Goals, Market & Sales Potential, Chain-ratio method, Market build-up method, The Buying Power Index Method, Techniques, Quotas, Sales Analysis, Cost

1. 1
Module 3 : Goals in Sales Management

2. GOALS IN SALES MANAGEMENT
 There are three main goals in sales management. They
are:
 Adequate sales volume to be achieved
 Maximum contribution to profits
 Continuing growth

3. GOAL SETTING PROCESS IN SALES MANAGEMENT
 Forecasting the demand & sales
 Determining the sales budget
 Designing Sales Territories
 Defining Sales Quota
 Assigning Goals to Sales Force

4.  The total expected sales of a given product or service for the
entire industry in a specific market over a state of time is called
Market Potential
 The maximize share (or percentage) of market potential that an
individual firm can reasonably expect to achieve is called
Sales Potential
4

5.  Chain-ratio method
 Market build-up method
 Buying power index method
5

6.  This method begins with an aggregate measure of
demand and through the application of a series of ratios
or usage rates, arrives at an estimate of current demand.
 Example 1:
 The market for a new sail boat may consist of households,
with heads between the ages of 25 and 55, with annual incomes
greater than $40,000, and who live within 35 miles of a body of
water (say 30,000 households in Virginia).
 If 2% of these households engage in or are interested in
sailing, we can estimate market potential to be:
2% (30,000 households) = 600 households in
Virginia
6

7. Demand for Complan =
(Population) X (per capita discretionary income) X
(% discretionary income on food) X (% spent on beverages) X ( % spent
on health beverages ) X( % spent on white health beverages ) X (% spent
on Complan)
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8.  The basic procedure is to estimate market potential
in each of several markets. These estimates are then
added together to arrive at total market potential.
8

9. The Buying Power Index Method
 The BPI is a type of demand estimation procedure in which estimates of
demand are derived from the values of factors believed to be related to the level
of demand.
 Specifically, this method provides the relative buying power of regions (e.g., states
and metropolitan areas) through the following calculation:
 BPI = 0.5I + 0.2P + 0.3R
 Where:
 BPI = the proportion of aggregate regional buying power contained in
the area.
 I = the proportion of aggregate national disposable income contained
in the area.
 P = the proportion of national population contained in the area.
 R = the proportion of aggregate national retail sales occurring in the
area.
9

10.  Example:
 Texas contains 6.69% of the aggregate national disposable
income, 6.56% of the national population, and 7.52% of the
national retail sales. What is its buying power index?
BPI = 0.5 (6.69%) + 0.2 (6.56%) + 0.3 (7.52%)
= 6.91%
 Conclusion: Texas has 6.91% of the total national buying
power.
10

11.  The prediction, projection or estimation of expected sales over
a specified future time period..
 There are three methods that can be used to forecast
company sales:
1. Judgment Techniques
2. Time Series Techniques
3. Causal Techniques
11

12. Judgment techniques make use of qualitative data and rely
primarily on judgments from those participating in the
forecasting process.
There are 4 categories of judgment techniques:
1. Survey of customer expectations
2. Composite of sales force opinion
3. Jury of executive opinion
4. Delphi technique
12

13. 1. Survey of customer expectations - the firm goes to the
market and administers structured surveys to obtain the buying
intentions of customers.
2. Composite of sales force opinion - each sales person
estimates how much he or she will sell during the time period.
The estimates are revised and adjusted at various levels of
management.
3. Jury of executive opinion - each executive provides an
estimate of sales at a future time period. The estimates are
combined in some fashion to arrive at a final estimate.
4. Delphi technique - a variation of the jury of executive opinion
that overcomes the problems of group dynamics but maintains the
role of important executives.
13

14. Time series techniques rely entirely on historical data in the form of
past sales. They incorporate the movement of sales over time by
measuring the pattern of sales.
The fundamental assumption of time-series techniques is that past
sales are a basis for estimating future sales.
There are 2 categories of time series techniques:
1. Trend fitting
2. Moving averages
14

15.  Is the simplest form of time series analysis. It involves
fitting a line to a series of sales data. Forecasting occurs
by extending the fitted line to the time period for which
sales are being estimated.
 This procedure attaches equal weight to each entry in the
series.
15

16. 16
‘10‘09‘08‘07‘06‘05‘04‘03‘02‘01‘0099‘98‘97
YEAR
17,000
16,000
15,000
14,000
13,000
12,000
11,000
10,000
UNITS
Actual
Sales
Forecasted
Sales 1
Forecasted
Sales 2

17.  This approach also attaches equal weight to each entry in the series, but
as more entries become available early entries in the series are dropped
 For well established products with several years of data available, the
number of time periods to use in the moving average should be based on
the volatility of historical sales.
17

18. Moving average method
Forecast salesMonth Actual sales Total sales (3 months)
1 120 - -
2 130 - -
3 110 360 120.00
4 140 380 126.67
5 110 360 120.00
6 130 380 126.67
18

19. Causal techniques also rely on historical quantitative data. But,
rather than focusing on the historical pattern of sales alone, an
attempt is made to link movements in sales to movements in other
factors.
19
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20.  A sales budget is a detailed schedule
showing the expected sales for the
budget period which determines the
necessary expenditure that will occur
in making the sales
20

21.  Unit sales by sales territory
 Unit sales by month
 Unit sales by account
 Unit or rupee sales
 Forecasting Methods
 Selling Expenses
 Travel costs
 Board and lodge
 Standard costing
 Historical costing
 Actual or fixed expense
21

22.  Affordable Method
 Companies set the promotion budget at what they think the
company can afford. This method is adopted by firms dealing in
capital industrial goods
 Rule of Thumb or Percentage of Sales Method
 Companies set their sales budget as a specified percentage of
sales (either current or anticipated). Mass-selling goods and
companies dominated by finance are major users of this method
22

23.  Competitors’ Parity Method
 This method is adopted by large-sized companies facing tough
competition. The knowledge of competitors’ activities and resource
allocation is important if an organization wants to pursue this
method
 Objective and Task Method
 This method calls upon marketers to develop their budgets by
identifying the objectives of sales function and then ascertaining
the selling and related tasks to achieve the objectives
23

24.  A sales territory consists of existing and potential customers
assigned to a sales person. The territory may or may not have
geographic boundaries.
24

25.  Increase / improve customer coverage
 Control selling expenses
 Effective evaluation of salesman’s performance.
 improve customer relations
25

26. Main procedural steps:
1. Selection of a basic geographical control unit
2. Determination of sales potential present in each unit
3. Combining the basic units into tentative territories
4. Adjust for differences in coverage difficulty and readjust
the tentative territories ( build up / break down method )
26

27. Build up method:
 Decide call frequency
 Calculate total no of calls in the unit
 Estimate workload capacity of salesman
 Make tentative territories
 Develop final territories
27

28. Break down method:
 Estimate company sales potential for total market.
 Forecast sales potential for each control unit.
 Estimate sales expected from each salesman.
 Make tentative territories.
 Develop final territories.
28

29. Sales Manager should consider two criteria:
(A) Relative ability of salespeople
 Based on key evaluation factors:
(1) Product knowledge, (2) market knowledge, (3)
past sales performance, (4) communication, (5)
selling skills
(B) Salesperson’s Effectiveness in a Territory
 Decided by comparing social, cultural, and physical
characteristics of the salesperson with those of the
territory
 Objective is to match salesperson to the territory
29

30.  Quotas are quantitative goals assigned to individual sales
persons for a specified period of time.
 Quotas may be set equal to ,above or below the sales forecast.
30

31.  To help management motivate sales people.
 To direct sales people where to put there efforts.
 To provide standards of performance evaluation
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32.  Sales volume Quotas : Rupee volume / Unit volume
 Profit based Quotas: contribution / gross margin
 Activity Quotas: calls per day; sales meetings; product demos;
( efforts = results.)
 Expense Quotas
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33.  S - specific
 M - measurable
 A - achievable
 R - realistic
 T - time bound
33

34.  Territory potential
 Past sales experience
 Executive judgment
 Salespeople’s estimates
 Compensation plan
34

35.  Gathering, classifying, comparing and studying
sales data is termed as a sales analysis
 It helps in non marketing functions like production
planning, cash management, inventory management
etc.
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36. 36
Region S. Quota Actuals Diff. Performan
ce Index
Sales/SQ ×
100
West
South
North
East
10.25
10.00
9.75
8.75
10.20
10.02
9.73
7.01
-0.05
+0.02
-0.02
-1.74
99.51
100.20
99.79
80.11

37. 37
Sales Rep. S. Quota Sales Diff. Perf. Index
Ravi
Rahul
Rishi
Raj
500.5
300.5
500.25
425.75
475.5
290.5
150.25
400.75
-25
-10
-350
-25
95.00
96.67
30.03
94.12

38. 38
Product Quota (Rs.) Actual (Rs.) Diff.
Tooth Paste
Soap
Cosmetics
400
300
500
240
180
220
160
120
280

39.  Sales cost analysis is a detailed examination of the
costs incurred in the organization and administration of
the sales functions & its impact on sales volume.
 Sales Cost Analysis looks into costs incurred to
produce sales results.
 It analyses sales volume and selling expenses to
identify the profitability of sales activities.
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40.  Cost of goods per rupee of sales
 Profit per rupee of sales
 Cost per segment
 Cost per Territory
 Cost per Salesperson
 Cost per channel member
 Average cost per order
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