Mark W. Johnston | Greg W.

Marshall

McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
Part 1
Formulation of a
Sales Program
5 The Strategic Role of Information
in Sales Management
 IT in Perspective
 Tools enable rather than transform
 Implement successful business
processes
 Support w/new technology

Late 19th Mid 20th Late 20th

Century Century Century

Source: HR Chally Group (2009), 5-4

 5.1
Market potential,
sales potential,
and sales
forecasting
process

5-5

Discuss differences between market
potential, sales potential, sales forecast, and
sales quota

Understand methods by which sales
managers develop sales forecasts

Outline process of setting a sales quota
 Explain types of quotas used in sales
management

Discuss approaches to determining sales
force size

Describe sales territory design process
 Understand importance of sales analysis
 Conduct sales analysis
5-6
 Information for Managers

 Sales forecasts
 Territory estimates
 Quotas
 Sales force size
 Sales territory design

5-7
Market Opportunity Analysis

 Market potential – estimate of possible

sales for an entire industry in a market
during a stated period under ideal
conditions
 Sales potential – portion of market
potential the firm can expect to
reasonably achieve
 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

5-8
 5.1
Market potential,
sales potential,
and sales
forecasting
process

5-9
 5.2
Classification of sales
forecasting methods

5-10
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
5-11
 Objective Sales Forecasting

 Market test – places 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
5-12
Objective Time Series Analysis

 Moving average – averages sales

results over previous time periods
to forecast
 Exponential smoothing – type of
moving average where most recent
years given more weight
 Decomposition – applied to
monthly or quarterly data where
seasonal pattern is evident

5-13
 Subjective Objective

5.3 User expectations Market test

Forecasting
Sales force composite Time series analysis
Techniques

Jury of executive opinion Statistical demand

analysis
Delphi technique

5-14
 5.4
Example of a
moving average
forecast

5-15
 5.5
Graph of actual and
forecast sales using
moving averages

5-16
5.6 Calculation of a seasonal index

5-17
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

5-18
Effects of Territory Estimates

 Design of sales territories

 Procedures for identifying
potential customers
 Establishment of sales quotas
 Compensation and
subcomponents
 Evaluation of salesperson
performance

5-19
 Planning Tools

 North American Industry Classification

System (NAICS)
 Developed by US Bureau of the Census,
 Organizes reporting of business information
 Each U.S. industry is assigned a two-digit
number
 Buying Power Index (BPI)
 Published by Sales Marketing Management
Magazine
 Considers income, population and retail sales
 Most useful with low-priced convenience
goods

5-20
 Sales Quotas

 Goals assigned to salespeople

 Apply to specific periods
 Tool for planning and
controlling field selling
activities and results
 Benchmark for evaluating sales
effectiveness
 Motivate sales people

5-21
 Process for Setting Quotas

 Identify types of quotas to be

used
 Select level of each type of
quota

5-22
 Quota Purposes

 Provide incentives for sales

representatives
 Provide measures to evaluate
salespeople’s performance

5-23
Good Quota Characteristics

 Attainable
 Easy to understand
 Complete
 Timely

5-24
 5.1 Sales Process and Quota Attainment

Level
Level 1 Ad Hoc No clearly defined process and approximately half of sales
staff are not attaining quota. Large variation in performance
levels.
Level 2 Tribal Limited process used by certain "tribes" within the company.
Still only 50% of staff attaining quota but less variation
between best and worst performers.
Level 3 Religion Everyone is using the process but not to its full capability.
More salespeople making the quota than not making it.

Level 4 Dynamic Fully utilizing people, processes, and technology. Low

World-Class variation in performance levels of salespeople with very few
not attaining quota.

5-25
 Quota Types

 Sales volume - emphasize

sales or some aspect of sales
 Activity - focus on certain sales
activities
 Financial - examine financial
criteria such as gross margin
or contribution to overhead

5-26
 Sales Volume Quotas

 Most popular
 Often based on past sales
 Related directly to market
potential, thus credible and
easily understood
 May be expressed in dollars,
physical units, or points

5-27
 Activity Quotas

 Reflect territorial conditions

 Require a detailed analysis of work
required for effective territorial
coverage
 Customers influence activity quotas
through:
 Account and order size
 Purchasing patterns
 Support required for satisfaction
5-28
 Number of…
1. Calls on new accounts.
2. Letters to potential customers.
3. Proposals submitted.
5.7
4. Field demonstrations arranged.
Common types of 5. Service calls made.
activity quotas
6. Equipment installations supervised.
7. Displays arranged.
8. Dealer sales meetings held.
9. Meetings and conventions attended.
10. Past-due accounts collected.
5-29
 Financial Quotas

 Direct salespeople to more

profitable products and customers
 Common bases
 Gross margin
 Net profit
 Selling expenses
 Calculation not straight-forward
 Profit produced affected by factors
beyond a salesperson’s control
5-30
 Quota Level Considerations

 Territory available potential

 Quota’s impact on motivation
 Long-term company objectives
 Short-term profitability impact

5-31
 Sales Force Deployment
Considerations

 Sales force size or number of

territories
 Design of individual territories
 Allocation of total selling effort
to accounts
 Simultaneous decisions
implemented through software

5-32
Determining Sales Force Size

 Breakdown method
 Workload method
 Incremental method

5-33
 Breakdown Method

Forecasted
(S)ales volume
(N)umber of
sales personnel =
needed
Estimated
(P)roductivity of
each salesperson

5-34
 Workload Method

Total # hours
required to
service market
Total #
salespeople =
required
# Hours available
to each
salesperson

5-35
 5.8
Steps to determine
sales force size by the
workload method

5-36
 Incremental Method

 Add salespeople until

incremental profit produced
equals incremental cost
 Decreasing returns associated
with addition of salespeople

5-37
 Illustration of the incremental approach to
5.9 determining sales force size

5-38
 5.10
Stages in territory
design

5-39
 Ten largest CMSA/MSAs in decreasing order of
5.11 size

5-40
 5.12

Account planning
matrix

5-41
 Sales Analysis

 Gathering, classifying, comparing,

studying company sales data
 Highlights sales concentration in
products, customers, orders,
territories
 80:20 principle
 Decisions
 Evaluation system
 Sources of information
 Information aggregation type
5-42
 5.13
Key decisions when
conducting a sales analysis

5-43
 Evaluation Systems

 Determine how analysis will be

conducted
 Simple
 Comparative
 Basis for comparison?
 Reporting and control system?

5-44
5.14 Differences between simple sales analysis and comparative analysis

5-45
 Cash
register
receipts

Warranty Salesperson
cards call reports

5.15
Other sources of Sales
information for sales
analysis analysis Salesperson
Credit
expense
memos
accounts

Individual
Financial customer/
records prospect
records
5-46
5.3 Risks of ERP Implementation

 1. Lack of senior management commitment.

 2. Ineffective communication with users.
 3. Insufficient training.
 4. Failure to receive user support.
 5. Ineffective project management.
 6. Attempting to reconcile with existing systems.
 7. Departmental conflicts.
 8. Team composition.
 9. Failure to redesign business processes.
 10. Confusing change requirements.

5-47
Information Aggregation Type
 Possible groupings

Region

Product

Customer

Market

Method of sale
 Order size
 Financial arrangement

Considerations

Company size

Product diversity

Sales area

Number of markets/customers
 Management level/type to receive report

Hierarchical reports most effective
5-48
 5.16
Sales reports in
a consumer food
products company

*To understand the rationale behind who

was given access to each report, it is
useful to know that salespeople were
assigned accounts in
sales districts. Salespeople were
assigned one or, at most, a couple of
large accounts and were responsible for
all the grocery stores, regardless
of geography, affiliated with these large
accounts, or they were assigned a
geographic territory and were
responsible for all of the stores
within that territory. All sales districts
were assigned to sales offices or sales
centers. The centers were, in turn,
organized into regions.

5-49
 Mark W. Johnston | Greg W. Marshall

McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.