Sales objectives are targets for how much of a product or service a company aims to sell. They should be specific, measurable, achievable, realistic, and time-bound (SMART). Multiple quantitative and qualitative factors should be considered when setting sales objectives. Quantitative factors include historical sales trends, market potential, and budget/profit projections. Qualitative factors include economic conditions, competition, and the company's mission. Sales objectives can be set using outside macro analysis of total market sales and projected market share, inside micro analysis of past company sales trends, or expense-plus analysis of required sales to cover costs and profits. The objectives should then be reconciled and adjusted based on qualitative factors. Sales forecasts help implement the objectives and can utilize

1. Note by Maxwell Ranasinghe on
Sales Objectives and Sales Forecasting for Marketing
Planning
Sales Objectives
You dwelled on background for the marketing plan in the situation analysis that you
make in the initial stages of the marketing plan. It is always better to analyse facts found
in the situation analysis and develop a SWOT before you go further in to your marketing
plan. Then the next step is to set your sales objectives. It will shed light on the whole
marketing plan and give you the direction to design all other activities in a marketing
plan.
Understanding the importance of Sales Objectives
Sales objectives are basically how much of goods and services that you are going to sell
and what kind of sales volume that you hope to achieve in the marketplace. Most of the
elements in a marketing plan are designed to meet sales objectives. Confirming the size
of the target market and establishing realistic marketing objectives, to determining the
amount of advertising and promotion to be budgeted, to the actual hiring of marketing
and sales personnel to the number and kind of distribution channel utilized and, very
important, to the amount of product produced or stocked.
Sales Objectives should be SMART
Sales objectives should be Specific, Measurable, Achievable, Realistic and Time specific.
Objectives such as catch a substantial market share or increase sales by a big volume etc.
are not SMART objectives. “Increase Chicken Flavoured Soya Meat sales by 20 % in the
Western Province of Sri Lanka within the first year of operation”, is a SMART objective.
The company may be selling many soya products, but here, it specifically says “Chicken
Flavoured Soya Meat” and also the area that the sale is going to increase, so it is specific.
It says that the company is going to increase sales by 20%, so it is measurable. 20%
increase in a year is achievable and realistic. When the period ends, the company could
measure and how much of sales it has achieved and compare with the projected sales.
Further it indicates the period, within first year of operation, so it is time specific.
The sales objectives could be for a short term or for a longer term. Further the profit
expectations also could be projected at this time. It will help to prepare the marketing
plan with a view of obtaining the level of profits expected.
Factors to consider in setting sales objectives
Quantitative as well as qualitative factors should be taken into consideration when sales
objectives are set.

2. Quantitative factors
Sales Trends
Market potential, sales forecast and market share are all important elements in the setting
of sales objectives. All these elements could be measured from taking historical data and
the current tends in the market. If you do not expect anything to change dramatically,
historical data could be a very good predictor. If changes are taking place different to the
past trends then you got to take the future trends more into consideration.
In the quantitative factors, market sales, company versus market sales, market share
trend, market size, purchase rates of your target market should be analysed to have a
realistic Sales objectives.
Budget, Profit and Pricing Considerations
Company’s budgets in the past will provide a good understanding about the company’s
operating expenses and profit expectations. Sales expected from different products in
different markets, level of profits projected and achieved will provide important
information. Further, sales to different expenses ratios in the past also will provide more
information in setting realistic sales and pricing and profit expectations.
Qualitative Factors
All non quantitative factors that affect setting sales objective should be considered at this
stage. There could be numerous factors in this element and only more prominent factors
are discussed below briefly.
Economic considerations: You need take the changes in the economy into consideration
when deciding your sales objectives. It depend on what kind of economy you are facing,
such as a boom period or a rescission period etc. many other factors such as per capita
income, income distribution, interest rates, inflation, salary levels, employment and
unemployment etc have impact on economic consideration. Further global economic
trends such as American and other major economic financial crisis happened in year 2009
would have an effect on the economic consideration.
Competition: It is important take the analysis done in the business review section on
competition into consideration when sales objectives are set. It is not an easy task to
determine the impact of competition as you will find competitors act differently in many
occasions than you expect them to react.
Your product’s Life cycle: Your sales objectives will vary as to when you go along the
product life cycle. E.g. you may have a higher sales objective, if you have introduced a
product well into a growing market. Your sales objective may be low if your product is
on the declining stage. Therefore you need to take the PLC into consideration when you
are setting the sales objectives.

3. The mission and personality of your organization: What are your company’s
expectations? What is its philosophy of doing business? Are you a conservative or
careful or a moderate risk taker? Are you an aggressive and we can do it type of a
company? All those factors will have a bearing on your sales objectives. Therefore you
need to take all of them into consideration when sales objectives are set.
Process of setting sales objectives
Recommended process to set sales objectives is based on three tasks
1. Set individual sales objectives using three different quantitative methods
2. Reconcile these different quantitative goals into composite sales objectives
3. Adjust the quantitatively based composite sales objectives through the
interpolation of the relevant subjective qualitative factors, such as the economy,
competition, and the personality of your organization
Setting Quantitative Sales Objectives
Depending on the availability of data you could use following three different
quantitative methods
Outside macro
Inside macro
Expense plus
Each method will help you develop a sales objective estimate, and each estimate will
provide one of three parameters from which to make realistic judgments in arriving at
your final sales objectives. Each method can be used exclusively in arriving at a sales
objective: however, the final outcome will not be as reliable as when you apply all
three approaches. By using three different approaches, you develop sales objectives
derived from three different sets of data, a safeguard against using only one set of
data that might not be totally reliable or complete.
a) Outside macro approach
First look outside your immediate company environment and estimate total or
category sales for each of the next three years. Then estimate your company’s current
and future share of the market for next three years. Finally, multiply the total market
or category projections by your market share estimate for each of the next three-year
projections for both unit and value of sales. E.g. If the market category sales for next
three years are estimated at 100 million, 120 million and 150 million and your
company’s future share is estimated at 30%, 40% and 50% then the sales
projections for next three for your company would be 30 million, 48 million and 60
million.

4. Market Trend Line Sale Projection
Rather than applying straight percentage increase to arrive at market volume for future
years, you can statistically project a market trend line. If you need to project sales for
year 2015, you can take the changes taken place during the period 2006 to 2010 and
adopt the tend line to project the sales.
Assume the amount of sales done in year 2006 was Rs. 800 million and the sales done in
year 2010 was Rs. 900 million, you would perform the calculation as follows;
Increase in sales from 2006 to 2010 was Rs. (900 million – 800 million) Rs. 100 million
Average per year = 100/4 = Rs. 25 million
Projected sales increase for next 5 years would be 25 million x 5 = 125 million
Therefore the projected sales for 2015 would be 900 million plus 125 million = Rs.1025
million
This method is called the freehand and is the simplest method of determining trend lines.
There are advanced trend line methods when there is a substantial fluctuations in sales,
which are deal in detail in business statistics such as least squares method.
Company /product Trend Line Share Projections
To arrive at a share of market estimate, review the change in your company’s share over
the past five years and project similar share change for the future. You can estimate a
percentage point change or use the same freehand approach shown in the preceding
example.
Market
Sales
Volume
company
share
percent of
the
market
Value Rs.
Percentage
change of
value from
previous
years Units
Percentage
change of
units from
previous
year
Market
Share
Value
Percentage
point
change of
Mkt Share
value from
previous
year
Percentage
of units of
the market
share
Previous 5 years
1998 952.2 13.3 449.1 5.10 5.00% 0.10% 4.00%
1999 1067 12.1 484 7.77 5.10% 0.10% 4.70%
2000 1135.1 6.4 508.2 5.00 6.10% 1.00% 5.20%
2001 1202.9 6.0 527.9 3.88 6.50% 0.40% 5.70%

5. 2002 1275 6.0 544 3.05 6.60% 0.10% 6.10%
Projections Next
3 years
2003 1355.7 6.3 567.7 4.40 7.00% 0.40% 6.60%
2004 1436.4 6.0 591.4 4.10 7.40% 0.40% 7.10%
2005 1517.1 5.6 615.1 4.00 7.80% 0.40% 7.60%
Three year sales
projections for
company
would be
as follows
Market Sales
Value
company
sales
percentage
of value
Company
sales value
Market
Sales
Units
Company
unit share
percent of
market
Company
unit sales
2003 1355.7 7.00% 94.9 567.7 6.60% 37.
2004 1436.4 7.40% 106.3 591.4 7.10% 42.
2005 1517.1 7.80% 118.3 615.1 7.60% 46.
Inside Micro Approach
Review your organizations past sales records. Using the straight
percentage increase or the trend line approach, arrival at projected three
year sales for your company. From the top go further and using the
straight percentage or trend line approach, estimate sales for each
product or department, adding the projected sales of each
product/department together for a three year company total. Reconcile
this total with your initial sales estimate for the entire organization to
determine an ultimate top projection.
Next review your sales by Rupees and units from the bottom up to
arrive at an estimate of a sales figure. Bottom up approach means
estimating sales from where it generates, such as sales by each channel,
store unit, or service office. Based on history and the current changes in
the market, estimate sales for each bottom up sales generator and add
them together to determine each year’s projection.
Reconcile the organizations sales estimates derived from top with those
derived from the bottom to figure out a realistic value.
Expense plus approach
How mush of sales should be required to cover up the expenses. What
amount of sales is required to brake even? This method is more short

6. term in nature and is most useful in helping to arrive at your one year
sales objective. However, you can develop sales objectives for each
year for of a three year sales period by employing this approach. In
order to prepare a sales objective by this method the budgeted expenses
are required and even the expected profits also can be taken into
consideration. Then you can find out how much of sales at what level
gross margins should required covering the expenses and expected
profits.
E.g.
If the total expenditure is Rs. 500,000 and the expected profit is Rs.
100,000, then the gross margin should cover at least Rs. 600,000. If the
gross profit rate is 15%, then the sales target should be 4,000,000.
( 600,000 /15 * 100).
Alternative New product category approach
This method is useful for new products or product categories where
there are no past records. Potential target market has to be estimated
and then work backwards to figure out a value for sales objective. It
could comprise of trial purchases, repeat purchases of the new product.
The estimates would be highly speculative and uncertain if a good
analysis of the potential market is not made.
Reconciling Sales Objectives
You can take all the estimated sales objectives obtained through
different methods and make reconciliation. Then you can take an
average of all or weighted average placing more emphasis on or two
methods used. This reconciliation will help you to make a better
decision on the sales objective than taking only a sales objective
obtained by using one method.
Qualitative adjustments of quantitative sales
Once the quantitative assessment is taken about a sales objective, you
could review the qualitative factors that could affect sales. Then taking
them into consideration, you may increase or decrease your sales
objective. E.g. A positive economic outlook may increase the sales
estimate and negative outlook may decrease the sales estimates.
Other considerations
Include a rationale with the sales objectives. - It should summarise the
process used and assumptions made

7. Involve upper management in setting sales objectives.- Make sure that
upper management of the company has an understanding of the sales
objectives
Plan to revise the sales objectives – regularly the sales objectives
should be reviewed and necessary adjustments should be made to make
it current. It is better to have set periods in advance to review the sales
objectives, so that it would become and integral part of the marketing
control mechanism.
Sales Forecasting Guidelines
Steps in developing sales forecasts
1. Ascertain the sales forecast problem
2. Identify, evaluate and select Forecasting Techniques.
3. Implementing the forecasting system
1) Ascertaining the forecasting problem
What is the output required
What is the time period the forecasting needed?
Uses to be made of the forecast
Level of accuracy
What kind of details required such as national, regional and local level
sales, units, volumes etc
2. Identify, evaluate and select Forecasting Techniques.
There are several forecasting methods one could use. Each will have
certain features and limitations, the user’s needs, resources and
available data should be matched with the appropriate techniques. A
forecaster can use one or more techniques into the forecasting process
depending on the accuracy needed. One technique may be used for
primary basis of forecast and the other technique may be used to check
the validity of the primary forecasting method.
3. Implementation
Many forecasters begin with very formal forecasting approaches based
on projections of past experience would with a subjective assessment of
the future market environment.
As the forecasting needs increase, more formalized methods are
developed. Factors that often affect the choice of a forecasting system
include type of corporate planning process used, the complexity of the
market, the number of products etc.

8. Forecasting techniques
The macro approaches used in forecasting are briefly described.
Forecasting techniques generally follow two basic ways. The first
involves direct estimates of brand sales. The second forecast brand
sales as a product of several components such as industry sales and
market share.
Delphi method
Delphi is a systematic, interactive forecasting method which relies on a panel of experts
is based on the principle that forecasts from a structured group of experts are more
accurate than those from unstructured groups or individuals.
The experts answer questionnaires in two or more rounds. After each round, a facilitator
provides an anonymous summary of the experts’ forecasts from the previous round as
well as the reasons they provided for their judgments. Thus, experts are encouraged to
revise their earlier answers in light of the replies of other members of their panel. It is
believed that during this process the range of the answers will decrease and the group will
converge towards the "correct" answer. Finally, the process is stopped after a pre-defined
stop criterion (e.g. number of rounds, achievement of consensus, and stability of results)
and the mean or median scores of the final rounds determine the results.
The advantages of the method are that the forecast is based on opinion of experts in the
field. This method would be very effective if the products a high tech as the experts may
have a better idea of the future sales of such products.
The disadvantages are that the forecast needs great deal of time and some money to
implement. Accuracy depends on participant’s knowledge and level of initial and
continued participation. Further, the forecast needs and able and experienced coordinator.
Judgmental forecasting (Jury of executive Opinion)
This is one of the simplest and oldest methods. Top executives of the
company are asked to forecast the company’s future sales. By
averaging their views, a broad-base forecast is obtained. This is usually
accurate than taking one single executives estimate. The estimates are
taken from executives in functional areas such as marketing, finance,
production and purchasing. The more factual information that these
executives have at their disposal, the more accurate their sales estimates
will be.

9. The advantage is that the forecast is made by people of different
specializations and their view points, experience will affect their
judgments. It will lead to make an estimate taking overall viewpoints of
top executives. Further the method is easy and can be implemented
quickly. In addition, the forecast are made by people within the
company who would actually get involved in the process of achieving
targets based on such forecast. It would make everybody commit to
achieve what they have predicted.
The major disadvantage is the forecast depends on the quality of the
contribution made by the top executives, how much of data and
information they have and how they have interpreted them to forecast
the future. The outside view point of the market may not be considered
much as much of the decision making would be based on primary
research and data collection within the given time frame and cost
constraints.
Sales Force Composite Method
This method compiles the estimates done by the sales force of the
company. Sales people frequently make these estimates on their own on
a specially designed form. Some times it could be in consultation with
another sales person or the sales manager.
The reports of sales people are analysed and totaled for the district or
region. The district or regional mangers then evaluate the estimates by
comparing it with the accuracy of past estimates of the sales. The
resulting deviation factor and their own experience is involved in
developing the final district estimate, which is forwarded to the head
office, where a total sales estimates of all districts or markets that they
operate are complied.
The advantages of the method are that the forecast is based on
specialiased knowledge of individuals who are in the front line where
the sales occur. Further forecast is easily broken down to customer,
product, brand or territory basis as it generates from the bottom of the
sales force.
The disadvantages of the method are that the forecasts is based on
estimates of sales persons, who are often unaware of broad macro
elements such PESTEEL factors and also of future plans of a company
in detail. Forecast is based on sales person rough estimates and it may
not be very systematic. Further, sales person tend to estimate lower
than what is possible to achieve in the market place as they would be
given targets based on the forecasts.
Other methods

10. There are many other techniques of sales forecasting which is beyond
the context of this text. If one is really interested in sales forecasts, he
or she must get acquainted with methods such as scenario technique,
Cross impact analysis, relevant tree techniques and Correlation and
regression analysis. Most of the methods that are based on
mathematical equations are now converted to easy to use computer
based application programs and all what one needs is the data to feed
them.