Sales Management

Planning: It is deciding about the future course of action, an organisation decides about what it is
planning to do in the future, how and where it is going to do. Planning helps in executing the actions
efficiently and effectively.

Sales planning in an organisation happen at three levels namely

1. Corporate level
2. SBU level
3. Product/functional level

Planning in an organisation at various levels is depicted as

Corporate Planning

SBU A SBU B SBU C

Product A Product B Product C

Corporate level planning involves the following activities

1) Development of corporate mission and objectives

2) Defining SBUs
3) Allocation of resources for SBUs
4) Planning for the contingencies
SBU level planning involves the following activities:

1) Units mission
2) Analyse opportunity and threats
3) Analyse strengths and weaknesses
4) Develop long-term objectives
5) Formulation of strategies to achieve the objectives
6) Preparation of execution plan
7) Implementation of the plan
8) Monitor and correction

Product/functional level planning:

Routine tasks like sales, productions, purchase, recruitment, logistics and supply chain activities are
carried out. Functional level plans like HR, finance, operations are carried out by functional
managers.

Market Potential:

Market potential is defined as the maximum estimated sales for a given product/service for the
entire industry in a given market for a specific period of time. It is also known as industry sales
forecast.

Any study on market potential, sales potential and sales forecast must include the following

1) Item marketed – product/service

2) Estimated sales in value or units (Rupees or numbers)
3) Description of the market by geographic area or type of customers, or both
4) A specific time period – usually a particular year.

Sales potential:

It is the maximum estimated sales of a given product/service for a company in a given geographic
area for a specific period of time. It is also defined as the maximum share of market potential that is
expected to be achieved by the organisation.

ITC’s master chef is expected to achieve 10% of blended spices market by 2020

Sales forecast:

It is the estimated company sales for a given product/service, under the given marketing plan, in a
given specific market, for a specific period of time.

Sales forecast is always less than sales potential.

Sales forecast is referred by firms by defining three factors, namely

1. Product level
2. Geography level
3. Time period
Sales forecasting approaches;

Sales forecasting is carried out through break down (top down) approach and build up (bottom up
approach)

The steps involved in the top down approach are

Forecast relevant external environment factors over specific period of time

Forecast market potential for relevant industry over specific period of time

Company sales=market potential X company’s share of total industry sales %

Company sales forecast of the product/service under study

Sales manager’s forecast for the region/territory/branch/customers

In the above approach, the second and third stages are key. Industry sales are forecast using
methods like Delphi technique and regression analysis. To find Company’s share of total industry,
number of factors must be taken into account, namely current market share of the company, target
customers and their perception about the company’s performance, company’s relationship with key
customers.

Sales manager’s forecast for the region/territory/branch is carried out using market-build up method
and multiple factor index method.

In market –build up method, the existing and potential buyers in a given territory are identified.
Then their potential purchases of the product/service are studied. Finally the buying potential of all
the firms are added to obtain a fairly accurate market potential.

In multiple factor index method, the factors that influence the sale of product/service are identified.
These factors are given certain weightage based on the sales opportunity. For sale of FMCG products
factor like population, disposable income and retail sales are given a weightage.

The second forecasting approach is Bottom-up/ Build-up method:

This method starts with the salesperson’s forecasting with reference to his or her territory. The sales
forecast prepared by the salespersons are added up and modified where ever required and the
branch manager prepares the forecast for the branch. The branch managers forecast are added to
form the regional/zonal forecast. The regional or zonal forecast are combine to form the company
sales forecast as shown in the figure below.

Combined into company sales forecast

Combined into regional/zonal sales forecast

Combined into Area/Branch sales forecast

Salesperson’s sales forecast of individual customers

Sales forecasting methods:

Sales forecasting methods are classified into two types namely qualitative and quantitative.

Qualitative methods

Executive opinion
Delphi
Sales force composite
Survey of buyer’s intention
Test marketing

Qualitative method

Moving average
Exponential smoothing average
Decomposition
Naïve ratio
Regression

Sales Organisation and structure:

A sales organisation is a group of individuals working in unison for an enterprise that manufactures
products/services or procures products for the purpose of reselling.

A sales organisation defines the duties, roles and responsibilities of sales people engaged in selling
activities meant for effective execution of sales function.

A properly designed sales organisation helps in the flow of communication, both upward and
downward.

A well designed sales organisation focuses towards achieving the sales target at minimum cost and
maximum efficiency.

The factors influencing the structure of sales organisation are

 Type of product and services

 Size of the organisation
 Marketing mix factors and size of the market

Factors influencing the change in structure of a sales organisation:

1) Lower cost of storing, processing and distributing information.

2) Products turning into commodities at a faster pace.
3) Speed of market change.
4) Reduction in the number of vendors per buyer.
5) Close customer relationship.

Sales organisational design:

  Line organisation
 Organisation by territory
 Organisation by management function
 Organisation by product
 Combined design

Management of sales territories and quota:

A sales territory consists of existing and potential customers assigned to a specific salesperson. The
territory may or may not have geographic boundaries.

Reasons for setting up sales territories:

1. Increase market coverage

2. Control selling expenses
3. Evaluation of sales force performance
4. Improve customer relations
5. Increase sales effectiveness
6. Benefits sales person and the company
7. Improve co-ordination

Designing sales territories:

Control unit:

Commonly used control units are states, metros, districts, pin-codes, industrial estates and major
customers.

Potential of customers:

The location of present customers can be obtained from company’s database; the information about
prospective customers can be obtained from directories and market research studies. Next step is to
analyse the sales potential of existing and prospective customers using the forecasting methods.
Then the list of customers has to be categorised in to ABC.

Basic territories:

It is carried out by build-up or break down method. Build-up method equalises the workload of sales
people and is commonly used manufacturers and marketers of services or industrial products.
Breakdown method equalises the sales potential of the territories and is predominantly used by
consumer product (FMCG, consumer durable) companies.
Build-up Method

Decide call Estimate total number Estimate work load

frequencies of calls in each control capacity of each
unit salesperson

Develop final territory Make tentative

territories

Break down method

Estimate company Estimate sales volume

Forecast sales potential
sales potential for expected from each
for each control unit
entire market sales person

Develop final territory Make tentative

territories

Territorial coverage by sales people:

After designing sales territories and assigning sales people to the territory, the task of the sales
manager is to provide the route plan.

The advantages of route planning are

 It reduces travel time and cost by excluding backtracking and criss-crossing by sales people
in their territory.
 Improves territory coverage

The types of route planning available for a manager are

B – Base/Office

C - Customers

Sales Quota:

Sales quota is the sales goal set by a company for its marketing units for a specific duration of time.
The marketing unit is a salesperson, distributor, branch, territory. Sales quota can be set on sales
volume (in numbers or in rupees), expense, profit margin, activity, customer satisfaction and
combination.

The objectives of sales quota are

 Making available performance standards

 Controlling performance
 Motivating people
 Identifying strengths and weaknesses

Types of sales quota:

 Sales volume
 Financial
 Activity
 Combination

Methods for setting quota:

Several methods are used for setting sales quota. Sales quota is set based on

 Territory potential
 Past sales experience
 Total market estimate
 Executive judgement
 Compensation plan