMost useful with low-priced convenience goods

Sales QuotasSales Quotas

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

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

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

Characteristics of a Good QuotaCharacteristics of a Good Quota

AttainableAttainable Easy to understandEasy to understand CompleteComplete TimelyTimely

Types of QuotasTypes of Quotas

Sales based quotasSales based quotas Sales activities quotasSales activities quotas Financially based quotasFinancially based quotas

Determining Sales Force Size Determining Sales Force Size

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

How can an optimal sales force be How can an optimal sales force be established?established?

Breakdown methodBreakdown method::

Number of salespersonnel needed =

Sales Volume

Productivity

Determining Sales Force Size Determining Sales Force Size

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

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

Territory design – “The Build Up Approach”