SALES AND DISTRIBUTION

BBA- IV SEMESTER
MARKETING MANGEMENT SPECIALISATION

UNIT-II: ANALYSIS OF MARKET POTENTIAL

Dr.K.V.Nagaraj
Assistant Professor
Department of Management Studies
Gayatri Vidya Parishad College for Degree and
PG Courses (A), Rushikonda, Visakhapatnam.
Contact: nagaraj@gvpcdpgc.edu.in
rajavsp80@gmail.com
9032093381 , 9666691545.
UNIT-II: ANALYSIS OF MARKET POTENTIAL

• Sales Potential
• Sales Volume
• Sales Forecasting
• Sales Budgets
• Time and Territory Management
• Sales Quotas and Types.
 INTRODUCTION
 A company must measure and forecast the size and
growth and profit potential of each market opportunity
( market demand) before entering into a market. For
this purpose the terms ‘Market Potential’ and ‘Sales
Potential” are used.
 Demand can be defined as quantity by buyers over a
certain time period, in a given marketing environment,
and under a given marketing program or marketing
mix.
MAJOR COMPONENTS IN DEMAND
MEASUREMENT
 SALES POTENTIAL
It is an estimate of the maximum possible sales
opportunities present in a particular market segment
open to a specified company, selling a good or service
during a stated future period of time.
 Opportunity available to a particular manufacturer;
 Refers to maximum share/ percentage of market
potential an individual firm can reasonably expect to
achieve.
DETERMINANTS OF SALES POTENTIAL
1) Access to Distribution Channels
2) Intensity of the Competitive Environment
https://youtu.be/jBvhVONq_bg?list=PL3AB549F
94715A411
3) Pricing and Financing of Sales
4) Human and Financial Resources
5) Market Penetration Timetable
6) Risk Tolerance of Senior Manager
7) Special Links, Contacts and Capabilities of the
firm.
8) Reputation
 METHODS OF ESTIMATING SALES
POTENTIAL
a) Survey of End-Users and Intermediaries

b) Trade Audit

c) Competitor Assessment

d) Obtaining Estimates from Local Partners

e) Limited Marketing Efforts to Test the Waters

SALES POTENTIAL ANALYSIS

 SALES VOLUME
• Sales Volume is defined as “the total revenue
generated or the total number of units of a product
sold in a given period”
• Sales volume analysis is a careful study of a company’s
record as summarised in the net sales section of its
profit and loss statement.
• It is a study of the Rupee or the unit sales volume by
product lines, territories, key accounts, and general
classes of the customers.
 PROBLEMS IN ANALYSING SALES VOLUME
 Lack of sufficient Information
 Sales Volume analysis usually Insufficient
 SALES FORECASTING
• Forecasting is ordinarily used to refer to prediction for a future
period. Although this usage is technically correct. It is too general
for managerial value.

• Sales forecasting is an estimate of sales (in rupees or units)

that an individual firms expects to achieve during a specific
time horizon/ period, in a stated market and with certain
underlying assumptions.
• It is an essential tool used for business planning, marketing, and
general management decision making.
• It can help to drive sales revenue, improve efficiency, increase
customer retention and reduce costs.
 DEFINITION OF SALES FORECASTING

• According to Cundiff and Still “Sales forecast

is an estimate of sales during a specified
future period, whose estimate is tied to a
proposed marketing plan and which assumes
a particular state of uncontrollable and
competitive forces.”
 OBJECTIVES OF SALES FORECASTING
A. SHORT-RUN OBJECTIVES
1. Formulation of production policy so meet the
demand;
2. To make best use of resources based on sales
forecast;
3. Make provision for the regular of raw material;
4. To make regular supplier of machines on the basis
of sales forecast;
5. To estimate and provide the requisite working
capital;
6. To establish sales quotas and targets; and
7. To estimate stock requirements.
 B. LONG-RUN OBJECTIVES
1. Estimate cash inflow from sales;
2. Provision for capital expenditure;
3. Planning of plant capacity so as to meet rising future
demand;
4. Manpower Planning;
5. Planning for acquisition of resources;
6. Determining the dividend policy;
7. Establishing coordination between various functions of
the firm;
8. To estimate future profits of the business enterprise;
9. Facilitate budgeting and budgetary control; and
10. Reducing selling cost and thereby final cost of the
product.
 FUNCTIONS OF SALES FORECASTING

a) Base for Marketing Planning

b) Discovery of Marketing Opportunities

c) Reduction of Marketing Risks

d) Help in Control
 ROLE OF SALES FORECASTING
1. It is the foundation for budgeting

2. Guarantees effective control

3. Sound Decisions on expansion or contraction

4. Judicious resource allocation

5. Helps in making sound personnel decisions

6. Aids in Performance Evaluation

 FACTORS GOVERING SALES FORECASTS

1) The prevailing economic conditions

2) The prevailing business conditions

3) The Sociological conditions

4) The psychological conditions

5) The Competitive conditions

6) The internal conditions

 STEPS IN SALES FORECASTING
1. Determine the purpose for which forecasts are used;
2. Divide the company products into homogenous
groups;
3. Determine the factors affecting the sales of each
product and their relative importance;
4. Choose the forecasting methods;
5. Gather the available data;
6. Analyse the data;
7. Check and recheck the deductions;
8. Make assumptions regarding other factors;
9. Convert deductions and assumptions into forecast;
10. Apply the forecast to company operations.
ADVANTAGES OF SALES FORECASTING
1. To Produce the Required Quantity
2. To Assess Probable Demand
3. Control of Business
4. Inventory Control
5. Stability
6. To Plan Investment and Employment
7. To Call for Team Work
8. To Help the Government to Plan Import and
Export Policies
9. Manpower Planning
DEMERITS OF SALES FORECASTING
1. Changes in Consumer Behaviour
2. Non-Availability of Accurate Data
3. Insufficient and Inexperienced Sales
Forecasters
4. Difficulty in Anticipating Plans of Competitors
5. Dependence on One Method only
6. Biasness of Experts
7. Sudden Changes in Government Policy
8. Change in Economic Conditions
9. Fashions and Fads
METHODS OF SALES FORECASTING
QUALITATIVE METHODS QUANTITATIVE METHODS
• Jury of Executive Opinion • Time Series Analysis
Method
• Poll of Sales Force Opinion • Simulation Method
Method
• Computer-Assisted
• Projection of Past Sales
Method Forecasting
• Survey of Consumer Buying • Market Research Method
Behaviour
• Delphi Method • Control Market Experiment

• Statistical Sampling
 JURY OR EXECUTIVE METHOD
MERITS DEMERITS
• Easiest way to forecast • Opinion may not be valid
within shortest time; supporting the forecasts by
• Creative and Logic sound factual materials or
judgement of the top pool documents
executive; • Difficult to break into
• Suitable for new firm and estimates of probable sale
small firms by products
• Burdens key executives
 POOL OF SALES FORCE OPNION
METHOD
MERITS DEMERITS
• Utilises Specialised • May not be reliable;
knowledge;
• Possibility of
• Company can split the
requirements of variables; underestimating the sales;

• Forecasts accurate as the • Over-Burden on salesmen

planners are achievers
 PROJECTION OF PAST SALES METHOD
MERITS
• Simple and inexpensive
• Forecast is more reliable
• Results are more accurate
than other methods
DEMERITS
• Ready and Rough types
• Accuracy depends on
market saturation point
• Easier to explain but
difficult to predict as to
when it sets in.
 SURVEY OF CONSUMERS BUYING
PLANS METHODS
MERITS DEMERITS
• It is only opinion collecting
• Easier and Inexpensive
than getting reliable data;
method;
• Time consuming and costly
• More accurate as there will be
affair;
total survey and this is a • When market is large this
method is not suitable.
refined approach;

• Suitable for industrial goods.

 DELPHI METHOD
MERITS DEMERITS
• Best when historical data is
not available; • Selection of Panel

• Useful to develop long • Role of Coordinator is really

range forecasts of demand difficult
of new products;
• It is a time consuming
• Useful for technological
forecasting;
• Crates satisfaction on
employees.
 QUANTITATIVE METHODS
• Time Series Analysis
 Long-term trends
 Cyclic changes
 Seasonal Variations
 Irregular Fluctuations

• Simulation Method (S=R+N)

• Computer-Assisted Forecasting
• Market Research Method
• Control Market Experiment
• Statistical Sampling
 INTRODUCTION
• Sales budget is a blue print for sales involving the
capital invested in distribution facilities, promotional
efforts, and the manpower for selling the products and
services.
• In other words sales budget is a projection of what a
given marketing program should mean in terms of net
profits and improvements in the financial positions.
• Sales budget can be in narrow as well as in broader
sense.
 DEFINITION

• According to Cundiff and Still “

Sales-budget consist of estimates
of the probable dollar sales
(monetary terms) and unit sales
and expenses of obtaining them.”
 Features of Sales Budget
1. It estimates sales in units and in rupees
2. It is made by sales-department
3. It is prepared for a specific future period of time
4. It anticipates level of sales and selling expenses.
5. It effects the budgets of other departments
6. Helps in exercising controlling over sales force
7. It is effectively used planning techniques for sales as
well as other functional departments
8. It is a continuous process
Purpose of Sales Budget
• Planning
• Co-ordination
• Control

Types of Sales Budget

• Sales Budget

• Sales Expenses

• Administrative Expenses
 ESSENTIALS OF EFFECTIVE SALES
BUDGET
a) Support of Top-Management
b) Formation of Sales Budget Committee
c) Consider various internal and external factors
d) Clearly defined sales policy
e) Well-defined responsibility centre
f) Periodic review
g) Attainable Goals
h) Element of flexibility
i) Clearly defined budget period
 Factors affecting Sales Budget
1. Past sales figures and trend
2. Salesmen’s estimates
3. Plant capacity
4. General trade prospects
5. Orders on hand
6. Proposed expansion or discontinuance of products
7. Seasonal fluctuations
8. Potential market
9. Availability of material and supply
10. Financial aspect
11. Other factors
(a) The nature and degree of competition within the industry
(b) Cost of distributing goods
(c) Government controls, rules and regulations
(d) Political situation — national and international
 PROCEDURE FOR SALES BUDGET
1. Situation Analysis;
2. Identification of Threats and Opportunities;
3. Development of Sales Forecasts;
4. Formulation of Sales Objectives;
5. Determination of Sales Tasks;
6. Specification of Resource Requirement;
7. Finalisation of Projection;
8. Presentation and Review;
9. Revision of Sales Budget;
10.Approval of the budget.
 METHODS OF DETERMINING SALES
BUDGET
A. Budgeting by Percentage of Sales Method;

B. Budgeting by the Objectives and Task

Method;

C. Affordability Method;

D. Competitive Parity Method;

E. Return Oriented Method.

 TIME MANAGEMENT IN SALES
• Sales management helps in the achievement
of sales targets within defined deadlines
through effective planning and budgeting.
• Through effective sales management,
individuals generate revenues and earn profits
for the organization.
• It is essential for the sales professionals to
understand the value of time. One must fulfill
commitments and there should be no turn
backs in the same.
 HOW SALES PEOPLE SPEND THEIR
TIME
SALES PEOPLE’S TASKS TIME SPENT
(PERCENTAGE)
Administrative Tasks 15
Service Calls 12
Face-To-Face- Selling 32
Waiting/ Travelling 21
Telephone Selling 19

Total 100
 CRITICAL ASPECTS FOR TIME
MANAGEMENT

Focus on Important Aspects

Accept the Need for Change

Delegate Whenever Possible

 SALES TERRITORY
• Every company divides the target market in certain
geographical areas in which salesmen has to work, this
geographical area in which salesmen works is called as ‘Sales
Territory’.

• Sales Territory is the smallest and economic unit which is used

in planning and controlling the company’s marketing efforts.

• The fundamental purpose of designing the sales territories on

geographic basis, is to equate the workload among the
salesmen and to minimise the selling and distribution
expenses including the supervision costs.
 DEFINITIONS OF SALES TERRITORY
• According to Professor Cundiff and Still ‘ A Sales
Territory is a grouping of customers and prospectus
assigned to an individual sales- person’
• Professor Stanton defines ‘ A Sales Territory is a
number of present and potential customers located
within a geographical area, and assigned to a sales
person, branch or middlemen’.
• According to Davis ‘ Sales Territory is the basic unit of
sales planning and sales Control’.
 OBJECTIVES OF SALES TERRITORIES
1. To Provide Matching Market Coverage;
2. To Control Selling Expenses;
3. To Evaluate the Sales Personnel;
4. To Contribute to Sales Force Morale;
5. To Coordinate Personal Selling and Advertising
Efforts;
6. To Plan and Control Lowest Level Organisations;
7. To Meet Competition with Vigour.
 REASONS FOR ESTABLISING SALES
TERRITORIES
1. To establish a salesperson’s responsibility;

2. To evaluate performance;

3. To improve customer relations;

4. To allow better matching of salesperson to

customer;

5. To benefit salesperson and the company.

 REASONS FOR REVISING SALES
TERRITORIES
A. CUSTOMER RELATED REASONS
a) Shift in Business
b) Increased Competition
B. SALES- FORCE RETATED REASONS
a) Decreased Stamina
b) Frustration
C. MANAGEMENT RELATED REASONS
a) Over or Under- Sized Territory
b) Introduction of New Products
 FACTORS DETERMINING SIZE OF SALES
TERRITORY
1. Potential Volume of Sales;
2. Competition in the Sales Territory;
3. Demand for the Product;
4. The Type of the Product Sold;
5. Economic Conditions;
6. Cost of Covering an Area;
7. The Sales Policy;
8. The Method of Distribution;
9. The Program of Sale Promotion and Advertising;
10. Calibre of Middlemen;
11. Ability of the Salesmen.
BASES FOR DESIGNING SALES METHODS OF ESTABLISHING
TERRITORY THE SALES TERRITORY

 Geographic  On the Basis of

Terrorisation Country

On the Basis of State

 Potential
On the Basis of
 Servicing
District Unit
Requirements
Other Methods
 Work-load
PROCEDURE FOR DESIGNING SALES
TERRITORIES
 SHAPES OF SALES TERRITORY
The sales manager has to decide the shape of the territory. The
territory shapes affects the selling expenses and also helps for
sales coverage. There are four types of shapes, which are used
widely.
• The Wedge: This shape is suitable for the territories, which contain
both the urban and non-urban areas. The radius starts from the
most populated urban center. Wedges can be divided into many
sizes and the travel time can be maintained by balancing between
the calls of urban and non-urban areas.
• The Circle: When the clients are distributed evenly throughout an
area, the sales manager chooses the circle shape. The salesperson
starts from the office, moves in a circle of stops until he reaches the
office again. This helps the salesperson to come near to the
customer as compared to the wedge.
• Hopscotch: In this shape, the salesperson begins from the last point
from office and reach out the customers while coming back to the
office. While going, the salesperson does not stop anywhere and
attends calls in one direction while coming back to the office.
• The Cloverleaf: When the accounts or client are located randomly
in a geographical area, the cloverleaf shape is used. This type of
shape is more often found in industrial markets than in consumer
markets.
 ASSIGNMENT OF SALES PERSONNEL
TO SALES TERRITORIES

a) Personal Features and Environmental Factors

b) Perfect Alignment of Selling Efforts with Sale

Opportunities.

c) Astute Stability in Assignment

 PROS AND CONS OF SALES TERRITORIES
ADVANTAGES
1. To hold the salesman responsible for
sales and services,
2. Supervise and control over the sales
force,
3. To compete in the competitive
market easily, and
4. To save time and expenses.
5. Company is able to serve his
customers more satisfactorily.
6. Comparison among salesmen is
possible and can be easily made.
7. Comparison among salesmen is
possible and can be easily made.
8. Organization is able to know sales
potentialities of each area.
9. Ensures adequate market coverage
and avoids duplication of sales
efforts.
DISADVANTAGES
1. May not prove good in regions where
personal relationship is required
rather than professional approach.
Ex: Financial Products.
2. Companies having customers at
multiple locations often do not
design sales units on the basis of
geographical territories.
3. As service deliveries and product
deliveries are done at multiple places
and across the country, a geographic
division will not help the
organizations in achieving the
benefits of territorial designs.
4. Highly sophisticated and technically
complex products are sold through
sales team systematically effort.
 ROUTING AND SCHEDULING
• Routing is the task of mining travel time and call
frequencies.
• Scheduling the task of allocating time of sales
people.
• The most important advantages of routing and
scheduling are:
1. Routing and Scheduling Plans Improve Better
Sales Coverage
2. Fixation of Call Frequency Rate
3. Reduce Wastage of Time
4. Advance Appointment with the
Customers/Prospects
5. Assists Sales Management for Closer Control
 (SQ)
 INTRODUCTION
 MEANING AND DEFINITION
 OBJECTIVES OF SQ
 FACTORS CONSIDERED WHILE
SETTING SQ
 REQUISITIES FOR SUCCESSFUL
SQ
 METHODS OF SETTING SQ
 MERITS AND DEMERITS SQ
 TYPES OF SQ
 INTRODUCTION AND MEANING
Quota implies expected performance expressed in
volume or value over a period of time.
Sales quota is the estimated or predetermined
volume or value of sales expected to be achieved by
the sales-force over a given period of time.
Quota is fixed for a sales region or other marketing
unit at higher organizational levels. Then such a
quota is broken in lower level units such as sales
districts, sales supervisors, and salesmen.
It can be considered as an effective device to direct
and control sales operations of the unit as they are
closely linked with the sales budgets and sales
forecasts.
 DEFINITIONS OF SALES QUOTA
“A Sales quota is the sales goal set for a product
line, company division, or sales representative. It
is primarily a managerial device for defining and
stimulating sales effort”
– Prof. Philip Kotler
“Sales quota is a quantitative goal assigned to a
specific marketing unit,such as a salesmen or
territory”
– Cundiff and Still
 OBJECTIVES OF SALES QUOTA
1. To provide quantitative performance
standards;
2. To motivate desired performance;
3. To get more effective cost control;
4. To use in sales contests;
5. To identify strengths and weakness.
 FACTORS TO BE CONSIDERED WHILE
SETTING SALES QUOTA
1. Estimate purchasing power of consumers;
2. Study the past sales;
3. Consult facts and expert opinions;
4. Investigate company/ sales policies;
5. Measure the nature and extent of
competition;
6. Consumer standards;
7. Total production for the year.
 REQUISITES OF SUCCESSFUL
QUOTA SYSTEM
1. Accurate, fair and attainable quotas;
2. Securing and maintaining the sales-force
acceptance;
3. Participation in quota setting;
4. Keeping informed the sales-force of their
attainment;
5. Continuous managerial control.
 METHODS OF SALES QUOTA
1. Sales quota based on Sales Potential of
Individual units;
2. Sales quota on the basis of sales potential of
the market;
3. Sales volume quota on the basis of last years
sales;
4. Setting sales quota on the basis of judgment
of Higher officials;
5. Setting sales quotas on the basis of sales
force own estimation.
 ADVANTAGES OF SALES QUOTAS
a) Adjustment of sales and output;
b) Evaluation of sales performance;
c) Sizing up the market areas;
d) Useful in sales contests;
e) Quotas acts as motivators;
f) Maximisation of sales and profits;
g) Locate weak and underdeveloped areas;
h) Control Device;
i) Effective compensation plan;
 DISADVANTAGES OF SALES QUOTAS
1. Based on arbitrary estimates;
2. Danger of bad debts;
3. Danger of ineffectiveness;
4. Problem of quota fixing;
5. Apply of Discord;
6. Short Supply;
7. Too low quota;
8. Other Field Remain Untouched;
9. Wastage of time, energy and money.