session 2 sales planning & strategy

8/13/2019 Session 2 Sales Planning & Strategy

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Sales PlanningForecasting Sales and Developing Budgets

Deciding on Size of Sales Force

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Market Potential and Sales Potential (II)

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Sales potential The maximum share (orpercentage) of market potentialthat an individual firm can

reasonably expect to achieve

Companys sales potential specific the product, market,and time period


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Market Potential and Sales Potential (III)

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Sales forecast An estimate of sales (in dollars)that an individual firm expects toachieve during a specifiedforthcoming time period, in astated market, under a proposedmarketing plan

Less than the sales potential for manydifferent reasons

Ex. 4ps < quality, financial problem


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Estimating Market Potential and SalesPotential (I)

1. Market-factor Derivation Market factor

An item or element in a market that causes the demandfor a product or service or

Related to the demand

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Ex. Ahmedabads population annual as a market factor

underlying the demand for shoes. This element is related tothe number of shoes that manufacturer can sell


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Estimating Market Potential and Sales Potential (II)

Ex. Ahmedabads population annual as a market factorunderlying the demand for shoes. This element is related tothe number of shoes that manufacturer can sell. The sales

potential for shoes as follows:Estimate number of Ahmedabads pop = 4,000,000

Times: percent who buy shoes = x 0.70 (70%)

Market potential 2,800,000 Times: Potential market share = x 0.30 (30%)

Sales potential 840,000

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Market-factor Derivation


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Estimating Market Potential and Sales Potential (III)

2. Surveys of Buyer Intention for determiningpotential Consists of contacting potential customer and

questioning them about whether or not theywould purchase the product or service at the priceasked.

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Ex. The manufacturer established that it would be satisfied ifit sold 50,000 leather shoes pairs per year. Since the cost ofthe pair would be higher than that of plastic pair. Themanufacturer want to know 2 things. First, how many peoplewould buy product at retail price Rs.200? Second, What didcustomers think the price of such a product should be?


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Estimating Market Potential and Sales Potential (IV)

Survey through personal interviews with 240 Ahd popn.

170 of 240 (approximately 71%) were interested in product. They indicated that price should be Rs.130 to capture that size

of market The average (mean) price quoted (Rs.145) would eliminatehalf of respondents who showed interest in the product.

Still 10 people (4% of market) said they would be interested in

purchasing the product at retail price Rs.200 Survey showed 1/3 of AHD popn purchase shoes

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Estimating Market Potential and Sales Potential (V)

Estimate number of Ahmedabads pop = 4,000,000

Times: percent who buy shoes = x 0.70 (70%)

Market potential 2,800,000

Times: taking 4% of the result = x 0.04 (4%)

Market potential for Rs.200 leather sandal = 52,800 pairs

>50,000 = o.kYes - based on information obtain directly from peopleNo cost & time

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Sales Forecasting

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Survey methods: Executive opinion

Sales force composite

Buyers intentions

Mathematical methods Moving average modelExponential smoothingmodels

Regression models

Operational method Must -do calculations Capacity-based calculations


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Source of sales forecast data

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Executives & managers -Executive opinion

-Sales force composite

Customers Survey of buyer intention

Historical data -Moving average models

-Exponential smoothing

-Regression analysis

Company operation -Must -do approach

-Capacity-based approached

-Test market


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Moving average method

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Forecast sales Month Actual sales Total sales (3 months)

1 120 - -

2 130 - -

3 110 360 120.00

4 140 380 126.67

5 110 360 120.006 130 380 126.67


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Exponential Smoothing Models

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Forecast sales Month Actual sales Total sales (month/s)

1 x 120 = 120 -

2 x 130 = 260 -

3 (6) x 110 = 330 710

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Regression Analysis(sales trends into the future)

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5 10

15 20

25 30

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Sales

(millions )

2001 02 03

04 05 10

07

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2010 forecast, 10 yrsbase


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Must -Do Forecasts

Reasonable forecast is the sales that must beachieved for the firms to reach its break-evenpoint.

Ex. One new service enterprise budgeted itstotal overhead costs at Rs.165,000 for the firstyear. The entrepreneur desired a profit ofRs.60,000, which would represent her salary.Thus, she projected sales at Rs.225,000 for theyear and proceeded to plan on that basis

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Capacity-Based Forecasts

Ex. Restaurant 10 tables, each table for 4people, only lunch 30 /food with drink, open

everyday So 10x4 = 40 seat 40x30x365 = 438,000

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Review the forecasting process (Method)

Use more than one method Select the right method

Short period Moving average models Exponential smoothing models

Long period

Regression models

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Sales Force Size Determination

For Long Run Success


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Introduction

How can one determine if sales force is sizedcorrectly?

Two sections Some Observations Approaches for deciding on size


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Some Observations For Sales

Force Size


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Sales Force Effort Drives Sales

Relationship Between Territory-Level Call Effort & Sales

Terri level sales expected to be non zero when sales effort is removedWhere do these sales comes from?


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Carryover exists


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Some Insights (cont.)

Sales Force Reduction should not be usedto justify Productivity enhancement Productivity enhancement (time

management, automation, targeting) mayresult in reducing cost of a call

Previously unprofitable accounts ceases to be

unprofitable


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Sales Force size decision affects companyprofitability


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Phased Growth is rarely optimal

Sales & Profit Consequences of Three year sales force scale up strategies


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Gradual downsizing seldom works The sales force is a resource allocator

Which Industry? What volume segment? What profitability segment? New or old account?


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Some Insights (cont.) Resource deployment to customer segments,products and selling activities can be more

important than resource investment

Sales Response to sales effort: Five products comparison

Cos with high-volume, highly differentiated products should call on large set of customers


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When launching new products, launchhard, but protect your strengths How do I protect my strengths?

Company politics can encourageundersized sales force Will I disclose the true potential?


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How To Size Your Sales Force ToSuccess?

Assess Current Size Determine New Size

Implement New Size


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Assess The Current Size Of Your Sales Force Customer Tests

Sales person is not available to meet my needs

I cant reach my salesperson when I need him


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Assess The Current Size Of Your Sales Force Sales Force Morale Test

What would good salesperson say about their job? I barely have time to take orders, let alone determine how

customers needs might be changing or provide solutions tothese needs


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Assess The Current Size Of Your Sales Force Selling Activities

How do sales people spend their time? Sales people struggle just to keep up with basic tasks like

order taking


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Assess The Current Size Of Your Sales Force Competitive Position Test

Compare size with competitor

Mkt share depends on share of voice with customers


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Assess The Current Size Of Your Sales Force Financial Test

Estimate the annual cost of a salesperson Estimate the gross contribution margin rate

Calculate breakeven sales Estimate the incremental sales for one more salesperson in a

year Divide incremental annual sales per additional salesperson

by breakeven sales to get the breakeven ratio

Estimate the carryover rate (% of this years sales that will bemaintained next year without any sales force effort nextyear)

Assess state of current sales force size


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How To Size Your Sales Force ToSuccess? (Example)


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Implications Of The Incremental Sales Per AdditionalSalesperson/Breakeven Sales Ratio And Carryover For

Sales Force Size

ROI < 50% LargeROI 50 to 150% RightROI >150% small


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Assess Current Size Determine New Size

Implement New Size


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Market Based Approach For SalesForce Size

Understand and segment customers Determine sales force size

Activity based method Pipeline method Target return per call method Sales response method


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Market Based Methods


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Market Based Methods


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Assess Current Size Determine New Size Implement New Size


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Implement The New Size

Growing the size Challenges

Resistance of the sales force

Establishing process for assimilating new sales people

Downsizing A Sales Force Attrition management

Multiple waves affects morale Canadian company selling mature product line, Plan downsize less painful


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Thanks!

session 2 sales planning & strategy

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