Unit 2sales Management

7/31/2019 Unit 2sales Management

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Ankita Srivastava


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In the words of G.R Terry Planning is amethod or technique of looking ahead aconstructive reviewing of future needs so thatpresent actions can be adjusted in view of the

established goal. Planning should takeplace before doing ; most individual and groupefforts are made more efficient by determiningbefore any operative action takes place on what

shall be done, where, how and who shall do it.


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The planning process takes place under deepthinking. As a result of this, goals and

objectives, their nature, and the timing of theaction required are carefully studied forachieving these predestined goals andobjectives. In short, planning decides and

establishes the desirable courses of action tobe taken at a future date.


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Setting Objectives Budgeting

Programming

Establishing procedures Scheduling


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Organization sales structure

Pricing

Which Segment

Who are your customer How will you contact them

Benefits that you will talk about

What should be your call to order ratio Targets


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The objectives of the company should be

clearly stated in quantitative terms.

The specific activities to be performed and

the sequence in which they are to beperformed should be clearly indicated

The necessary elements should be included

All the elements of costs- money, material,man power etc- must be properly budgeted


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Criteria should be established for measuringand evaluating progress, and the procedure for

doing so must be specified. Alternative courses of action to cover any

contingency should be provided.

Provision should be made for periodic

planning.


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The planning process begins with theestablishment of specific goals towards thefulfillment of which all the company effortsare directed. In order to fix these goals for

the field sales organization, it is firstnecessary to determine the expected volumeof sales during the plan period. This is themain function of sales forecasting.


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Demand forecasting is a useful tool for planning.

It helps estimate and forecast the market share

of a firm. Most firms are very often confrontedwith the task of projecting future sales of their

product. Identifying future sales problems is no

easy task for companies, small or big. In somecases, it is very difficult to get any information

about future market sales. Sales forecasting is

not just an estimation of sales; it is alsomatching sales opportunities actual and

potentialwith sales planning and procedures.


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Sales forecasting, according to Candiff and Still,

is an estimate of sales during a specified

future period which is tied to a proposed

marketing plan and which assumes a particular

set of uncontrollable and competitive forces.


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1. Defining the objectives to be achieved.

2. Dividing various products into homogeneous

groups.

3. Analyzing the importance of various factors

to be studied for sales forecasting.

4. Selecting the method.

5. Collecting and analyzing the related

information.

6. Drawing conclusions from the analysis made.


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7. Implementing the decisions taken.

8. Reviewing and revising the sales

forecasting from time to time.


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There are two major types of forecasting, which

can be broadly described as and :

is concerned with forecastingmarkets in total. This is about determining theexisting level of Market Demand and consideringwhat will happen to market demand in the future.

is concerned with detailed unitsales forecasts. This is about determining aproducts market share in a particular industryand considering what will happen to that marketshare in the future.


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According to Stuits, A sales forecast is an

estimate of the amount or unit for a specified

future period under marketing plan or

programme.

According to American marketing Association

forecasting is an estimate of sales in dollars or

physical units for a specified future period undera proposed marketing plan or program and

under an assumed set of economic and other

forces outside the unit for which the forecast is

made. The forecast may be for a specified itemof merchandise or for an entire line.


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The objectives of sales forecasting may be

studied under the following two major heads

Short - run (range) objectives.

Long - run (range) objectives.


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1. Formulation of suitable production policy

so as to meet the demand as per the salesforecast.

2. To make provision for the regular supply

of raw material etc. for the production on

the basis of sales forecast.

3. To make the best utilization of machines

on the basis of sales forecast.

4. To make the regular supply of labour force

as per the sales forecast.


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5. To determine an appropriate price policy for

a given period.

6. To estimate and provide the requisite

working capital on the basis of sales

forecast.

7. To establish sales quotas targets for different

market segments.

8. To estimate stock requirements for unfinished

semi-unfinished and finished products for a

specified period of time.


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1. Estimating cash inflows from sales.

2. Provision for capital expenditure.

3. Planning of plant capacity so as to meet the

future demand.

4. Manpower planning so that production and

distribution may not suffer in the long run.

5. Planning for acquisition of raw materials so

as to meet the future demand.


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6.Determining the dividend policy.

7. Establishing coordination between various

functions of an organization.

8. Reducing selling costs and thereby reduces

the final cost of the product.

9. To estimate future profits of the business

enterprise.


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1. Business Environment

2. Conditions within the industry

3. Internal Conditions of the business

Enterprise

4. Socio Economic Conditions

5. Factors Affecting Export Trade


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General economic conditions within the

boundaries of the nation, do effect the

purchasing power of the individual customer.

The standard measure for assessinggeneral economic conditions will be: gross

national product, per capita income, personal

income, personal consumption expenditure,

level of employment etc.


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Though the industry forecast are available fromthe trade associations and chambers ofcommerce, a SWOT analysis of the competitionprevailing could throw much light on the

competition within the industry.


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The sales manager, while preparing the sales

budgets of the company has to forecast thecompany and product sales for the comingyear. The entire planning of the organizationfor production, manpower, financialarrangements, and revenue calculations willdepend upon the accuracy of the salesmanager's forecast.


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Forecasting

Method

QuantitativeMethod

QualitativeMethod


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Quantitative

Method

Test Market

Method

Time Series

Projection

Moving

average

Method

Exponential

Smoothing

Method

Regression

Method


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Qualitative

Method

Executive

opinion

Method

Delphi Method

Users

Expectation

Method

Build to Order

Method


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It is a popular method of measuringconsumer acceptance of new product. Theresult from a test market is used to makeprediction about future sales. Companies

select a limited number of medium sizedcities with population which they feel arerepresentative of their customers in terms ofsuch factors as age income or shopping

behavior. A product is promoted just if itwere being sold nationally.


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Time series method use chronologicallyordered raw data. Historical data are used toproject future events. For example Past salesare used to project future sales. By studying

the historical correlation of sales levels overtime , a manager can find a general indicationof the possible continuation of the timeseries. The primary advantage of time series

analysis is its objectivity, because it is basedon the established record of historical data.


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Moving averages are used to allow for marketplace factors changing at different rates and atdifferent times . With this method both thedistant past and distant future have little value inforecasting. The moving average is a techniquethat attempts to smooth out the different rates ofchange for the immediate past usually the past 3to 5 years. The forecast is the mean of these pastperiods and is only valid for one period in the

future. The forecast is updated by eliminating thedata for the earliest period and adding the mostrecent data.


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It is similar to moving average forecastmethod. It allows consideration of all pastdata but less weight is placed on data as itages. For example last year data has greater

weight than data from 5 years ago. It isbasically a weighted moving average of allpast data.


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Regression Analysis is a statistical methodused to incorporate independent factors thatare thought to influence sales ( for exampleadvertising, population) into the forecasting

procedure. Two or more variables are used toestimate the tendency of sales to vary. Onevariable required is the dependent variablewhich in this case is past sales. Simple

regression procedure use only oneindependent variable such as population.


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The well known delphi method consists ofadministering a series of questionnaire topanels of experts. Each new questionnairedepends upon the responses from the

previous questionnaire. This approachenables each panel respondent to have accessto information contributed by otherrespondents but eliminates the snowball or

bandwagon effect (response based on thereplies if others.


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The opinion of sales personnel concerningfuture sales. The method is often used togenerate forecast in the industrial equipmentindustry .


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Consumer and industrial companies often polltheir actual and potential customers , rangingfrom individual households to intermediaries.Some companies employ consumer panel that

are given products and asked to supplyinformation on the products quality, price,feature etc.


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Driven by recurring demand forecastingnightmares and faced with a rapidly changingmarketplace , major desktop computerwendors such as dell have decided to build

final products only after firm orders areplaced , a practice called build to order.


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THE SALES FORECASTis a projection into the future of expectedsales, given a stated set of environmentalconditions.

THE SALES PLAN

is a set of specified managerial actions to

be undertaken to meet or exceed the salesforecast.


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The sales force budget is the amount of themoney available or assigned for definiteperiod, usually one year. It is based onestimates of expenditures during that period

and on proposals for financing the budget.Thus the budget depends on the salesforecast and the amount of revenue expectedto be generated for the organization during

that period. The budget for the sales force isa valuable resource that the sales managerredistributes among lower level managers.


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The budget is an extremely important factorin the successful operation of the sales force.Top sales managers spend a great deal oftime attempting to convince corporate

management to increase the size of theirbudgets. Budgets are formulated for manyreasons, including the major ones of planning, coordination and control.


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Corporations and their functional unitsdevelop objectives for future periods andbudgets determine how these objectives willbe met. For example alternative marketing

plan , the probable profit from each plan ,and the individual budget for each will beconsidered before management is able todecide on future marketing programs.


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The budget is a major management tool forcoordinating the activities for all functional

areas and sub groups within the entireorganization. For example sales must becoordinated with production to ensure thatenough products are available to meet

demand. The production manager can usesales forecast and the sales departmentsmarketing plans to determine the necessaryproduction level. Budgeting allows the

financial executives to determine the firmsrevenues and expenses ( e.g A/C recievables,inventory, raw material labor etc) and haveenough capital to finance all businessoperations


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Allocation of budgeted funds givesmanagement control over their use. Salesmanagers estimate their budget needs, aregiven funds to operate their units and then

are held responsible for reaching their statedgoals by using their budgets effectively. Asthe sales programme is implemented andincome and expense are actually generated,

managers assess results against the amountbudgeted and determine whether they aremeeting objectives.


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How much money does the sales manager

receive to operate the sales force? Althoughno fixed financial formulas exist toappropriate funds , firms use one of threegeneral method to determine how money

should be allocated: A. some firms use an arbitrary percentage of

sales

B. other firms may use executive judgement

C. A few companies estimate the cost ofoperating each sales force unit along with thecost of each sales program over a specifiedperiod to arrive at a total budget.


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1. Base Salaries a. Management

b. Sales people

2. Commissions

3. Other Compensation

Social Security

Retirement Plan

Hospitalizations


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Product Samples

Office Transportation expenses

Entertainment

Travel


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A quota refers to an expected performanceobjective. Quotas are routinely assigned tosales unit , such as regions and districts.Quotas also are assigned to individual sales

people.

Documents

Unit 2sales Management