SALES MANAGEMENT

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

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Sales Effort

SALES FORECASTING
Sales forecasting is the process of planning the sales of various products or
services 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 person

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 forecasting

Following are the sales forecasting methods;

1. Jury of executive opinion
2. Poll of sales force Opinion
3. Projection of past sales
4. Survey of customers buying plans
5. Mathematical analysis (Regression analysis)
6. Conversion of industry forecast into company sales forecast

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Sales Effort

BUDGETING AND QUOTAS

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
costs
4. Trade discounts and commissions and Training expenses

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PURPOSE OF SALES BUDGET

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

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Sales Effort

BUDGETARY PROCEDURE

Basically starts with sales department where the basic structure is prepared
with the revenue expected (of course based on the sales forecast)

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.

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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
budget

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

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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.

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Sales Effort

QUOTAS
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

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Sales Effort

Profitability Analysis
A must for any organisation.
Analysis basically starts with capturing the entire data of sales customer-wise,
product-wise, area-wise, sales person wise, cost and expenses incurred on the
sales, selling prices and discounts offered, credit controls, targets achieved etc.
This answers following;
1. Reveals area with good and poor performances
2. Reveals the salespersons performances
3. The accounts will disclose the sales to larger and small customers both and
the efforts required for future
4. The sales product wise will let you take a decision as to what ration of
products to be maintained for selling and what extra efforts are required to sell
more profitable items
5. It helps in realising the strengths and weaknesses of the organisation to take
timely actions and make the organisation more profitable

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Sales Effort

TERRITORIZATION
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

2. Evaluation of sales personnel

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Sales Effort

3. Contributing to sales force Morale

Good design helps in reducing extra loads or over burdening of salesman

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

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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

2. Determining sales potential present in each control unit

3. Combining control units into tentative territories

Forming a shape of the territory so that travel is easy and connectivity is

better

4. Adjusting for differences in coverage difficulty

5. Deciding assignments of sales personnel to territories

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Sales Effort

ROUTING AND SCHEDULING SALES PERSONNEL

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 sometimes may be necessary without the direct in-charge
of the area)

This basically helps in maintaining proper control over the movement and
expenses of the field sales persons