Sales Management

Module 2
Dr.R.Satish Kumar,
Professor, CMS Business School,
Bangalore.
Module 2: Planning the Sales Team Efforts
09 Hours
Market-driven sales organisations; forecasting market demand and sales budgets; Sales
Force Management.
Learning Outcomes: Understand the importance of sales leadership to manage the sales
team effectively
 LEARNING OBJECTIVES
The process of forecasting helps an organization make decisions; it
is necessary for determining information about future markets.
This session should help you understand:

❑ The importance of forecasting in a firm’s marketing decision

support system.
❑ The uses and different categories of sales forecasts.
❑ The two forecasting methods – survey and mathematical – and
their different uses.
❑ That the responsibility for approving the final forecast rests at
the top management level.
❑ The Various types of Sales Organisation Straucture
 FORECASTING MARKET DEMAND

A marketing decision support system (MDSS) is an

ongoing, future-oriented structure designed to generate,
process, store, and later retrieve information to aid
decision making in an organization’s marketing program.
It involves problem-solving technology composed of
people, knowledge, software, and hardware “wired” into
the sales management process.
 USES OF SALES FORECASTS

A sales forecast is the estimated rupee or unit sales for a

specific future time period based on a proposed
marketing plan and an assumed market environment.
A sales forecast is important for at least five reasons:
1. A sales forecast becomes a basis for setting and
maintaining a production schedule – manufacturing.
2. It determines the quantity and timing of needs for labor,
equipment, tools, parts, and raw materials – purchasing,
personnel.
3. It influences the amount of borrowed capital needed to
finance the production and the necessary cash flow to
operate the business – controller.
4. It provides a basis for sales quota assignments to various
segments of the sales force – sales management.
5. It is the overall base that determines the company’s
business and marketing plans, which are further broken
down into specific goals – marketing officer.
FIGURE 5.1 PLANNING/FORECASTING/BUDGETING SEQUENCE
 THE FORECASTING PROCESS

The forecasting process refers to a series of

procedures used to forecast.
A market factor is an item or element that
(1) exists in a market, (2) may be measured
quantitatively, and (3) is related to the
demand for a product or service.

A market index is simply a market factor

expressed as a percentage relative to some
base figure.
FIGURE 5.2 THE FORECASTING PROCESS
FIGURE 5.3 BASIC STEPS IN BREAKDOWN METHOD OF FORECASTING SALES
Industry sales forecast, or market
potential, is the estimated sales for all
sellers.
Company sales potential is the maximum
estimated or potential sales the company
may reach in a defined time period under
given conditions.

The company’s share of the estimated

sales for an entire industry is referred to as
market share.
 SALES FORECASTING METHODS

Two categories of sales forecasting methods exist:

• Survey methods are qualitative and include

executive opinion, sales force composite, and
customer’s intention surveys.
• Mathematical methods are test markets,
market factors, naïve models, trend analysis,
and correlation analysis.
FIGURE 5.4 THE MORE POPULAR OF MANY FORECASTING METHODS
SURVEY FORECASTING METHODS

Four basic survey methods are

• Executive Opinion
• Sales Force Composite
• User’s Expectations
• Build-to-Order
Executive Opinion

Executive forecasting is done in two ways:

1. By one seasoned individual (usually

in a small company).
2. By a group of individuals, sometimes
called a “jury of executive opinion.”
The group approach uses two methods:

1. Key executives submit the independent

estimates without discussion, and these
are averaged into one forecast by the chief
executive.
2. The group meets, each person presents
separate estimates, differences are
resolved, and a consensus is reached.
Delphi Method

Administering a series of questionnaires

to panels of experts.
Sales Force Composite

Obtaining the opinions of sales

personnel concerning future sales.
User’s Expectations

Consumer and industrial companies

often poll their actual or potential
customers.
Build-to-Order

Companies build final products only after

firm orders are placed.
MATHEMATICAL FORECASTING
METHODS

Test markets are a popular method of

measuring consumer acceptance of new
products.
Time Series Projections

Time series methods use chronologically

ordered raw data.
Classical approach to time series analysis:

• The trend component.

• The seasonal component.
• The cyclical component.
• The erratic component.
Naïve Method

This Year’s Sales

Last Year’s Sales
Next Year’s Sales = This Year’s Sales X
Moving Average

Moving averages are used to allow for

marketplace factors changing at different
rates and at different times.
TABLE 5.1 EXAMPLE OF MOVING-AVERAGE FORECAST

SALES SALES FOR THREE-YEAR

PERIOD VOLUME THREE-YEAR PERIOD MOVING AVERAGE
1 200
2 250
3 300 750
4 350 900 300
5 450 1100 ( 3) = 366.6
6 ?
Period 6 Forecast = 366.6
Exponential Smoothing

Exponential smoothing is similar to the

moving-average forecasting method. It allows
consideration of all past data, but less weight is
placed on data as it ages.

Next Year’s Sales = a (This Year’s Sales) + (1-a) (This Year’s Forecast)
Trend Projections – Least Squares

Eyeball fitting is simply a plot of the data

with a line drawn through them that the
forecaster feels most accurately fits the
linear trend of the data.
FIGURE 5.6 A TREND FORECAST OF SALES
Regression Analysis

Regression analysis is a statistical method used to

incorporate independent factors that are thought to
influence sales into the forecasting procedure.
FIGURE 5.7 REGRESSION ANALYSIS
FIGURE 5.8 QUESTIONS TO ANSWER TO IMPROVE CHANCES OF HITTING THE FORECASTING
BULL’S-EYE
 TABLE 5.2 GUIDE TO FORECASTING

FORCASTING MATHEMATICAL COMPUTER

METHOD TIME SPAN SOPHISTICATION NEED ACCURACY
Executive Opinion Short to medium Minimal Not essential Limited

Delphi Method Medium to long Minimal Not essential Limited; good in dynamic
conditions
Sales Force Composite Short to medium Minimal Not essential Accurate under dynamic conditions

User’s Expectations Short to medium Minimal Not essential Limited

Test Markets Medium Needed Needed Accurate

Naïve Method Present to medium Minimal Not essential Limited

Moving Average Short to long Minimal Helpful Accurate under stable conditions

Exponential Smoothing Short to medium Minimal Helpful Accurate under stable conditions

Least Squares Short to long Needed Desirable Varies widely

Regression Analysis Short to Medium Needed Essential Accurate if variable relationships

stable
 THE SALES MANGAGER’S BUDGET

The sales force budget is the amount of money

available or assigned for a definite period, usually one
year.
 SALES ORGANIZATIONAL DESIGN

Organizational design refers to the formal,

coordinated process of communication,
authority, and responsibility for sales groups and
individuals.
PURPOSES AND IMPORTANCE OF JOB
DESIGN

• Content
• Qualifications required to perform
• Returns and rewards for performance
 SALES ORGANIZATIONAL STRUCTURE

Organizational structure is the relatively

fixed, formally defined relationship
among jobs within the firm.
THE LINE ORGANIZATION
In the pure line organization, the chief
executive – usually the president – does
the decision making for the firm. The
president has complete authority.
FIGURE 4.2 COMPUTE CORPORATION’S LINE ORGANIZATION
SPECIALISED DESIGN

Functional organisational design is the

grouping of work according to its
characteristics.
FIGURE 4.3 ALARM SYSTEM CORPORATION’S FUNCTIONAL ORGANIZATIONAL DESIGN
Staff Positions with Line Authority

Line authority means that people in management

positions have formal authority to direct and
control immediate subordinates.
Staff authority is narrower and includes the right
to advise, recommend, and counsel in the staff
specialists’ areas of expertise.
Geographic Specialization

Many large corporations are organized by

geographic territory. This type of organization is
generally used by companies with more than
strictly local distribution of their products.
FIGURE 4.4 TEXTRON CHEMICAL CORPORATION GEOGRAPIC SPECIALIZATION
Product Specialisation

Another common type of organisation in large

companies is based on the firm’s product. The
entire company may be organised by product,
with separate sales, advertising, marketing, and
so on, along with staffs for each, or some
functional units may remain centralized.
Customer Specialization

Companies with several separate and distinct

markets accounting for major portions of their
sales often organize based on these markets or
customers.
Combination of Design Elements

Many companies organise on the basis of some

combination of functional, geographic, product,
or customer design.
FIGURE 4.5 MULTIPLE DESIGN FACTORS
ORGANIZING FOR SELLING TO MAJOR
CUSTOMERS

Companies use four basic organisational

methods.
1. A separate division to deal with major
accounts.
2. Select members of the current sales
force.
3. Sales managers.
4. A combination of 1, 2, and 3.
 NEW FORMS OF ORGANIZATIONS
STRATEGIC ALLIANCES

A strategic alliance is a formal relationship created with

the purpose of joint pursuit of mutual goals.
FIGURE 4.6 CROSS-FUNCTIONAL SELLING TEAM
TEAM-BASED ORGANISATIONS

Many organisations are more responsive to their

environment because they use work teams as
their basic building blocks.
 COORDINATION AND TECHNOLOGY

Coordination refers to the quality of

collaboration across groups.
INTERNATIONAL COORDINATION

The most important methods for achieving

coordination are information systems, task forces
and teams, and integrating managers.
 SUMMARY

Because of the growing trend in business to centralize data

collections, the job of forecasting has become an integral part of
a firm’s marketing decision support system (MDSS).
A sales forecast is the estimated dollar or unit sales for a specific
future period based on a proposed marketing plan and an
assumed market environment.
Firms know sales forecasting is never 100 percent correct.
Two categories of sales forecasting methods are survey methods
and mathematical methods.
Because the sales forecast has a major impact on the company,
the top executives give final approval.
To create a sales forecast, sales managers should know how to
 SUMMARY

Markets, job types, and job activities influence the design

of the various sales jobs and, consequently, even the
structure of the sales organization.
Sales activities are very diverse and easier to understand
if classified in one of seven categories.
A salesperson’s job activities involve much more than
person-to-person selling.
Companies can structure their organisations in numerous
ways.
 SUMMARY
Skilled sales managers are the key to a successful organization.
Sales managers have five functions that, when combined, can
allow them to achieve the goals desired by higher levels of
management.
The various types of sales managers can be broken down into the
categories of vertical and horizontal.
Most corporations hire a person who cannot only sell but who
also shows the potential to one day become a sales manager.