• Sales related

marketing policies

• Sales forecasting

• Sales Organization
• Product policies : What to sell

• Distribution policies : Who to sell

• Pricing policies : How to price the product/service

• Product Objectives
• “We will make products superior to competition
• “We will make products requiring minimum after sales
service”
• Product Line policy
• Full line V/s short line
• Re-appraising the product line and line
simplification
• Product Design policy
• Product Quality and service policy
• Policies on marketing channels
• Sales volume potential
• Comparative distribution costs
• Net profit possibilities
• Policies on distribution intensity
• Mass distribution
• Selective distribution
• Exclusive agency distribution
• Relative to Competition
• Meeting the competition
• Above the competition
• Under the competition
• Relative to costs
• Full cost pricing
• Promotion pricing
• Contribution pricing
• Policy on discounts
• Geographical pricing policies
• Policy on price leadership
• Market Potential

• Sales potential

• Sales forecast
Market Potential is an estimate of the maximum
possible sales opportunity present in a particular
market segment and open to all sellers of a
good/service during a stated future period
Sales Potential is an estimate of the maximum
possible sales opportunity present in a particular
market segment open to a specified company during
a stated future period
Sales forecast is an estimate of sales (in
Value/volume terms) in a future period under a
particular marketing program and an assumed set of
economic/other factors.
 Breakdown Method of Sales Forecasting

General Industry Company Sales Individual

environment sales sales forecast for product
forecast forecast forecast the product forecasts
lines
Sales Forecasting Approaches

• Two basic approaches:

• Top-down or Break-down approach
• Bottom-up or Build-up approach

• Some companies use both approaches to

increase their confidence in the forecast
 Steps followed in Top-down / Break-down
Approach
• Forecast relevant external environmental factors
• Estimate industry sales or market potential
• Calculate company sales potential = market potential
x company share
• Decide company sales forecast (lower than company
sales potential because sales potential is maximum
estimated sales, without any constraints)
Steps followed in Bottom-up / Build-up Approach

• Salespersons estimate sales expected from their

customers
• Area / Branch managers combine sales forecasts
received from salespersons
• Regional / Zonal managers combine sales forecasts
received from area / branch managers
• Sales / marketing head combines sales forecasts
received from regional / zonal managers into
company sales forecast, which is presented to CEO
for discussion and approval
Executive opinion method
• Procedure includes discussions and / or average of all
executives’ individual opinion
• Advantages: quick forecast, less expensive
• Disadvantages: subjective, no breakdown into subunits

Delphi method
• Process includes a coordinator getting forecasts separately
from experts, summarizing the forecasts, giving the summary
report to experts, who are asked to make another prediction;
the process is repeated till some consensus is reached
• Experts are company managers, consultants, intermediaries,
and trade associations
 Delphi Method (Continued)
• Advantages: objective, good accuracy
• Disadvantages: getting experts, no breakdown into subunits,

Salesforce composite method

• An example of bottom-up or grass-roots approach
• Procedure consists of each salesperson estimating sales.
Company sales forecast is made up of all salespersons’ sales
estimates
• Advantages: Salespeople are involved, breakdown into
subunits possible
• Disadvantages: Optimistic or pessimistic forecasts, medium to
long time required
• Accuracy: fair to good (if trained)
Survey of Buyers’ Intentions Method
• Process includes asking customers about their intentions to
buy the company’s products and services
• Questionnaire may contain other relevant questions

• Advantages: gives more market information, can forecast new

and existing products, good accuracy
• Disadvantages: some buyers’ unwilling to respond, time
required is long (3-6 months), medium to high cost
Test Marketing Method
• Methods used for consumer market testing: full blown,
controlled, and simulated test marketing
• Methods used for business market testing: alpha and
beta testing

• Advantages: used for new or modified products, good accuracy,

minimizes risk of national launch
• Disadvantages: Competitors may disturb if some methods are
used, medium to high cost, medium to long time required
Naive Method
• Assumes: what happened in the immediate past will happen in immediate
future
• Simple formula used:

• Advantages: simple to calculate, low cost, less time, accuracy good for short-
term forecasting
• Disadvantages: less accurate if past sales fluctuate

Actual sales of this year

Sales forecast for next year  Actual sales of this year 
Actual sales of last year
Exponential Smoothing Method
• The forecaster allows sales in certain periods to influence the
sales forecast more than sales in other periods
• Equation used:
Sales forecast for next period=(L)(actual sales of this year)+(1-
L)(this year’s sales forecast), where (L) is a smoothing
constant, ranging greater than zero and less than 1
• Advantages: simple method, forecaster’s knowledge used, low
cost, less time, good accuracy for short term forecast
• Disadvantages: smoothing constant is arbitrary, not used for
long-term and new product forecast
 Regression analysis
• Regression analysis is form of correlational technique.

• Reveals average relationship between two variables and this

makes possible estimation or prediction.

• Statistical method used to incorporate independent factors that are

thought to influence sales into forecasting procedures.
Regression analysis
 Regression Analysis Method
• It is a statistical forecasting method
• Process consists of identifying causal relationship between
company sales (dependent variable, y) and independent variable
(x), which influences sales
• If one independent variable is used, it is called linear (or simple)
regression, using formula; y=a+bx, where ‘a’ is the intercept and
‘b’ is the slope of the trend line
• In practice, company sales are influenced by several independent
variables, like price, population, promotional expenditure. The
method used is multiple regression analysis
• Advantages: Objective, good accuracy, predicts upturn /
downturn, short to medium time, low to medium cost
• Disadvantages: technically complex, large historical data needed,
software packages essential
 Econometric Analysis Method
• Procedure includes developing many regression
equations representing (i) relationships between
sales and independent variables which influence
sales, and (ii) interrelationships between variables.
Forecast is prepared by solving these equations

e.g. S=R+N

• Advantages: Good accuracy of forecasts of economic conditions and

industry sales
• Disadvantages: need expertise & large historical data, medium to long
time, medium to high cost
Trend forecast of Sales
 Method of semi-averages
In this method available data are divided into two parts, usually with
equal number of years on both the parts

Year Sales The average of the first three years will

1993 102 be:
1994 105 102+105+114 321
----------- = -------- = 107
1995 114 3 3
1996 110
Similarly, for the last three years,
1997 108
108 + 116 + 112 336
1998 116 ---------------------- = --------- = 112
3 3
1999 112
 Method of semi-averages
The 3-yearly moving average can be computed with the following
formula:
a+b+c b+c+d c+d+e d+e+f
--------- , ----------- , ---------- , --------- , ………….
3 3 3 3
 How to Improve Forecasting Accuracy?
• Sales forecasting is an important & difficult task
• Following guidelines may help in improving its
accuracy
• Use multiple forecasting methods
• Select suitable forecasting methods, based on application,
cost, and available time
• Use few independent variables / factors, based on
discussions with salespeople & customers
• Establish a range of sales forecasts – minimum,
intermediate, and maximum
• Use computer software forecasting packages
What is a Sales Budget?
• It includes estimates of sales volume and selling expenses
• Sales volume budget is derived from the company sales forecast –
generally slightly lower than the company sales forecast, to avoid
excessive risks
• Selling expenses budget consists of personal selling expenses
budget and sales administration expenses budget
• Sales budget gives a detailed break-down of estimates of sales
revenue and selling expenditure
Purposes of the Sales Budget
• Planning
• Coordination
• Control
 Sales Organisation
• Needed to increase effectiveness of salesforce
• Done by expanding basic sales organisation
• Basis of specialisation
• Geography
• Type of product
• Market /customers
• Combination of above
• Criteria for selection – (1) meeting customer needs,
(2) nature and number of products, (3) abilities of
sales force, (4) selling costs.
 Geographic Specialisation
VP and Head
Sales

GM Sales GM Sales GM Sales GM Sales

East West North South

Branch Sales Branch Sales Branch Sales Branch Sales

Manager-1 Manager-2 Manager-3 Manager-4

Salespeople Salespeople Salespeople Salespeople

Characteristics: salespeople, assigned geographic areas, are responsible for all selling
activities to all customers within assigned areas.
Advantages: Better market coverage and customer service, more control over salesforce,
quick response to local conditions & competition
 Product Specialisation

CEO

General Manager General General manager General Manager

Marketing Sales Manager Finance H.R & Training

Area Sales Area Sales

Managers – Managers –
Product Group ‘A’ Product Group ‘B’

Salespeople – Salespeople –
Product Gr. ‘A’ Product Gr. ‘B’
 Market Specialisation

Chief
Distribution
Officer

VP
VP VP
International- VP Retail
Institutional Government
Markets

Area Sales Area Sales Area Sales Area Sales

Mgrs Manager- Manager- Mgrs-
International Institutional Government Retail

Sales
Salespeople Salespeople Salespeople
Executives

• Characteristics: Desirable when customers are classified by type, user industry, or

channel. Salespeople carry out all activities for all products only for specific
customer groups
 Combination Sales Organisation

Director – Sales
& Marketing

General Manager General Manager General Manager General Manager

Sales - North Sales - East Sales - West Sales - South

Regional Sales Regional Sales Regional Sales

Mgr. – Govt. Mgr. - Commercial Mgr. - Dealers

Salespeople Salespeople Salespeople

• Most firms use some combination of specialisation organisations, called hybrid or

combination sales organisation, with a view to minimise disadvantages and maximise
advantages of specialisation organisations
• Figure above shows combination of geographic and market specialisations
Management of Major / Key Accounts
• Also called national accounts / customers.
• They have high sales & profit potential.
• They may expect superior service, low prices, strategic
relationship.
How to manage key accounts?
Objective: Sole / preferred supplier
Strategy
• Appoint key account manager
• Team selling and superior service
• Strategic collaborative relationship
Create a special sales organisation
 Size of the Salesforce

• How many salespeople needed (or salesforce size) to

achieve a firm’s sales and profit objectives is a key
decision
• Methods available to decide optimum salesforce size
are as follows:
• Workload
• Sales potential (or breakdown)
• Incremental
• We shall discuss these methods briefly: