THE STRATEGIC ROLE OF INFORMATION IN SALES MANAGEMENT

1. THE STRATEGIC ROLE OF INFORMATION IN SALES MANAGEMENT www.AssignmentPoint.com

2. INFORMATION TECHNOLOGY Information Technology (IT) has been the most notable addition to the business landscape in the last 30 years. From the vexing "dumb terminals" of the 1970s to the "PC on every desktop" of Bill Gates's dreams, computers and their supporting infrastructure have come to permeate every aspect of twenty-first century business. Businesses, though, have struggled to keep the role of information technology in perspective. Like others before it, computers are simply another (albeit dramatically more powerful) tool to improve the operations of a company. The IT revolution of the late twentieth century put "tools" in a completely different light. Companies often want information to not just improve the way they do business; they expect it to transform the way they do business. Successful selling is determined by the salespeople's ability to satisfy their buyers' needs at every step of the buying process, regardless of what tools support them. They focus first on determining how they need to do business and then purchase information technology to play a supporting role. www.AssignmentPoint.com

3. INTRODUCTION TO MARKET OPPORTUNITY ANALYSIS Market opportunity analysis requires an understanding of the differences in the notions of market potential, sales potential, sales forecast, and sales quota. Market potential is an estimate of the possible sales of a commodity, a group of commodities, or a service for an entire industry in a market during a stated period under ideal conditions. A market is a customer group in a specific geographic area. Sales potential refers to the portion of the market potential that a particular firm can reasonably expect to achieve. Market potential represents the maximum possible sales for all sellers of the good or service under ideal conditions, while sales potential reflects the maximum possible sales for an individual firm. The sales forecast is an estimate of the dollar or unit sales for a specified future period. The forecast may be for a specified item of merchandise or for an entire line. It may be for a market as a whole or for any portion of it. Importantly, a sales forecast specifies the commodity, customer group, geographic area, and time period and includes a specific marketing plan and accompanying marketing program as essential elements. If the proposed plan is changed, predicted sales are also expected to change. Sales quotas are sales goals assigned to a marketing unit for use in managing sales efforts. The marketing unit in question might be an individual salesperson, a sales territory, a branch office, a region, a dealer or distributor, or a district, just to name a few possibilities. www.AssignmentPoint.com

4. Asses economic environment Estimate market and/or sales potential Develop sales forecast Redesign marketing program Compare forecast with objectives No In agreement? Yes Establish sales quotas MARKET POTENTIAL, SALES FORECASTING PROCESS www.AssignmentPoint.com

5. Sales forecasting methods Subjective methods User expectations Sales force composite Jury of executive opinion Delphi technique Objective methods Market test Time- series analysis Moving averages Exponential smoothing Decomposition Statistical demand analysis CLASSIFICATION OF SALE FORECASTING METHODS www.AssignmentPoint.com

6. SUMMARY OF ADVANTAGES AND DISADVANTAGE OF VARIOUS SALES FORECASTING TECHNIQUES www.AssignmentPoint.com

7. SUMMARY OF ADVANTAGES AND DISADVANTAGE OF VARIOUS SALES FORECASTING TECHNIQUES www.AssignmentPoint.com

8. OBJECTIVE METHODS OF FORECASTING Objective forecasting methods rely primarily on more sophisticated quantitative (empirical) analytical approaches in developing the forecast. • Market Test: The typical market test (or test market) involves placing a product in several representative geographic areas to see how well it performs and then projecting that experience to the market as a whole. Often this is done for a new product or an improved version of an old product. • Market tests have several drawbacks: • Market tests are costly to administer and are more conducive to testing of • consumer products than industrial products. • The time involved in conducting a market test can be considerable. • Because a product is being test marketed, it receives more attention in the • market test than it can ever receive on a national scale, giving an unrealistic • picture of the product's potential. • A market test, because it is so visible to competitors, can reveal a firm's hand • on its new-product launch strategy, thus allowing competitors time to formulate • a market response before full market introduction. www.AssignmentPoint.com

9. Time-Series Analysis: Approaches to sales forecasting using time-series analysis rely on the analysis of historical data to develop a prediction for the future. The sophistication of these analyses can vary widely. At the most simplistic extreme, the forecaster might simply forecast next year's sales to be equal to this year's sales.Moving Average: The moving average method is conceptually quite simple. Consider the forecast that next year's sales will be equal to this year's sales. Such a forecast might be subject to large error if there is much fluctuation in sales from one year to the next. To allow for such randomness, we might consider using some kind of average of recent values. Exponential Smoothing: The method of moving averages gives equal weight to each of the last n values in forecasting the next value, where n represents the number of years used. Thus, when n=4 (the four-year moving average is being used), equal weight is given to each of the last four years' sales in predicting the sales for next year. In a four-year moving average, no weight is given to any sales five or more years previous. Exponential smoothing is a type of moving average. However, instead of weighting all observations equally in generating the forecast, exponential smoothing weights the most recent observations heavies, for good reason. The most recent observations contain the most information about what is likely to happen in the future, and they should logically be given more weight OBJECTIVE METHODS OF FORECASTING www.AssignmentPoint.com

10. Decomposition The decomposition method if sales forecasting is typically applied to monthly or quarterly data where a seasonal pattern is evident and the manager wishes to forecast sales not only for the year but also for each period in the year. The decomposition method attempts to isolate four separate potions of a time series: the trend, cyclical, seasonal, and random factors. - The trend reflects the long-run changes experienced in the series when the cyclical, seasonal, and irregular components are removed. It is typically assumed to be a straight line.- The cyclical factor is not always present because it reflects the waves in a series when the seasonal and irregular components are removed. These ups and downs typically occur over a long period, perhaps two to five years. Some products experience little cyclical fluctuation (canned peas), whereas others experience a great deal (housing starts).- Seasonality reflects the annual fluctuation in the series due to the natural seasons. The seasonal factor normally repeats itself each year, although the exact pattern of sales may be different from year to year. - The random factor is what is left after the influence of the trend, cyclical, and seasonal factors is removed. OBJECTIVE METHODS OF FORECASTING www.AssignmentPoint.com

11. DEVELOPING TERRITORY ESTIMATES • Territory estimates recognize the condition that the potential for any product may not be uniform by area. Territory demand estimates allow for effective planning, directing, and controlling of salespeople in that the estimates affect the following: • The design of sales territories. • The procedures used to identify potential customers. • The establishment o sales quotas • Compensation levels and the mix of components in the firm's sales • compensation scheme. • The evaluation of salespeople's performance. • The development of territory demand estimates is typically different for industrial versus consumer goods. Territory demand estimates for industrial goods are often developed by relating sales to some common denominator. The common denominator or market factor might be the number of total employees, number of production employees, value added by manufacturing process, value of materials consumed, value of products shipped, or expenditures for new plant and equipment. www.AssignmentPoint.com

12. PURPOSES AND CHARACTERISTICS OF SALES QUOTAS Purposes of Quotas: Quotas facilitate the planning and control of the field selling effort in a number of ways. Two important contributions of sales quotas are in (1) providing incentives for sales representatives and (2) evaluating salespeople's performance. Characteristics of a Good Quota For a quota to be effective, it must be (1) attainable, (2) easy to understand, (3) complete, and (4) timely. Some argue that quotas should be set high so they can be achieved only with extraordinary effort. Although most salespeople may not reach their quotas, the argument is that they are spurred to greater effort than they would have expended in the absence of such a "carrot." Although perhaps intuitively appealing, high quotas can cause problems. The use of very high "carrot" quotas seems to be the exception rather than the rule and is generally not recommended. Quotas should be not only realistic but also easy to understand. Complex quota plans may cause suspicion and mistrust among sales representatives and thereby discourage rather than motivate them. It helps when salespeople can be shown exactly how their quotas were derived. Finally, the quota system should allow for timely feedback of results to salespeople. Quotas for a sales period should be calculated and announced right away. Delays in providing this information not only dilute the advantages of using quotas but also create ambiguity, as the salesperson gets well into another performance period without knowing how he or she fared in the prior period. www.AssignmentPoint.com

13. PURPOSES AND CHARACTERISTICS OF SALES QUOTAS SETTING QUOTAS Types of Quotas: There are three basic types of quotas: (1) those emphasizing sales or some aspect of sales volume, (2) those that focus on the activities in which sales representatives are supposed to engage, and (3) those that examine financial criteria such as gross margin or contribution to overhead. Sales volume quotas are the most popular. PURPOSES AND CHARACTERISTICS OF SALESVOLUME QUOTAS The popularity of sales volume quotas, those that emphasize dollar sales or some other aspect of sales volume, is understandable. Activity Quotas: Activity quotasattempt to recognize the investment nature of a salesperson's efforts. On the other hand, they may influence a future sale. If the quota system emphasizes only sales volume, salespeople may be inclined to neglect these activities. Today, many activities are necessary to support long-term client relationships. It is appropriate that these activities be considered for quota development. Financial Quotas: Financial quotas help focus salespeople on the cost and profit implications of what they sell. All else being equal, it is easy to understand that salespeople might emphasize products in their line that are relatively easy to sell or concentrate on customers with whom they feel most comfortable interacting. Financial quotas attempt to direct sales people's efforts to more profitable products and customers. Common bases for developing financial quotas are gross margin, net profit, and selling expenses, although most any financial measure could be used. www.AssignmentPoint.com

14. STEPS TO DETERMINE SALES FORCE SIZE BY THE WORKLOAD METHOD Classify customers into categories Determine frequency and length of calls for accounts in each category Calculate workload to cover entire market Determine time available per salesperson Apportion salesperson's time by task performed Calculate the number of salespeople needed www.AssignmentPoint.com

15. Select basic control unit Step 1 Estimate market potential in each control unit Step 2 Combine control units into tentative territories Step 3 Step 4 Perform workload analysis Adjust tentative territories to allow for sales potential and coverage difficulty differences Step 5 Assign salespeople to territories Step 6 Stages in territory design DESIGNING SALES TERRITORIES www.AssignmentPoint.com

16. ACCOUNT PLANNING MATRIX High Account Potential Low Weak Strong www.AssignmentPoint.com Competitive Strength

17. Quota Last year's sales Forecasted sales Other territories Other Simple Type of evaluation system Basis for comparison Comparative All comparisons Significant deviations only Other Type of reporting system Sources of information Sales invoice Salesperson call reports Salesperson expense accounts Warranty cards Store audit or scanner data Diary panel data Enterprise resource planning (ERP) system Customer relationship management (CRM) system Other Geographic regions or salespeople's territories Product, package size, grade, or color Customer or customer size Class of customer or channel of distribution Size of order Terms of sale Other Points of sales aggregation KEY DECISIONS WHEN CONDUCTING A SALES ANALYSIS www.AssignmentPoint.com

18. SOURCES OF INFORMATION FOR SALES ANALYSIS Generally, one of the most productive source documents is the sales invoice. From this, the following information can usually be extracted: • Customer name and location. • Product(s) or service(s) sold. • Volume and dollar amount of the transaction. • Salesperson (or agent) responsible for the sale. • End use of product sold. • Location of customer facility where product is to be shipped or used. • Customer's industry, class of trade, or channel of distribution. • Terms of sale and applicable discount. • Freight paid or to be collected. • Shipment point for the order. • Transportation used in shipment. www.AssignmentPoint.com