Sales Force Management

5

The Strategic Role of Information in Sales Management

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IT in Perspective

• Tools enable rather than transform
• Implement successful business processes
• Support w/new technology

Source: HR Chally Group (2009),

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5.1

Market potential, sales potential, and sales forecasting process

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• Discuss differences between market potential, sales potential, sales forecast, and sales quota
• Understand methods by which sales managers develop sales forecasts
• Outline process of setting a sales quota
• Explain types of quotas used in sales management
• Discuss approaches to determining sales force size
• Describe sales territory design process
• Understand importance of sales analysis
• Conduct sales analysis

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Information for Managers

• Sales forecasts
• Territory estimates
• Quotas
• Sales force size
• Sales territory design

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Market Opportunity Analysis

• Market potential – estimate of possible sales for an entire industry in a market during a stated period under ideal conditions
• Sales potential – portion of market potential the firm can expect to reasonably achieve
• Sales forecast – estimate of dollar or unit sales for a specified future period
• Sales quotas – sales goals assigned to a marketing unit to manage sales efforts

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5.1

Market potential,

sales potential, and sales forecasting

process

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5.2

Classification of sales forecasting methods

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Subjective Sales Forecasting

• User expectations – relies on buyers’ expressed intention
• Sales force composite – sales force opinions
• Jury of executive opinion - key experts’ opinions
• Delphi technique – participants prepare estimates which are compared anonymously and iteratively to reach consensus

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Objective Sales Forecasting

• Market test – places product in select areas
• Time series analysis – relies on historical data to develop predictions
• Statistical demand analysis – attempts to determine the relationship between sales and factors that influence sales

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Objective Time Series Analysis

• Moving average – averages sales results over previous time periods to forecast
• Exponential smoothing – type of moving average where most recent years given more weight
• Decomposition – applied to monthly or quarterly data where seasonal pattern is evident

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5.3

Forecasting

Techniques

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Note to instructor -

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5.4

Example of a moving average forecast

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5.5

Graph of actual and forecast sales using moving averages

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5.6

Calculation of a seasonal index

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Choosing a Forecasting Method

• No method remains superior under all conditions.
• Apply multiple forecasting methods to a problem
• Scenario planning prepares “what-if” questions and produces possible outcomes

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Effects of Territory Estimates

• Design of sales territories
• Procedures for identifying potential customers
• Establishment of sales quotas
• Compensation and subcomponents
• Evaluation of salesperson performance

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Planning Tools

• North American Industry Classification System (NAICS)
• Developed by US Bureau of the Census,
• Organizes reporting of business information
• Each U.S. industry is assigned a two-digit number
• Buying Power Index (BPI)
• Published by Sales Marketing Management Magazine
• Considers income, population and retail sales
• Most useful with low-priced convenience goods

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Sales Quotas

• Goals assigned to salespeople
• Apply to specific periods
• Tool for planning and controlling field selling activities and results
• Benchmark for evaluating sales effectiveness
• Motivate sales people

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Process for Setting Quotas

• Identify types of quotas to be used
• Select level of each type of quota

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Quota Purposes

• Provide incentives for sales representatives
• Provide measures to evaluate salespeople’s performance

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Good Quota Characteristics

• Attainable
• Easy to understand
• Complete
• Timely

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5.1 Sales Process and Quota Attainment

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Quota Types

• Sales volume - emphasize sales or some aspect of sales
• Activity - focus on certain sales activities
• Financial - examine financial criteria such as gross margin or contribution to overhead

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Sales Volume Quotas

• Most popular
• Often based on past sales
• Related directly to market potential, thus credible and easily understood
• May be expressed in dollars, physical units, or points

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Activity Quotas

• Reflect territorial conditions
• Require a detailed analysis of work required for effective territorial coverage
• Customers influence activity quotas through:
• Account and order size
• Purchasing patterns
• Support required for satisfaction

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5.7

Common types of

activity quotas

Number of…

1. Calls on new accounts.

2. Letters to potential customers.

3. Proposals submitted.

4. Field demonstrations arranged.

5. Service calls made.

6. Equipment installations supervised.

7. Displays arranged.

8. Dealer sales meetings held.

9. Meetings and conventions attended.

10. Past-due accounts collected.

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Financial Quotas

• Direct salespeople to more profitable products and customers
• Common bases
• Gross margin
• Net profit
• Selling expenses
• Calculation not straight-forward
• Profit produced affected by factors beyond a salesperson’s control

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Quota Level Considerations

• Territory available potential
• Quota’s impact on motivation
• Long-term company objectives
• Short-term profitability impact

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Sales Force Deployment Considerations

• Sales force size or number of territories
• Design of individual territories
• Allocation of total selling effort to accounts
• Simultaneous decisions implemented through software

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Determining Sales Force Size

• Breakdown method
• Workload method
• Incremental method

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Breakdown Method

(N)umber of sales personnel needed

Estimated (P)roductivity of each salesperson

Forecasted (S)ales volume

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Workload Method

Total # salespeople required

# Hours available to each salesperson

Total # hours required to service market

=

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5.8

Steps to determine sales force size by the workload method

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Incremental Method

• Add salespeople until incremental profit produced equals incremental cost
• Decreasing returns associated with addition of salespeople

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5.9

Illustration of the incremental approach to determining sales force size

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5.10

Stages in territory

design

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5.11

Ten largest CMSA/MSAs in decreasing order of size

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5.12

Account planning

matrix

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Sales Analysis

• Gathering, classifying, comparing, studying company sales data
• Highlights sales concentration in products, customers, orders, territories
• 80:20 principle
• Decisions
• Evaluation system
• Sources of information
• Information aggregation type

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5.13

Key decisions when conducting a sales analysis

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Evaluation Systems

• Determine how analysis will be conducted
• Simple
• Comparative
• Basis for comparison?
• Reporting and control system?

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5.14

Differences between simple sales analysis and comparative analysis

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5.15

Other sources of information for sales analysis

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5.3 Risks of ERP Implementation

• 1. Lack of senior management commitment.
• 2. Ineffective communication with users.
• 3. Insufficient training.
• 4. Failure to receive user support.
• 5. Ineffective project management.
• 6. Attempting to reconcile with existing systems.
• 7. Departmental conflicts.
• 8. Team composition.
• 9. Failure to redesign business processes.
• 10. Confusing change requirements.

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Information Aggregation Type

• Possible groupings
• Region
• Product
• Customer
• Market
• Method of sale
• Order size
• Financial arrangement
• Considerations
• Company size
• Product diversity
• Sales area
• Number of markets/customers
• Management level/type to receive report
• Hierarchical reports most effective

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5.16

Sales reports in

a consumer food

products company

*To understand the rationale behind who was given access to each report, it is useful to know that salespeople were assigned accounts in

sales districts. Salespeople were assigned one or, at most, a couple of large accounts and were responsible for all the grocery stores, regardless

of geography, affiliated with these large accounts, or they were assigned a geographic territory and were responsible for all of the stores

within that territory. All sales districts were assigned to sales offices or sales centers. The centers were, in turn, organized into regions.

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McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

Mark W. Johnston | Greg W. Marshall