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Sales Effort

Some of the important terms are as under;

1. Market potential
2. Sales potential
3. Sales forecast

Analysing Market Potential

1. Market identification – who buys / who uses / who are prospective
buyers and or sellers
2. Market Motivation – how best to present product in sales talk / relative
effectiveness of different selling appeals / the appropriateness of different
promotional methods
3. Analysis of Market Potential – select the market factors associated with
product demand / eliminate the segments not containing prospective
buyers of the products
Sales Effort

Sales forecasting is the process of planning the sales of various items or
products during the year in advance
• Sales forecasting is normally done by the sales departments directly
involved in selling, since this in turn also sets the targets for the sales
• Sales forecasting is also the base for calculations of the financial figures
and budgets of the organisation
• It is therefore very important that every possible care is taken in
Following are the sales forecasting methods;
1. Jury of executive opinion

2. Poll of sales force Opinion

3. Projection of past sales

Sales Effort

4. Survey of customers’ buying plans

5. Mathematical analysis (Regression analysis)

6. Conversion of industry forecast into company sales forecast

Sales Effort


A sales budget is a blueprint of the sales plan product-wise, estimates of the
revenue and profits of the organisation for a particular period (normally a
financial year)
The budget starts from the quantities forecast during the period, the revenue
generated based on the expected price level, the value addition generated
during the period and the expenses
In simple terms this would be as under;
No of products sold x unit price = Revenue generated
Cost of products + expenses + profits = Revenue generated
The expenses would consist of;
1. Salary and other personnel expenses
2. Administrative expenses, traveling expenses
3. Promotional expenses, including advertising, special discounts, sampling
4. Trade discounts and commissions and Training expenses
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Mechanism of Control - It is an instrument of control and serves as a yard
stick for;
1. Measurement of sales
2. Revenue
3. Expenses
4. Profit
5. Variance from plan etc.
Instrument of planning
1. The total plan of the organisation for the period
2. Direction in which the organisation will move
3. It shows the management vision
4. It shows path for future growth
Sales Effort

• Basically starts with sales department where the basic structure is
prepared with the revenue expected (of course based on the sales
• Based on these figures, all departments prepare their expenses and other
activities for the year
Planning is either Top down or Bottom up
• In case of Top down, the top management sets the objectives and targets
which have to be followed and accordingly the budget is prepared
• This follows the ‘Theory X’ which says people need to be told what needs
to be got done, since they dislike work and shirk responsibility
• While bottom up follows ‘Theory Y’ where people like work and take
responsibility willingly and achieve objectives of the organisations.
Sales Effort

Actual Budgetary Procedure

The process starts from lowest level, i.e. from the profit centers
Each territory or area manager starts working the sales figures first
This gets the revenue figures for the planned period
The next step is to work out the details of expenses on the basis of what the
actual expenses for the previous year were and the likely next year
This is prepared for the area / territory and sent to head office / regional office
The budgets for the different regions are then consolidated to make a full
The budget is then discussed among the head of regions and the head office
people and changes made
The budget is then forwarded to the top management for approval
Sales Effort

Errors in Budgets
• Conditions actually vary as compared to the time when prepared (change
in demand
• Sudden change in some raw material costs, and not necessarily be
passed on to the customers
• Change in technology
• Change in government policies
The organisations therefore must have a system to review the operations
regularly and in case of justified change in conditions, changes are accepted
and made. Sometimes even correction is made and revised accordingly.
Some companies even prepare flexible budgets because of not being able to
get accurate data of forecast. They therefore prepare alternate budgets based
on different estimates and assumptions
When the budget has errors due to faulty forecasting, the accepted
procedure is to alter estimates by applying standard ratios of costs to
the adjusted volumes of business. This practice is normally accepted by
most companies.
Sales Effort

Quotas are the quantitative objectives assigned to an area, individual (a profit
centre, an individual sales man, an agent/distributor )
These then form the basis for appraising effectiveness, evaluation of the
performance levels, of all budgeted items such as;
• The volume of sales
• Expenses etc.
Quotas are therefore devices for directing and controlling operations
Management bases quotas on;
• The derived information from sales forecasts
• Market studies
• Sales potential and
• Cost estimates
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Objectives of using Quotas

1. To provide Quantitative Performance Standards

2. To obtain tighter sales & expense control

3. To motivate desired performance

4. To use in connection with sales contests

Sales Effort

The placement of suitable staff/salesmen to look after a group of customers /
locations are an important task
This allocation of responsibility is called as territorization
The ultimate aim is to break the total market into smaller areas classified as
‘Territory’ which helps in planning and controlling the ultimate achievements
Territorization is aimed at;
1. Controlling selling expenses
• Good design of territory with deployment of proper sales force helps
in optimising the sales volume and expenses
• Salesman out on tour with minimum time spent per call or
• Maximising calls with highest output at lowest cost
1. Evaluation of sales personnel
Sales Effort

3. Contributing to sales force Morale

• Good design helps in reducing extra loads or over burdening of
• Helps in making each person as productive as possible to make
higher earning
• Makes the field staff self confidant and
• Minimises conflicts since some customers transact business in more
than one territory
4. Aiding in coordination of personnel selling and advertising
• Proper coordination with advertisements planned to be released in
the media can boost sales efforts since he can always plan his visits
based on the release
Sales Effort

Procedures for setting up or revising territories

Setting up of territories involves four steps
1. Selecting a basic Geographical control unit
• The first and foremost is the selection of the basic geographical unit
consisting of various states, districts, towns and cities etc.
• This has to be based on the sales potential and the number of
customers in the territory fixed or planned to be fixed
• The statistical data of the area also helps in setting the territory
• The free movement and routing is necessary between the various
areas of the territories
1. Determining sales potential present in each control unit
2. Combining control units into tentative territories
• Forming a shape of the territory so that travel is easy and
connectivity is better
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4. Adjusting for differences in coverage difficulty

5. Deciding assignments of sales personnel to territories


• Proper coordination with advertisements planned to be released in the
media can boost sales efforts since field sales force can always plan visits
based on the release
• Regular scheduling of visits can help in developing relationship with the
channels or the customers so that visits can be fruitful
• A proper rout of the visit is a must, to save on the cost and time and if
possible, less of surprise visits be made (surprise visits are also
necessary) and may be sometimes visits or meats with the customers
without the presence of the direct in-charge of the area also helps