Sales Management

Module Five
Prospecting and Pre-approach
 Learning Objectives

1. Explain strategic prospecting.

2. Discuss why prospecting can be a
challenging task for a salesperson.
3. Explain where salespeople find prospects.
4. Understand the importance of gathering
and studying precall information.
 Setting the Stage
Using Questions to Qualify
Potential Customers

1. What are the two categories Mike

Ciccheto uses to organize his
prospects?
2. Why does Mike categorize his
prospects?
 Why Buyers Won’t See
Salespeople
1. They may have never heard of the salesperson’s
firm.
2. They may have no need; they just bought the
product category.
3. The buyer may have their own deadlines on
other issues.
4. Buyers are constantly getting calls from
salespeople and do not have the time to see
them all.
5. Gatekeepers in any organization screen their
bosses’ calls and are often curt and even rude.
 Prospecting
Sales The process of
Leads identifying, qualifying,
and prioritizing
Screening organizations and
Procedures individuals that have the
for Qualifying need for and potential to
Leads purchase the
Qualified
salesperson’s market
Prospects offering of products and
services.
 Popular Prospecting Sources &
Methods
Internal Sources External Sources
– Company Records – Referrals
– Lists and Directories – Introductions
– Advertising Inquiries – Community Contacts
(Centers of Influence)
– Telephone Inquiries
– Organizations
– Mail Inquiries
– Non-competing
– Internet or World Wide Salespeople
Web
– Visible Accounts

Personal Contact
– Observation
– Cold Canvassing
– Trade Shows
– Bird Dogs (Spotters)
Qualified Prospects . . .

 Can benefit from the sales offering

 Have the financial wherewithal to
make the purchase
 Play an important role in the
purchase decision process
 Qualified Prospects . . .

 Are eligible to buy based on a fit within

the selling strategy VW cars

 Are reasonably accessible and willing to

consider the sales offering
 Can be added to the customer base at an
acceptable level of profitability
 Importance of Effective
Prospecting
100
Suppose it takes 10 leads to generate one
Leads
qualified prospect

And suppose it takes 10 qualified prospects

to generate one customer

You would need 100 leads to generate one

customer.
One
Customer
 Importance of Effective
Prospecting
50
The better the lead generation method, the
Leads
higher the proportion of qualified leads.

The more accurate the qualifying process,

the higher the proportion of customers per
qualified lead.

Improving the lead generation method so that

10 leads generates two qualified customers
means you will need only 50 leads to One
generate one customer. Customer
Gathering Precall Information:
The Prospect

The prospect’s name and title

Correct spelling and

pronunciation can be gathered
by asking the receptionist or
secretary or gatekeeper to verify
information.
Gathering Precall Information:
The Prospect

Is this prospect willing to take

risks? Are they confident with
their decision making?

May have to ask the prospect

Gathering Precall Information:
The Prospect

Does the prospect have

hobbies or interests they are
proud of?

Observation of office.
Gathering Precall Information:
The Prospect

What is the prospect’s

personality type? Easy going?
All business?

Observation and experience with

buyer.
Gathering Precall Information:
The Prospect’s Organization

What type of business are

we dealing with?

Can be gathered from a

directory and company web
site.
Gathering Precall Information:
The Prospect’s Organization

To what market does the company

sell?
Who are its primary competitors?
What does the company make & sell?

Annual reports and company web

site.
Gathering Precall Information:
The Prospect’s Organization
Who and how many vendors does the
prospect presently buy from?
How much and how long have they
been purchasing from their
supplier(s)? What challenges is the
organization facing?
Salesperson may have to ask for
this information.
 Module Three

Organizational Strategies
and The Sales Function
 The Importance of Trust
An Expert’s Viewpoint:
Franciscan Estates consists of seven winery estates based
in California. Using the traditional sales strategy of
working through distributors, the company had little
information about product or customer sales beyond the
distributor level. The company developed a customer
relationship management (CRM) strategy to establish
different types of relationships with different customers at
different levels.
Action
 The Importance of Trust
An Expert’s Viewpoint:

Result

The sales organization uses this information to

strengthen relationships with existing accounts and to
prioritize sales efforts to existing and new customers . . .
. . . Franciscan Estates has used it CRM strategy and
technology to develop a competitive advantage for its
marketing and selling efforts.
Organizational Strategy Levels
Strategy Level Key Key
Decision Areas Decision Makers

Corporate Mission
Corporate Corporate
SBU Definition
Strategy Management
SBU Objectives

Sales Strategy Types SBU

Strategy Strategy Execution Management
Organizational Strategy Levels
Strategy Level Key Key
Decision Areas Decision Makers

Target Market Selection

Marketing Corporate
Strategy Integrated Mkt Comm. Management
Marketing Mix Dev.

Account Targeting Strategy

Business SBU
Sales Channel Strategy
Strategy Management
Relationship Strategy
 Definition of
Strategic Business Units (SBUs)

An SBU is a single product or brand, a line of

products, or a mix of related products that
meets a common market need or a group of
related needs, and the unit's management is
responsible for all (or most) of the basic
business functions."
Cravens (1991)
 SBU Objectives and
the Sales Organization
Market Sales
Share Organization Primary Compensation
Objectives Objectives Sales Tasks System

Build Build sales vol. Prospective and Salary plus

Secure distrib. new accounts incentive
Provide high
service levels
particularly pre-
sales service
Product/market
feedback
 SBU Objectives and
the Sales Organization
Market Sales
Share Organization Primary Compensation
Objectives Objectives Sales Tasks System

Hold Maintain sales vol. Call on targeted Salary plus

Consolidate current accounts commission
market position Incr. service levels to or bonus
through current accounts
concentration on Call on new accounts
targeted segments
Secure additional
outlets
 SBU Objectives and
the Sales Organization
Market Sales
Share Organization Primary Compensation
Objectives Objectives Sales Tasks System

Harvest Reduce selling Service most Salary plus

costs profitable accounts bonus
Target profitable eliminate
accounts unprofitable
accounts
Reduce service
levels
Reduce inventories
levels
 SBU Objectives and
the Sales Organization
Market Sales
Share Organization Primary Compensation
Objectives Objectives Sales Tasks System
Divest or Minimize selling Dump inventory Salary
Liquidate costs and clear Eliminate service
out inventory
 Business Strategy and
the Sales Function

• Low-cost supplier Pursue large customers

Minimize cost
Compete on price
Seek customers who are
low price shoppers
 Business Strategy and
the Sales Function

• Low-cost supplier Compete on non-price

benefits
Provide high quality
• Differentiation customer service
Seek customers who are
not low price shoppers
 Business Strategy and
the Sales Function

• Low-cost supplier Serve a distinct target

market not served well by
others
• Differentiation Provide high quality
customer service
Seek customers who are
• Niche not low price shoppers
Marketing Strategy and
the Sales Function
Advantages
+ Only promotional tool that consists of
personal communication between seller
and buyer
+ More credible and has more impact
+ Better timing of message delivery
+ Ability to tailor message to buyer
+ Allows for sale to be closed
Disadvantage
– High cost per contact
 Personal Selling-Driven vs. Advertising-Driven
Marketing Communications Strategies
Personal Selling

When Message Flexibility is Important

When Message Timing is Important
When Reaction Speed is Important
When Message Credibility is Important
When Trying to Close the Sale

When Low Cost per Contact is Important

When Repetitive Contact is Important
When Control of Message is Important
When Audience is Large

Advertising
Target Market Situations and
Personal Selling
Target Market:
A definition of the specific market segment to be served

Personal Selling-Driven Promotional Strategies

are appropriate when:
– The market consists of only a few buyers that tend
to be concentrated in location
– The buyer needs a great deal of information
– The purchase is important
– The product is complex
– Service after the sale is important
 Integrated Marketing
Communications

The strategic integration of multiple marketing

communications tools communicating a consistent message
in the most effective and efficient manner.
The Sales Strategy Framework
Account
Buying
Targeting
Situation
Strategy

Buying Relationship
Center Strategy

Organizational Sales
Account Salesperson
Buyer Behavior Strategy

Buying Sales Channel

Process Strategy

Buying Selling
Needs Strategy
Organizational Buyer Behavior:
Types of Organizations
Major Category Types

Users: purchase products

and services to produce
other products and services
Business or
Original Equipment
Industrial
Manufacturers (OEM):
Organizations
purchase products to
incorporate into products

Resellers: purchase
products to sell
Organizational Buyer Behavior:
Types of Organizations
Major Category Types

Federal, State, and

Government
Local Government
Organizations
Agencies

Public and
Institutions
Private Institutions
Organizational Buyer Behavior:
Buying Situations

Straight Rebuy Buying Situation

– Routinized Response Behavior
Modified Rebuy Buying Situation
– Limited Problem Solving
New Task Buying Situation
– Extensive Problem Solving
Organizational Buyer Behavior:
Buying Center

• Initiators
• Users
• Gatekeepers
• Influencers
• Deciders
• Purchasers
Organizational Buyer Behavior:
Buying Process
Phase 1: Recognize Problem/Need
Phase 2: Determine Item Specs/Quantity Needed
Phase 3: Specify Item Specs/Quantity Needed
Phase 4: Identify and Qualify Potential Sources
Phase 5: Acquire and Analyze Proposals
Phase 6: Evaluate Proposals/Select Suppliers
Phase 7: Selection of Order Routine
Phase 8: Performance Feedback/Evaluation
 Personal and Organizational
Needs
Personal Goals Organizational Goals

Want a Feeling of Power Control Cost in Product

Use Situation
Seek Personal Pleasure Few Breakdowns of Product
Dependable Delivery for
Desire Job Security
Repeat Purchases
Want to be Well Liked Adequate Supply of
Products
Want Respect Cost within Budget Limits
 Sales Strategy:
Account-Targeting Strategy

The classification of accounts within

a target market into categories for
the purpose of developing strategic
approaches for selling to each account
or account group.
 Sales Strategy:
Relationship Strategy

A determination of the type of

relationship to be developed
with different account groups.
 Characteristics of
Relationship Strategies
Transaction Solutions Partnership Collaborative

Goal Sell Products Add Value

Time Long
Short
Frame

Offering Standardized Customized

Number of
Many Few
Customers
 Sales Strategy:
Selling Strategy

Ensuring that accounts receive

selling effort coverage in an
effective and efficient manner.
 Matching Selling and
Relationship Strategies
High

Collaborative

Cost
to Partnership
Serve
Solutions

Transaction

Low Commitment High

 Sales Strategy:
Sales Channel Strategy

The planned selling approach for each

relationship strategy.
– The Internet
– Industrial Distributors
– Independent Representatives
– Team Selling
– Telemartketing
– Trade Shows
 Sales Strategy:
The Internet

• Increase Reach
• Gather Information about Customers
• Showcase New Products
• Conduct Surveys
• Enhance Corporate Image
• Obtain Feedback
• Service Existing Customers
Sales Channel Strategy:
Industrial Distributors

• Have Their Own Sales Force

• May Represent One Manufacturer;
Several Non-competing Manufacturers;
Several Competing Manufacturers
• Normally Carry Inventory
 Sales Strategy:
Independent or Manufacturers’
Reps

• Sell complimentary products from non-

competing manufacturers.
• Do Not Normally Carry Inventory
• Paid for Performance
• Reduced Control over Selling Effort
• Reduced Access to Customer Information
 Sales Strategy:
Team Selling

Three Selling Situations

– New Task Selling
– Modified Resell Selling Situation
– Routine Resell Selling Situation
Two Types of Team Selling
– Multilevel Selling
– Major Account Selling
 Sales Strategy:
Telemarketing

May replace field sales force for certain accounts

When integrated with field sales force, activities
include:
– Prospecting, Qualifying Leads, Conducting Surveys
– Taking Orders, Checking on Order Status, Handling
Order Problems
– Following Up for Repeat Business
 Sales Strategy:
Trade Shows

• Generate Leads
• Test Market New Products
• Introduce New Products
• Close Sales
• Gather Competitive Information
• Service Existing Customers
• Enhance Corporate Image
Determining size of sales
force
Done
 Affordability method
• The company recruit only that many
number of sale person that the company
can afford.
• Most easiest process.
• Use by the small organization.
 Work load method
Number of Sales person recruit by the company depending up on
the amount of work or activities they have to perform.

1. Classify customers –present+ prospective

into sales volume categories
2. Decide on the length of time per sales call
and desired call frequencies on each class
3. Calculate the total work load in covering the
entire market
4. Determine the total work time available per
sales person
5. Divide the total work time available per
sales person by task
6.Calculate the total number of sales people
needed
 Example
• No of customers-1000
Class A large – 100 accounts
Class B medium- 300
Class C small -- 500
 Step 2
• Allocate time
Class A – 60 minutes/52 calls-52hrs
Class B - 30 minutes/24calls -12hours
Class C – 15minutes/12calls -3hours/year
 Step 3

• Total work load covering entire market

Class A – 100 x 52 -5200
Class B – 300X12 -3600
Class C- 500X3 -1500
Total -10300
 Step4
• Total work time available per sales person

40 hrs per week for 48 weeks –1920

hours/year
 Step 5
• Divide the work time by task

Selling task 50%--- 960

Non selling task 20%--384
Traveling 30% --576

Total 1920
 Step 6
• Number of sales persons

10300/960
=11 sales people
 Sales Potential method
• N= S(1+T )/P
• N=no of sales personnel
• S= forecasted sales volume
• P- Estimated sales productivity per sales
Person
• T = Allowance for sales force turnover
 example
• Estimated forecast – 1000000
• Sales productivity- 100000
• Sales person turnover-10percent

• N --- (1000000/100000) * (1+0.1)

= 10*1.1 = 11 sales personnel
 Incremental method
• Net profits will increase when additional
sales personnel are added if the
incremental sales revenues exceed the
incremental costs involved.

• Here we look at the net profit contribution

resulting from additional sales person
 Steps
• Calculate the gross margin of the sales
people ( incremental)
• Calculate for each addition the net profit
contribution for each addition to find out
the right mix
 Module Eight

Motivation and Reward

System Management
 Motivation and Rewards
An Expert’s Viewpoint:
Optimus Solutions has a substantial motivation and reward
system. The sales reps receive a 10% - 25% commission
on every dollar of profit they generate. The more profit
sales reps generate, the more they earn. In addition, any
rep that reaches an aggressive, yet obtainable, annual
sales goal of $1 million during a 12-month period receives
a one-year lease on a Porsche 911.

Action
 Motivation and Rewards
An Expert’s Viewpoint:

Result

The company’s system for motivating and rewarding its

salespeople has been very successful. Five people
qualified for the Porsche in 2000, and eight qualified in
2001. The company has grown to more than $100
million in revenues in just four years
 Motivation
The force within us that activates our behavior. It
is a function of three distinct components,
Intensity, Direction, and Persistence.

Motivation
Motivation

Intensity Direction Persistence

 Motivation - Intensity
Intensity refers to the amount of mental and
physical effort put forth by the salesperson.

Motivation
Motivation

Intensity Direction Persistence

 Motivation - Direction
The extent to which an individual determines and
chooses efforts focused on a particular goal.

Motivation
Motivation

Intensity Direction Persistence

 Motivation - Persistence
The extent to which the goal-directed effort is
put forth over time.

Motivation
Motivation

Intensity Direction Persistence

 Motivation: Intrinsic vs.
Extrinsic

Intrinsic Extrinsic
When doing When rewards
the job is such as pay
inherently and formal
motivating recognition act
as motivators
Motivation
 Two Basic Categories of
Rewards
Compensation rewards:
Those given in return for acceptable performance or
effort. They can include nonfinancial compensation.

Noncompensation rewards:
Those beneficial factors related to the work situation
and well-being of each salesperson.
 Optimal Sales Force Reward
System
1. Provides an acceptable ratio of costs and sales force
output in volume, profit, or other objectives
2. Encourages specific activities consistent with the
firm's overall, marketing, and sales force objectives
and strategies
3. Attracts and retains competent salespeople, thereby
enhancing long-term customer relationships
4. Allows the kind of adjustments that facilitate
administration of the reward system.
Types of Sales Force Rewards

Intrinsic Extrinsic
Sense of Pay
Accomplishment
Job security Promotion
Personal Growth
Recognition
Opportunities

Motivation
 Financial Compensation:
Straight Salary
Advantages
- Salaries are simple to administer
- Planned earnings are easy to project.
- Salaries can provide control over salespeople’s
activities, and reassignments are less of a problem.
- Salaries are useful when substantial development
work is required.
Disadvantages
- Salaries offer little incentive for better performance.
- Salary compression could cause perceptions of
inequity among experiences salespeople.
- Salaries represent fixed overhead.
 Financial Compensation:
Straight Commission
Advantages
- Income is linked directly to desired results.
- Straight commission plans offer cost-control
benefits.
Disadvantages
- Straight commission plans contribute little to
company loyalty.
- Problems may also arise if commissions are not
limited by an earnings cap.
 Straight Commission: Plan
Variations
1. Commission base — volume or profitability
2. Commission rate — constant, progressive, or a
combination
3. Commission splits — between two or more
salespeople or between salespeople and the
employer
4. Commission payout event — when the order is
confirmed, shipped, billed, paid for, or some
combination of these events
 Straight Commission: Rates
Constant rates:
– Rates that remain unchanged over the pay period.
Pay is linked directly to performance.

Progressive rates:
– Rates that increase as salespeople reach pre-
specified targets.

Regressive rates:
– Rates that decline at some predetermined point.
 Financial Compensation:
Performance Bonuses
Advantages
- Organization can direct emphasis to what it considers
important in the sales area.
- Bonuses are particularly useful for tying rewards to
accomplishment of objectives.
Disadvantages
- It may be difficult to determine a formula for
calculating bonus achievement if the objective is
expressed in subjective terms.
- If salespeople do not fully support the established
objective, they may not exert additional effort to
accomplish the goal.
 Financial Compensation:
Combination Plans
Advantages
- Combination pay plans are flexible.
- They are also useful when the skill levels of the
salesforce vary.
- Combination pay plans are attractive to high-
potential but unproven candidates for sales jobs.
Disadvantages
- Combination pay plans are more complex and
difficult to administer.
- A common criticism of combination pay plans is that
they tend to produce too many salesforce objectives.
Nonfinancial Compensation

Opportunity for Promotion:

– The ability to move up in an organization along
one or more career paths

Sense of Accomplishment:
– The internal sense of satisfaction from
successful performance
– Sales managers should facilitate salespeople’s
ability to feel this a sense of accomplishment
Nonfinancial Compensation
Opportunity for Personal Growth:
– Access to programs that allow for personal
development (e.g., tuition reimbursement,
leadership development seminars)

Recognition:
– The informal or formal acknowledgement of a
desired accomplishment

Job Security:
– A sense of being a desired employee that comes
from consistent exceptional performance
 Sales Expenses

Controls used in the sales expense

reimbursement process include:
1. A definition of which expenses are reimbursable
2. The establishment of expense budgets
3. The use of allowances for certain expenditures
4. Documentation of expenses to be reimbursed
Additional Issues in Managing
Salesforce Reward Systems

• Sales Contests
• Equal Pay
• Team Compensation
• Global Considerations
• Changing the Reward System
 Sales Contests:
Recommended Guidelines
1. Minimize potential motivation and morale problems
by allowing multiple winners. Salespeople should
compete against individual goals and be declared
winners if those goals are met.

2. Recognize that contests will concentrate efforts in

specific areas, often at the temporary neglect of other
areas. Plan accordingly.
 Sales Contests:
Recommended Guidelines
3. Consider the positive effects of including nonselling
personnel in sales contests.

4. Use variety as a basic element of sales contests.

Vary timing, duration, themes, and rewards.

5. Ensure that sales contest objectives are clear,

realistically attainable, and quantifiable to allow
performance assessment.
Guidelines for Motivating and
Rewarding Salespeople
1. Recruit and select salespeople whose personal
motives match the requirements and rewards of
the job.

2. Attempt to incorporate the individual needs of

salespeople into motivational programs.

3. Use job design and redesign as motivational tools

Guidelines for Motivating and
Rewarding Salespeople
4. Provide adequate job information and assure
proper skill development for the sales force.

5. Concentrate on building the self-esteem of

salespeople.

6. Take a proactive approach to seeking out

motivational problems and sources of
frustration in the salesforce.
Controlling the sales effort
 Tools used
• Sales Budget
• Quotas
• Sales Territories
• Sales control and cost analysis
Sales Budget
 Purposes
• Mechanism of control
• Composite of sales expense & profit goals serves
as yardstick
• Master standard against which performance is
measured
• Instrument of planning
• Complex sequence of planning decisions
• Show how sales volume and net profit objectives
are reached.
• Requires alternative sales plans
 Sales budget-form and content
• Statement of projected sales revenues
and selling expenses
• Break down to regions, products or units.
 Sales budget
• Obtaining optimum net profit for the
forecast sales volume.]
• Short term and long term goals are taken
into consideration.
• Selling expenses--- volume of
performance of activity X cost of
performing a measurable unit of the
activity
• For estimating cost, standard cost is taken
into consideration.

• Other methods are used like simply

adding up the expenses and divide the
number of units sold gives the average
cost.
• Use past data to find the percentage
relationship
 Budgetary procedure
• Begins with the sales department.

• Planning styles
• Top down
» Management sets the objectives
• Bottom up.
» Department prepares the tentative objectives and
plans
 How it is done
• The lowest level- profit center estimates
the sales volume & expenses + district
contribution to overhead
• Includes rent, secretarial cost and other operating
expenses
• This is submitted to the next level and
finally added up to form company budget
• Detailed plan of action is submitted to
justify the budget
• Each managers will argue for his share in
the budget .
• The amount of money finally allocated will
depend on the value of the individual
proposals.
 Using budget for control
• Budget progress report card
• Shows the performance variance
quotas
 quotas
• Quotas are quantitative objectives assigned
to sales organisational units.
– Provide quantitative performance standards
– Product /territory/ channel/customer etc

– To obtain tighter sales and expense control

– Reimburse expenses upto a certain percentage of sales
volume
– To motivate desired performance
• There has to be an integration between
sales quota, sales forecast and sales
budget.
 Type of quotas
• Sales volume quotas
• Oldest and most common type
• Set for geographical areas, product lines marketing channels
or combination of these
• In units or revenues or points
– Procedure
• Sales volume quota derived from territory sales potentials
• Derived from total market estimate
• Based on past experience
• Executive judgement
• Related to compensation plan
 Types
• Budget quotas
• Control expenses, gross margin or net profit
• To make it clear that volume alone is not enough
• Profitability is the key
– Expense quotas
– Gross margin or net profit quotas
– When product line contains high and low margin items
• Activity quotas
• Non selling activities
 Administering quota system
• Accurate fair and attainable
• Secure sales person’s acceptance
– Participation
– Inform the sales persons
– Continuous control
Sales territories
 Territories
• Grouping of customers and prospects
assigned to individual sales person
– Provide proper market coverage
– Control selling expenses
– Assist evaluating sales personnel
– Contribute morale
– coordination of sales and other marketing
activities
 Procedure
• Selecting a basic geographical unit
– District, pincodes, panchayats ,villages etc
• Determining the sales potential present in
each control unit
• Combining control units into tentative
territories
• Adjusting for differences in coverage difficulty
and redistricting tentative territories
– Determine no,size of customers,prospects
– Estimate time required for each sales call
– Determine length of time between calls
– Decide call frequencies
– Calculate no of calls possible within a period
– Adjust with call frequency and customers
– Check with sales personnel
 Assigning sales persons
• Assign each salesperson to territories
where his relative contribution to profit is
highest
• Routing
• Scheduling
Setting personal selling
objectives
 Types of objectives
• To do the entire selling job
• To service the existing accounts
• To search out and obtain new customers
• To secure and maintain customers cooperation in stocking
and promoting a product line
• To keep the customer informed on changes in the product
line or other aspects of marketing strategy
• To assist customers in selling
• To provide technical advice and assistance to consumers
 Types of objectives
• To assist with the training of middlemen’s sales personnel
• To collect and report market information of interest and use to
company management.
Quanitative objectives
• To capture and retain certain market share.
• To obtain sales volume in ways that contribute to profitability.
• To obtain some number of new accounts of given types
• To keep personal selling expenses within limits
• To secure targeted percentages of certain accounts business.
 Analyzing Market potential
• Market identification
• Who buys the product?
• Who uses the product?
• Who are the prospective buyers and users?
• Market motivation
• How best to present the product in sales talks
• The relative effectiveness of different selling appeals
• The relative appropriateness of various promotional
methods.
 Sales Potential and Sales
Forecasting
• Sales Forecast – Estimates maximum
possible sales opportunities present in a
particular market segment open to a
specific company during a stated time
period
 Forecasting Process
Forecast
Develop forecast Determine
objectives
procedures dependent and
independent
variables
Evaluate
performance

Select forecast
analysis method Make and finalize
forecast

Comprehend total
forecast procedure Collect collate Present all
data assumptions
 Forecasting Methods

Quantitative Qualitative
 Qualitative

Experts Survey of buyers Sales force Delphi

Historical Analogy
opinion intentions composite Technique
 Quantitative

Test Marketing Naïve Method Trend Method Moving Average Regression Exponential Smothing
 Naïve Method
• Next year’s sales = This year’s Sales *
This year’s Sales

-----------------------------

Last Year’s Sales

 Moving Averages
• a+ b+ c b+c+d
------------, -------------
3 3
 Exponential Smoothing
• Next years sales = a ( this year’s sales ) + (1-
a)( This year’s forecast)

• a is the smoothing constant usually between

0.1 and 0.5

• Larger the factor , more sensitive the

forecasting values will be to past data ( recent
changes in sales)
• This year sales – 50000
• This year forecast – 40000
• a = 0.2

• Next year sales = .2*50000 + 0.8 * 40000

= 42000