Sales Analysis & Sales & Cost Control

Sales Control

Management policies and practices aimed at ensuring that all sales are recorded, made at correct prices, and fulfilled to customers' satisfaction.

Sales Control and Cost AnalysisCompanies need to have proper mechanisms in

place so that salespeople adhere to the top line and bottom line objectives

Sales Audit is a systematic, critical & unbiased review and appraisal of the basic objectives and policies of the selling function and of the organisation, policies, methods, principles and personnel employed to implement those policies and achieve those objectives

Ex- TLc in IndiaSalespeople tend to lose sight of this core

objective over time; that is why this becomes critical

Sales Audit – Areas of Coverage 1. People• Assessment of your key sales and marketing personnel, from the

executive team to the sales reps.• Do you currently have the right resources and infrastructure to reach

your goals? Processes• Are your current sales and marketing processes operating efficiently

and maximizing profitsMarketing• Are your marketing activities measured directly with sales increases?Measurements• What are your Key Performance Indicators (KPI’s) and are they being

effectively measured, reported, and managed.

Technology Are your sales and marketing teams taking

advantage of technology to maximize profitability, or are they held hostage to technology that hinders their effectiveness.

Strategy- Is your sales strategy in line with your core values?

Culture• Is your team farmers or hunters? What is

their level of satisfaction andmotivation?• Does marketing, sales and other key

departments or individuals in yourcompany communicate effectively with each

other?

• Sales Channels Are you currently utilizing the most effective

sales channels for your service or product? Are you effectively managing your current

channels to maximize the relationship and profitability?

Client Satisfaction Do your clients share the same opinion of you as

you do? How do they describe you as a company? Why did your clients choose you? What do they

think of the sales process they experienced with your team?

Compensation Plans Are your management and staff effectively

compensated to achieve sales targets? Are you achieving the right balance between

base and performance-based pay?Customer Satisfaction

WHAT IS SALES ANALYSIS?

Sales analysis is the detailed examination of a company’s sales data and involves assimilating, classifying, comparing, and drawing conclusions.

Quota Sales +/- % age achieved

New Delhi 5 3.78 -1.22 75.6%

Mumbai 7 8.35 +1.35 119.28%

Hyderabad 4 5.49 +1.49 137.25%

Chennai 3.5 3 -0.5 85.71%

Bangalore 2.5 2 -0.5 80%

Figures in Rs. Million unless otherwise specified

Illustration of sales analysis:

The data must then be analyzed in New Delhi, Chennai and Bangalore to ascertain which salesperson (s) in these areas missed the quotas. Then we can further analyze where he missed the quota by factors like sales account type, or by product line

Analysis is necessary to uncover the reason for poor performance:

1. Was the quota set too high?2. Are salespeople having trouble

with a particular product line?3. Can the problem be narrowed

down to a particular salesperson, sales district, product, or price line?

4. Do any sales divisions or districts have poor management?

Use of Sales Analysis continued

• Planning sales force activities.• Evaluation of salespeople’s performance.

• Measuring the effect of advertising and other sales promotional activities.

• Evaluating channels of distribution.• Modifying channels of distribution

The 80/20 or “concentration” principle states that the majority of a company’s sales (or profits) may result directly from a very small number of the company’s accounts, product or price lines, or geographic areas.

Pareto principle The term "Pareto principle" can also refer to Pareto efficiency. The Pareto principle (also known as the 80–20 rule, the law of

the vital few, and the principle of factor sacristy) states that, for many events, roughly 80% of the effects come from 20% of the causes.

Business-management consultant Joseph M. Juran suggested the principle and named it after Italian economist Wilfred Pareto, who observed in 1906 that 80% of the land in Italy was owned by 20% of the population.

he also observed that 20% of the pea pods in his garden contained 80% of the peas

IN BUSINESS

80% of your profits come from 20% of your customers

80% of your complaints come from 20% of your customers

80% of your profits come from 20% of the time you spend

80% of your sales come from 20% of your products

80% of your sales are made by 20% of your sales staff

Therefore, many businesses have an easy access to dramatic improvements in profitability by focusing on the most effective areas and eliminating, ignoring, automating, delegating or re-training the rest, as appropriate.

MARKETING COST ANALYSIS

Marketing cost analysis, or distribution cost analysis, is the analysis of costs that affect sales volume, with the purpose of determining the profitability of different segment operations.

Profitability is determined by sales volume and its associated costs and expenses.

Types of MARKETING COSTS

Marketing vs. Production CostsA production cost is the cost incurred by processing a product from its raw elements to a finished state.

Marketing, or distribution costs, can be broken down into two distinct categories:

• Costs incurred by getting orders.

• Costs incurred by filling orders.

FIGURE 15.1 CATEGORIES OF MARKETING COSTS

Marketing (Distribution) Costs

Order-Getting Costs • Direct Selling • Sales Promotion • Advertising • Market Research

• Administrative

Order-Filling Costs • Physical Distribution

ShippingTransportation Warehousing Material Handling

• Credit and Collection • Administrative

USES OF MARKETING COST ANALYSIS

• An integral part of the decision-making process.

• Serves as the basis for management decisions,

Allocating sales effort: ‘Iceberg principle’ says that only a small part of the total situation is visible; the rest has to be gauged through sales analysis.

There are customers who account for a smaller percentage of sales but time, money and effort to tap them is no less. These situations must be analysed & corrective action taken.

The desirable outcome is that allocation be done based on sales potential and actual sales.