DIR.

COMERCIAL II (ADE)

LESSON 4

XAVIER CANADELL

1
LESSON 4
The role of information
in Sales Management

2
LESSON 4
The role of information in Sales Management
FORECASTING SALES, SETTING QUOTAS, ESTABLISHING THE
SIZE AND TERRITORY DESIGN OF THE SALES FORCE
Macro-Framework Perspective
 Market Opportunity Analysis
►Market potential: estimate of possible
sales for an entire industry in a market
during a stated period.
►Sales potential: portion of market
potential the firm can expect to
reasonably achieve, also known as TAM.
►Sales forecast: estimate of dollar or
unit sales for a specified future period
►Sales quotas: sales goals assigned to a
marketing unit to manage sales efforts
 Company Sales Forecast
►The company sales forecast is
the expected level of company
sales based on a chosen
marketing plan and an assumed
marketing environment.
►A sales quota is the sales goal
set for a product line, company
division, sales representative…
Market potential, sales
potential, and sales
forecasting process
 Market Estimation
►Knowing the potential size
of each addressable market
is fundamental in any
marketing plan or strategy
►Total market potential
estimation methods can be
viewed from the perspective
of top-down vs. bottom-up.
 Two Basic Approaches

Niche (narrow) markets Big markets

(chain ratio)
 Market Sizing Approach: Top Down

Example:
Estimate the market size for
eco-friendly dental floss in US.
 01
Determine population
Population of the US:
327 million people in 2018
 
 

327
 02
Determine factor 1 12%
% of Americans who oss
daily: 12%

327
 03
Determine factor 2
Number of uses per year:
365 (assume daily ossing)
365 uses per year

327
 04
Determine factor 3
Amount of product consume
per use: 1 foot
One foot

327
 05
Determine factor 4
Price for one usage of oss (1
foot): 0,03 $ 0.03 $

327
17
 06 OF Americans
Determine factor 5
% of consumers using
2% use
eco-friendly
products
eco-friendly products: 2%

327
 07
Calculate demand $8.6 Demand per year
(327 x 0.12 x 365 x x 1 x 0.03 x 0,02)

Calculate demand by
MILLION
multiplying factors

327
 Market Sizing Approach: Bottom Up

Example:
Estimate the market size in
USA for positron emission
tomography/computed
tomography, or PET/CT
scanning machines.
 01
Determine market type
It's a niche market, with a very
expensive product ($3M)

327
 02
Identify relevant players
 
Large hospitals (over 500
beds): 5,795 in USA

327
 03
Determine # of players
5% of large hospitals estimated:
0.05 x 5,795= 290
290

327
17
 04 870 Demand per year
Get market size
290 (quantity) x 3M (price)= (5,795 x
$ 870 M $870 0.05 x 3)
MILLION

327
17
 Company Sales Forecast
►Usually, a company derives its
sales forecast by assuming it will win
a certain market share of the total
industry sales.
►Market share is a firm’s percentage
of an industry’s total sales. It is
calculated as the amount of firm’s
sales divided by the industry’s sales
during a specified period.
►So, we should understand how
market share is achieved.
 Company Sales Forecast

Volume Sold (units) = Market Demand (units) x Market Share

Sales = Market Demand (units) x Market Share x Selling Price
 Market Share Performance Metrics

Projecting future market share

involves complex propositions.
 
We can arrive at a reasonable
estimate using the market
share performance tree (based
on the sales funnel) and its
sequential metrics.
 Company Sales Forecast

Prospect becomes AWARENESS

aware of product/brand

Prospect considers the CONSIDERATION

product/brand attractive

Prospect considers the

price competitive PREFERENCE
Prospect plans to buy
an available product
INTENTION
Prospect buys and BUY
becomes a customer

27
Company Sales Forecast

AWARENESS

X CONSIDERATION

X PREFERENCE

X INTENTION

X BUY

= Market
27

Share
Index
Subjective forecasting methods do not rely on quantitative approaches
Objective forecasting methods rely on quantitative approaches
 
 Subjective Sales Forecasting
►User expectations: relies on
buyers’ expressed intention
►Sales force composite: sales
force opinions
►Jury of executive opinion: key
experts’ opinions
►Delphi technique: participants
prepare estimates which are
compared anonymously and
iteratively to reach consensus
 Objective Sales Forecasting
►Market test: place product in
select areas
►Time series analysis: relies on
historical data to develop
predictions
►Statistical demand analysis:
attempts to determine the
relationship between sales and
factors that influence sales
 Objective Sales Forecasting
►Moving average: averages sales
results over previous time periods
to forecast
►Exponential smoothing: type of
moving average where most recent
years are given more weight
►Decomposition: applied to
monthly or quarterly data where
seasonal pattern is evident
The quarterly moving average is calculated by adding the latest four quarters of sales
(e.g. Q1 + Q2 + Q3 + Q4) and then dividing by four. This technique smoothes out the
quarterly variations and gives a good indication of the overall trend in quarterly sales.
The formula for exponential smoothing is: Ŷt+1 = αYt + (1-α) Ŷt
Ŷt+1: forecast value for period t + 1
Yt:actual value of the current period, t
Ŷt: forecast value for the current period, t
α:weight you assign to the most recent observation (between 0 and 1

The smaller the α, the

smoother the curve
for forecasted sales.
 Choosing a Forecasting Method
►No method remains superior under
all conditions.
►Apply multiple forecasting methods
to a problem
►Scenario planning prepares “what-
if” questions and produces possible
outcomes
 Exercise
EXERCISE 1.1
Use Excel spreadsheet to forecast sales for year 4 of
the company in document previsionbase_ej in Campus
 Sales Quotas
►Goals assigned to salespeople
►Apply to specific periods Team Sales Quotas
►Tool for planning and controlling
field selling activities and results
►Benchmark for evaluating sales
effectiveness
►Motivate sales people

John 10 Mary 10 Susan 30

 Sales Quotas
Good Quota Characteristics:
►Attainable Team Sales Quotas
►Easy to understand
►Complete
►Timely

John 10 Mary 10 Susan 30

 Sales Quotas
Quota types:
►Sales volume: emphasize sales or some Team Sales Quotas
aspect of sales
►Activity: focus on certain sales activities
►Financial: focus financial criteria such
as gross margin or contribution to
overhead

John 10 Mary 10 Susan 30

 Sales Volume Quotas
►Most popular
►Often based on past sales Team Sales Quotas
►Related directly to market potential,
credible and easily understood
►May be expressed in dollars, physical
units, or points 30

10

10

John 10 Mary 10 Susan 30

 Activity Quotas
►Reflect territorial conditions
►Require a detailed analysis of work Team Sales Quotas
required for territorial coverage
►Customers influence activity quotas
through:
Account and order size 30

Purchasing patterns
Support required for satisfaction
10

10

John 10 Mary 10 Susan 30

 Financial Quotas
►Direct salespeople to more profitable
products and customers Team Sales Quotas
►Common bases:
Gross margin
Net profit
Selling expenses 30

►Calculation not straight-forward

►Profit produced affected by factors
beyond a salesperson’s control 10

10

John 10 Mary 10 Susan 30

 Sales
Force
Size
(workload
method)
Sales
Total # hours
required to
Total #
Force
service market
salespeople =
required
Size # hours available
per salesperson
Stages in territory design
 Sales Route Planning
►Technique to optimize the movements of the
sales person from its operational base to the
different clients, minimizing time, space and
fatigue, and maximizing visits to clients.
►A route is a document that contains names
and addresses of clients to visit every day,
communication routes, distances, times,
priorities, recommendations ...
http://www.actiruta.com/Index.aspx
 Exercise
EXERCISE 1.2
INDUALIMENT is a food industry B2B manufacturer based in Manresa.
The workload analysis for next year shows that there are 5.800 hours
required to service its market (including prospecting). There will be 980
hours available to each salesperson.
QUESTIONS:
1. How many salespeople does the company need
to attend its next year’s market needs?
2. Define the territory of each salesperson , using as
control units the market potentials areas (non food
industry in column 9)provided by the Economic
Yearbook of Spain (La Caixa ) (annex 1)