MKTM508

Sales & Distribution

RAJEEV GUPTA

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Learning Outcomes

1 You will be able to implement and

execute the sales forecasting
techniques.
2 You will be able to manage the sales
budgeting and sales territories.
Sales Forecast

• Projection of your performance as a sales organization at the end of

a period of time.

• It helps in aligning what is important for an organization

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Forecasting Technique
• Qualitative:
• Relies on input from people
• Quantitative:
• Relies on input from numerical data

• Before using any technique one should answer a few questions like:
• Is your market growing or shrinking?
• Are there new trends impacting your market?
• Is business seasonal?

• Note:
• If you do not know your market well, lean on a qualitative technique that leverages
expert advice
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Forecasting Technique

• What methods did your predecessor use?

• Were those methods successful?
• Were there big misses in the forecasting?

• Sales figures teach you about the future.

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Forecasting Technique

• Prerequisite for data based sales forecasting:

• Clean data
• Accurate
• Distortion free
• Uncorrupted

• Historical Sales data

–Gather as much as you can
–Enlist the help of IT and Finance
–Source the most accurate data available
–Check and clean the data

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Forecasting Technique

• The Rollover Technique:

• Past actual Sales = Next sales forecast

• The rollover technique serves as a benchmark to compare other

forecasting techniques

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Forecasting Technique

• The Moving Average Forecast:

• The average move month to month

• The weighted Moving Average Forecast:

• Give the most recent months more weight

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Forecasting technique

• Smoothing Forecast:
• Calculate the exponential smoothing forecast
• Current period sales
• Current period forecast
• Current weighting factor

• Calculate the smoothing factor

• (A X S) + (F X (1-S))

• Where,
• A = most recent period’s actual sales
• S = smoothing factor in decimal form
• F = most recent period’s forecast
• (A X 0.4) + ( F X 0.6)

• The smoothing technique recognizes all past data as having some historical contribution to
make to today's forecast while making the most current data more impactful than the
oldest data.

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Forecasting Technique

• Customer Insight on future buying patterns

• What kind of data did they use to create their forecast?

• Is their historical data clean and consistent?

• If their business is uncertain can their data hurt your forecast?

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Forecasting Technique

• Customer Insight forecast

• Ask the customer for an order estimate for a time period

• Record the actual order from the same time period

• Subtract the customer order estimate from the actual sales to get
the error

• Compare the average error for the customer estimate with the
rollover technique

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Forecasting Technique

• Use estimates from sales reps and distributors

– Annual sales estimates per territory
– Total annual sales in a month or Quarter

• Sandbagging:
• Giving a sales forecast that is artificially low so that you end up with an easier
sales quota

• Understand the assumptions used:

– New or lost accounts
– New competitors
– Price changes
– New marketing initiatives
– New product launched 12
Forecasting Technique

• Expected Value:
• Anticipated forecast for a given territory
• EV = Possible value X Respective probability

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How to Handle the Unexpected

• Keep your current forecasting technique in place

• Measure accuracy versus the benchmark rollover technique
• Add qualitative methods to supplement your quantitative techniques
• Adjust your historical database so it better represents future
business
• Set up a second forecast
• Remove data from the hardest-hit periods
• Compare it to your original forecast and benchmark rollover
technique

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Sales Forecast

• A forecast is just a forward-looking tool to help reduce errors in

sales decisions.

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Sales Budget

• A sales budget consists of detailed estimates of expected sales

volume of sales and selling expenditures.
• The sales volume part of the sales budget is based on the sales
forecast.
• The sales budget is used for planning the company’s production,
purchasing, and cash flow.

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Sales Budget

The sales volume budget which is derived from the sales forecast is
broken into:
• Product-wise and size-wise or model-wise quantities, the average
selling price per unit, and resulting sales revenue.
• Territory-wise quantities to be sold and sales revenue, and
• Salesperson-wise sales volume targets or quotas during yearly,
quarterly, and monthly budget period

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Sales Territory

• A sales territory is defined as a group of present and potential

customers assigned to an individual salesperson, a group of
salespersons, a branch, a dealer, a distributor, or a marketing
organization at a given period of time.
• Territories are defined on the basis of geographical boundaries in
many organizations.

• Note:
• A well-planned territorial design helps in matching the selling efforts
with the sales opportunities in that market.

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Designing a Sales Territory

Factors to be considered while designing a sales territory:

• Size of the organization

• Level of competition in each product category
• Number and quality level of the products in the portfolio
• Type and quality of the services
• Customer support to be provided
• The quality of the salesperson serving in the organization

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Procedure for Designing Sales Territories

• Select a control unit

• Find the location and sales potential of customers
• Determine basic territories
• Assign salespeople to territories
• Manage territorial coverage
• Evaluate and revise sales territories

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Determine basic territories

• Build-up Method
• Breakdown Method

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Build-up Method

• The basic territories are set up by building-up from the control unit.
• The objective to be achieved is to equalize the workload of
salespeople.

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Build-up Method of territorial design

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Shapes of Sales Territories

• The three popular territory shapes used in the Indian market are:
• Wedge
• Circle
• Cloverleaf

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THANK YOU

RAJEEV GUPTA

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