The Strategic Role of Information in Sales Management

1. The Strategic Role of Information in Sales Management Sales & Distribution Management Marketing 3345

2. Information Drives Management Decision Making and Planning • Sales forecasts • Territory estimates • Quotas • Sales force size • Sales territory design

3. Market Opportunity Analysis • Market potential –estimate of 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 • Sales potential – the portion of the market potential that the firm can expect to reasonably achieve • Sales forecast – an estimate of the dollar or unit sales for a specified future period • Sales quotas – sales goals assigned to a marketing unit for use in managing sales efforts

5. Sales budget Production budget Revenue budget Sales and administrative expense budget Direct labor materials and overhead budgets Cost of goods sold budget Budgeted profit and loss statement Sales forecasts Impact of Sales Forecasts on Budgeting

6. Utilization of Sales Forecasting Methods of 134 Firms Percentage Percentage of of Firms Percentage of Firms that That Use Firms No Methods Use Regularly Occasionally Longer Used Subjective Sales force composite 44.8% 17.2% 13.4% Jury of executive opinion 37.3 22.4 8.2 Intention to buy survey 16.4 10.4 18.7 Extrapolation Naïve 30.6 20.1 9.0 Moving Average 20.9 10.4 15.7 Percent rate of change 19.4 13.4 14.2 Leading indicators 18.7 17.2 11.2 Unit rate of change 15.7 9.7 18.7 Exponential smoothing 11.2 11.9 19.4 Line extension 6.0 13.4 20.9 Quantitative Multiple regressing 12.7 9.0 20.9 Econometric 11.9 9.0 19.4 Simple regression 6.0 13.4 20.1 Box-Jenkins 3.7 5.2 26.9 S&MM, February 2008

7. Choosing a Forecasting Method • Which forecasting method should be used and how accurate is the forecast likely to be? • In general, the various forecast comparisons suggest that no method remains superior under all conditions. • Good forecasters apply multiple forecasting methods to the problem • Scenario planning prepares a series of “what-if” questions and produces possible outcomes

8. Developing Territory Estimates • Territory estimates effect: • The design of sales territories • Procedures for identifying potential customers • The establishment of sales quotas • Compensation and its subcomponents • The evaluation of salesperson performance

9. Planning Tools • North American Industry Classification System (NAICS) • Developed by the US Bureau of the Census, organizes the reporting of business information • Each industry in the US is assigned a two-digit number • Buying Power Index (BPI) • Generated and published by Sales Marketing Management Magazine, considers income, population and retail sales • Most useful with low-priced convenience goods

10. Sales Quotas • Goals assigned to salespeople • Apply to specific periods and may be expressed in dollars or physical units • Tool for sales managers’ planning and controlling field selling activities and results • Benchmark for evaluating sales effectiveness • Motivate sales people

11. Characteristics of a Good Quota • Attainable • Easy to understand • Complete • Timely

12. Types of Quotas • Sales based quotas • Sales activities quotas • Financially based quotas

13. Determining Sales Force Size • Salespeople are among the most productive assets of a company, and they are also among the most expensive! • How can an optimal sales force be established? • Breakdown method: Sales Volume Number of sales personnel needed = Productivity

14. Determining Sales Force Size • Workload method uses the buildup method to estimate the work required to serve the entire market • Incremental method suggests that sales representatives should be added as long as the incremental profit produce by their addition exceeds the incremental cost

16. Territory design – “The Build Up Approach”