sales budget new

7/24/2019 Sales Budget New

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Sales Budget


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What is a SalesBudget?

It includes estimates of sales volumeand selling expenses

Sales volume budget is derived fromthe company sales forecast generallyslightly lower than the company salesforecast, to avoid excessive risks

Selling expenses budget consists ofpersonal selling expenses budget andsales administration expenses budget

Sales budget gives a detailed break-down of estimates of sales revenue and

selling expenditure


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What is meant by a Sales Budget?

It is a blueprint for making profitable

sales.

It is a projection of what a sales program

means in terms of

sales volume,

selling expensesand

profit.


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ey !ecision "oints

#. $he kind of sales personnel

%. Sales force si&e


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Purposes of the SalesBudget

Planning

oordination

ontrol


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"lanning !ecisions

Sales 'olume objecti'es are deri'ed from the

sales forecast and is broken down into

#. $he (uantities of products that are to be sold.

%. $he sales districts and people to sell them.

). $he customers that are to buy them.

*. $he (uantities that are to be sold duringdifferent time segments in the operating

period.


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Sales Budget Process

!any "rms follow a process forpreparation of annual sales and companybudgets# It generally includes$

%eview past, current, and future

situations ommunicate information to all managers

on budget preparation guidelines,formats, timetable

&se build-up approach, starting with "rst-line sales managers

'et approval of sales budget from topmanagement

Prepare budgets of other departments


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Sales Budget +ormats

"g % - undiff n Still


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/ethods of Sales Budgeting

"ercentage of Sales method

0ll you can 0fford

+ollowing the ompetition

12ecuti'e 3udgment method

4bjecti'e and task /ethod


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Percent of Sales (ixed percent of sales, often

based on past expenditure

patterns#

Comparative Parity Budget is based largely

upon what competition is

doing#

Objective and Task Set ob)ectives and then

determine tasks *and costs+

necessary to meet theob)ectives#

Percent of Sales he method is very arbitrary#

Budget may be too high when

sales are high and too low whensales are low#

Comparative Parity i.erences in marketing

strategy may re/uire di.erent

budget levels#

Objective and Task he ma)or issue in using this

method is deciding the right

ob)ectives so measurement ofresults is important#

Features Limitations

Budgeting ethods


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Budget !etermination

OB"#CT$%# &'! T&S( #T)O! )&S& ST*O'+#* S,PPO*T$'+ -O+$C

T)&) T)# OT)#* #T)O!S.

Media/Scheduling

CreativeStrategy

Budget

Determination


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Before setting the objecti'es for ad'ertising we

need to check what we need to set the

objecti'es5

#.$he budget for ad'ertising

%.!etermine who the target audience is).0d'ertisement content

*./edia to use

.0d'ertising fre(uency

6./easure the effecti'eness of ad'ertising


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$he decisions can be summari&ed as

follows5

#.4bjecti'es 7why8

%.$arget 7who8

).opy platform 7what8*./edia 7where8

.reati'e platform 7how8

6.$iming 7when8

9.Budget 7how much8

:.Schedule

;.


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#!$& 0 SC)#!,-$'+

!#C$S$O'S Television

Radio Magazines

Online

Wesite

Outdoor


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!ccess to the

target audience

Cost o" reaching the

target grou#$s%

1avorableaccess to cost

,nfavorable access tcost

1actors $n2uencing edia!ecisions


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/edia ad'ertising can achie'e the following5

0lter perception> attitudeson'ey information

reate desires1stablish connections!irect actions"ro'ide reassurance


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&dvertising

&gency

*ole of the &dvertising&gency

Target &udience

&dvertising Objectives

&dvertising Budget

Creative Strategy

&dvertising edia andProgramming

#valuate the #3ectiveness of the

Strategy


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&!%#*T$S$'+ ST*&T#+/$P-##'T&T$O' &'!

#11#CT$%#'#SS

!ecide ho4 to measure e3ectivenessbefore implementing the strategy.

&ssign responsibility for trackingperformance.

&ssessing the 5uality of advertising isimportant.

#6posure to advertising is not a verysensitive measure of e3ectiveness.


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Who

target audience, - what do they already know about the productor service? What do they know about the competitors?What kind of people re they?How do we describe identify them?

WhatResponse do we wish to achieve through advertising? Are thesespecific communications obectives?

HowHow can we embody our communications obectives in anappealing form? What is the evidence that we have is that isacceptable and appropriate and acceptable to our audience?

Where Which are the most cost effective places to make ourcommunications?

WhenWhen are communications going to be made to clients? What isthe reasoning for our scheduling of advertisements!communications over time

Result

What results do we expect? How are we planning to measure the

results?"o we intend to measure results and if so do we need to doanything beforehand?

#udgetHow much money do the activities need? How much money isavailable?How is expenditure going to be controlled?

$cheduleWho is to do what and when? How much is to be spent on what,where and when?


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M&!S'R()*!D+&RT(S()*

&FF&CT(+&)&SS

Rating

Services

Sales and

&,#ense !nalysis

Test

Mar-eting

ControlledTests

RecallTests


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S&-#S P*OOT$O'consists of various

incentives7 mostly short term7 intended

to stimulate 5uicker and0or greater

purchase of particular goods0services by

end8user consumers or value chain

organi9ations.

The strategy process is similar to the

design of advertising strategy.

S&-#S P*OOT$O'ST*&T#+/


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S&-#SP*OOT$O'

T&*+#TS

Consumer

Buyers Sales#eo#leBusiness

Buyers

+alue Chain

Sales Promotion &ctivitiesand Targets

0ctivities include trade shows, specialtyadvertising, contests, displays,

coupons, recognition programs, andfree samples#

'ypes of $ales )romotion


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%oney &oods $ervices

'arget market "irect (ndirect "irect (ndirect "irect (ndirect

onsumer "rice reduction

coupons

'ouchersmoneye(ui'alentcompetitions

+ree goodspremium offersfree gifts trade@in offers

Stamps

coupons'ouchersmoneye(ui'alentcompetitions

uarantees

groupparticipatione'ents speciale2hibitions anddisplays

co@operati'e

ad'ertisingstamps coupons'ouchers forser'ices

$rade

!ealer loadersloyaltyschemesincenti'es

12tended

credit !elayedin'oicing saleor returncoupons'ouchersmoneye(ui'alent

+ree gifts $rialoffers $rade@inoffers

uaranteesgroupparticipatione'ents +reeser'ices


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Sales uota

Using quotas is to control the sales efforts


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3hat are Sales 4uotas5

Sales /uotas are sales goals ortargets set by a company for its

marketing 6 sales units for a time period !arketing 6 sales units are regions,

branches, territories, salespeople, andintermediaries

'enerally, company sales budget isbroken down to sales /uotas for variousmarketing units


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7b)ectives of Sales 4uotas

o use /uotas as performancestandards or performance goals

o control performance

o motivate people by linking/uotas to compensation plans

o identify strengths andweaknesses of the company


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Types of :uotas

7rgani8ations set many types ofsales /uotas$

*9+ sales volume,

*:+ "nancial,

*;+ activity,

*


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Sales volume /uotas

(or e.ective control, sales volume/uota should be set for the smallestmarketing units, such as salesperson,districts 6 branches, product items 6

brands

Sales volume /uotas can be stated in *a+

rupees 6 dollars, *b+ units, or *c+ points %upees 6 dollars sales volume /uotas

are appropriate when salespeople arere/uired to sell many products


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&nit sales volume /uotas are suitable when Salespeople are selling a few products

Prices of the product 2uctuate rapidly

Price of each product 6 service is high

Point sales volume /uotas are appropriatewhen the company wants salespeople to

sell products that contribute more topro"ts


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1inancial :uotas

'ross-margin 6 =et-pro"t /uotas

alculate gross margin by subtracting >cost ofgoods sold? *i#e# cost of manufacturing+ from salesvolume# Sales managers are not responsible for cost

of manufacturing@ =et pro"t /uotas are generally accepted by sales

mangers as it is calculated by subtracting directselling expenses from the gross margin

Axpense /uotas

In many companies, expense /uotas are stated asa percentage of sales

Axpense /uotas to be administered with 2exibility,to make salespeople cost conscious, allowing

reasonable expenses


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&ctivity :uotas

hese are set when salespeople performboth selling and non-selling activities

7b)ective is to direct salespeople tocarry out important activities

(or e.ective implementation, activity/uotas are combined with sales volume

and "nancial /uotas A#g# alling on high potential customers,

payment collection from defaultingcustomers


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Combination :uotas

&sed when companies want tocontrol Salesforce performance on

key selling and non-sellingactivities

(ocus on a few types of /uotas, to

avoid confusing salespeople#


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0n 12ample


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Type of:uota

:uota &ctual Percent:uota

Weight;$mportance7>>>

7=>7>>>

@> A >

*eceivabl

es ;days D@ ED

'e4Customers ;'os >= E= E E=

Total F =A


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otal point scoreCDE;6FCGD#D for asalesperson

ypically use >points? as a common measure toresolve the problem of di.erent measures used byvarious types of /uotas


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ethods for SettingSales :uotas

Several methods are used for establishing sales/uotas

In practice, companies use more than one of

the following methods to increase theircon"dence in sales /uotas

otal market estimates

erritory potential

Past sales experience

Axecutive )udgment

Salespeople?s estimates

ompensation plan

Total arket #stimates


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Total arket #stimatesethod

he Process followed by established companiesis as under$

9+ Astimate next year?s total market demand,or industry sales forecast, using sales

forecasting methods:+ ecide the company?s estimated market

share for next year

;+ ompany?s next year sales forecastC *9+ x*:+


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Territory Potential ethod

@ 9+ Astimate next year?s industry sales forecastor market potential, using sales forecastingmethods

@ :+ Astimate multiple factor index *!(I+ for

each territory, based on factors that in2uencesales of the product# hese factors are givenweights corresponding to the degree of salesopportunity#

@ ;+ Industry sales forecast in a territory *orterritory market potentialC*9+x*:+

@


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Past Sales #6perienceethod

he process consists of taking past one year?ssales *or an average of previous ; to Dyear?s sales+, adding an arbitrarypercentage *or a percentage by which the

market is expected to grow+, and thussetting each territory sales /uota

he assumption that future sales arerelated to past sales may not be alwayscorrect

his method should not be the onlymethod used

Past sales should be one of the factorsused for deciding sales /uotas


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#6ecutive "udgment ethod

Senior executives use their)udgment when the product,territories, and the company are newor very little market information is

available

Axecutives predict company salesbudgets and also territory sales

/uotas his method should generally be

used along with other methods

SalespeopleGs #stimate


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Salespeople s #stimateethod

Some "rms ask their salespeopleto set their own /uotas

!any salespersons either set veryhigh or too low sales /uotas

(or setting proper /uotas, manysales managers use : or ; of above

methods, discuss with salespersonsto get their inputs, and decide sales/uotas


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Compensation Plan ethod

Some organi8ations set /uotas to "twith their sales compensation plan

A#'# 0 company wants to pay amonthly salary of %s DHHH, and a

commission of ; on monthly salesabove %s 9,HH,HHH# he /uota of %s9,HH,HHH is set in such a way thatsalesperson would "nd it very diJcult to

cross total compensation of %s KHHH permonth *DHHHL;HHH+

Sales /uotas should not be basedonly on this method, because it would

Mput the cart before the horseN


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1ave 2exibility in administering /uotas

hange /uotas in cases of ma)or changesin market demand or company strategies

&se monthly or /uarterly /uotas forincentives and annual /uotas forperformance evaluation

Select a few /uotas that have

relationships with marketing environmentand sales situations

@


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Develo#ing .uotas

Factors to Consider

Com#any and de#artment o0ectives

Customer mi,

(ndividual sales#ersons ca#ailityDiversity o" #roduct line and mi,

desirale

(m#ortance o" service and "ollo1 u#&nvironmental "actors


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Ten Most (m#ortant &lements in

!ssigning 2uotas

34 Business concentration in the territory

54 *eogra#hic Size o" territory

64 Business gro1th in the territory

74 Sales manager8s commitment to hel#

94 Com#le,ity o" #roduct

:4 Sales#erson8s #ast #er"ormance

;4 &,tent o" the #roduct line4 Clerical su##ort given sales#eo#le

sales budget new

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