Chapter 5

Pataasin ang iyong marka sa homework at exams ngayon gamit ang Quizwiz!

Breakdown Method

(N)umber of sales personnel needed= Forecasted (S)ales volume/Estimated (P)roductivity of each salesperson

user expectations

method of forecasting sales is also known as the buyers' intentions method because it relies on answers from customers regarding their expected consumption or purchases of the product.

Decomposition

method of sales forecasting is typically applied to monthly or quarterly data where a seasonal pattern is evident and the manager wishes to forecast sales not only for the year but also for each period in the year. • The trend reflects the long-run changes experienced in the series when the cyclical, seasonal, and irregular components are removed. It is typically assumed to be a straight line. • The cyclical factor is not always present because it reflects the waves in a series when the seasonal and irregular components are removed. These ups and downs typically occur over a long period, perhaps two to five years. Some products experience little cyclical fluctuation (canned peas), whereas others experience a great deal (housing starts). • Seasonality reflects the annual fluctuation in the series due to the natural seasons. The seasonal factor normally repeats itself each year, although the exact pattern of sales may be different from year to year. • The random factor is what is left after the influence of the trend, cyclical, and seasonal factors is removed.

The sales forecast is one of the most important pieces of data used by management and lies at the heart of most companies' planning efforts.

true

When Jeffrey stated that the number of pounds of sugar to be used by food service providers in the Houston metropolitan area in 2001 was 1,000,000 pounds, he was referring to market potential.

true

breakdown method

An average salesperson is treated as a salesperson unit, and each salesperson unit is assumed to possess the same productivity potential. To determine the size of the sales force needed, divide total forecast sales for the company by the sales likely to be produced by each individual.it fails to account for differences in (1) ability levels of salespeople, (2) potential in the markets they service, and (3) level of competition across sales territories

Many firms consider test marketing to be the ultimate measure of market potential for their products.

true

Scenario planning involves asking those preparing a forecast a series of "what-if" questions.

true

The Delphi technique for sales forecasting eliminates the influence of group dynamics on the final decision.

true

The jury of executive opinion method of developing sales forecasts may be done either formally or informally.

true

sales territory design process

1. select basic control unit 2. estimate market potential in each control unit 3.combine control units into tentative territories 4.perform workload analysis 5.adjust tentative territories to allow for sales potential and coverage difficulty differences 6.assign salespeople to territories

Delphi technique

Delphi uses an iterative approach with repeated measurement and controlled anonymous feedback, instead of direct confrontation and debate among the experts preparing the forecast

account analysis

First, the sales potential for each customer and prospect in the territory is estimated

process of setting a sales quota

In setting quotas, the sales manager must first decide on the types of quotas the firm will use. Then, specific quota levels must be established. Next, the sales manager must decide the level for each type of quota.

Sales Process and Quota Attainment

Level 1 Ad Hoc: No clearly defined process and approximately half of sales staff are not attaining quota. Large variation in performance levels. Level 2 Tribal: Limited process used by certain "tribes" within the company. Still only 50% of staff attaining quota but less variation between best and worst performers. Level 3 Religion: Everyone is using the process but not to its full capability. More salespeople making the quota than not making it. Level 4 Dynamic World-Class: Fully utilizing people, processes, and technology. Low variation in performance levels of salespeople with very few not attaining quota.

scenario planning

Scenario planning involves asking those preparing the forecast a series of "what-if" questions, where the what-ifs reflect different environmental changes that could occur.

enterprise resource planning

Software that links processes such as bid estimation, order entry, shipping, billing systems, and other work processes

Sales Forecasting Methods

Subjective and Objective

methods by which sales managers develop sales forecasts

Subjective forecasting methods: user expectations, sales force composite, jury of executive opinion, Delphi technique Objective forecasting methods: market test, time-series analysis, moving average, Exponential smoothing, Decomposition, Statistical demand analysis

moving average

Such a forecast might be subject to large error if there is much fluctuation in sales from one year to the next. To allow for such randomness, we might consider using some kind of average of recent values.

80:20 principle

This means it is not at all unusual to find 80 percent of the customers or products accounting for only 20 percent of total sales

key approaches to determining sales force size

Three of the more popular are the (1) breakdown, (2) workload, and (3) incremental methods.

Workload Method

Total # salespeople required= Total # hours required to service market/# Hours available to each salesperson

SUMMARY

We have seen in the chapter that sales managers perform a vital role in the process of both using and generating information. The sales forecasts, quotas, territories, and sales analyses developed under the leadership of sales managers touch most every operational aspect of a firm. Aspects of organizational success at many levels are affected by the proficiency of sales managers in performing these information management roles. From the profitability brought by strategic marketing plans when a forecast proves accurate, to the satisfaction of a customer when a sales territory design allows for proper coverage, to the rewards afforded a salesperson for quota attainment—all these outcomes reflect on the sales manager's capability to effectively use information in the job. Because of this impact, sales managers have a vested interest in becoming as proficient as possible in the information management aspect of their job as described in this chapter. The greater their mastery of these important facets of the position, the greater will be not only their own professional success but also the success of the firm and its salespeople.

time-series analysis

analysis of historical data to develop a prediction for the future

sales quota

are sales goals assigned to a marketing unit for use in managing sales efforts. quotas provide specific goals to work toward that are tailored to his or her sales territory.

Activity quotas

attempt to recognize the investment nature of a salesperson's efforts

Statistical demand analysis

attempts to determine the relationship between sales and the important factors affecting sales to forecast the future. Typically, regression analysis is used to estimate the relationship.

Subjective forecasting methods

do not rely primarily on sophisticated quantitative (empirical) analytical approaches in developing the forecast.

The decomposition method of sales forecasting would be more likely used by a manufacturer of bricks than a manufacturer of wood burning stoves.

false

The terms sales potential and sales forecast are correctly used as synonyms of each other.

false

When Robin stated that her company can reasonably expect to sell 5,000 blades to Pacific Northwest lumber mills that have a market potential of 22,000 blades for the next three years, she was setting a sales quota for her company's marketing department.

false

Financial quotas

help focus salespeople on the cost and profit implications of what they sell

isolate and explode

in which the most significant discrepancies between actual and standard are identified, or isolated, and then examined in detail, or exploded.

market test

involves placing a product in several representative geographic areas to see how well it performs and then projecting that experience to the market as a whole. Despite this fact, market tests have several drawbacks: • costly • The time • unrealistic picture of the product's potential. • allowing competitors time to formulate a market response before full market introduction.

jury of executive opinion

is a formal or informal internal poll of key executives within the selling company in order to gain their assessment of sales possibilities

sales forecast

is an estimate of the dollar or unit sales for a specified future period. The forecast may be for a specified item of merchandise or for an entire line. It may be for a market as a whole or for any portion of it. Importantly, a sales forecast specifies the commodity, customer group, geographic area, and time period and includes a specific marketing plan and accompanying marketing program as essential elements. If the proposed plan is changed, predicted sales are also expected to change. Naturally, forecast sales are typically less than the company's sales potential for a number of reasons. The firm may not have sufficient production capacity to realize its full potential, or its distribution network may not be sufficiently developed, or its financial resources may be limited. Likewise, forecast sales for an industry are typically less than the industry's market potential. the forecast allows for the development of estimates of demand for individual sales territories and subsequently for the establishment of specific sales quotas by territory and by salesperson.

market potential

is an estimate of the possible sales of a commodity, a group of commodities, or a service for an entire industry in a market during a stated period under ideal conditions. A market is a customer group in a specific geographic area.

sales force composite

is so named because the initial input is the opinion of each member of the field sales staff. Each person states how much he or she expects to sell during the forecast period. Subsequently, these estimates are typically adjusted at various levels of sales management.

workload method

is that all sales personnel should shoulder an equal amount of work. 1. Classify all the firm's customers into categories. 2. Determine the frequency with which each type of account should be called upon and the desired length of each call. 3. Calculate the workload involved in covering the entire market. 4. Determine the time available per salesperson. 5. Apportion the salesperson's time by task performed. 6. Calculate the number of salespeople needed.

incremental method

is that sales representatives should be added as long as the incremental profit produced by their addition exceeds the incremental costs.

Objective methods

market test, time-series analysis, moving averages, exponential smoothing, decomposition, statistical demand analysis

sales potential

refers to the portion of the market potential that a particular firm can reasonably expect to achieve. Market potential represents the maximum possible sales for all sellers of the good or service under ideal conditions, while sales potential reflects the maximum possible sales for an individual firm.

Sales force deployment

refers to the three interrelated decisions of (1) sales force size or the number of territories, (2) design of the individual territories, and (3) allocation of the total selling effort to accounts.

Objective forecasting methods

rely primarily on more sophisticated quantitative (empirical) analytical approaches in developing the forecast.

importance of sales analysis for managerial decision making

sales analysis represents another heavy use of information in that it involves gathering, classifying, comparing, and studying company sales data

sales analysis

sales analysis represents another heavy use of information in that it involves gathering, classifying, comparing, and studying company sales data

iceberg principle

so named because only about 10 percent of an iceberg's mass is above the water level (analogous to the symptoms of a problem). The other 90 percent of the berg is below the surface (analogous to the real problem), and not always directly below the tip either. The submerged portion can be very dangerous to ships. So it is with much sales, marketing, and business data. Real problems are often obscured by visible symptoms.

sales volume quotas

those that emphasize dollar sales or some other aspect of sales volume

types of quotas used in sales management

three basic types of quotas: (1) those emphasizing sales or some aspect of sales volume, (2) those that focus on the activities in which sales representatives are supposed to engage, and (3) those that examine financial criteria such as gross margin or contribution to overhead. Sales volume quotas are the most popular.

Buying Power Index (BPI)

to determine each region's market potential and has then multiplied these potentials by the company's expected market share to generate the regional quotas

In terms of sales forecasting, exponential smoothing is a type of moving average.

true

Exponential smoothing

type of moving average. However, instead of weighting all observations equally in generating the forecast, exponential smoothing weights the most recent observations heaviest, for good reason.smoothing constant

Subjective methods

user expectations, sales force composite, jury of executive opinion, delphi technique

Incremental Method

•Add salespeople until incremental profit produced equals incremental cost •Decreasing returns associated with addition of salespeople

Determining Sales Force Size

•Breakdown method •Workload method •Incremental method

Effects of Territory Estimates

•Design of sales territories •Procedures for identifying potential customers •Establishment of sales quotas •Compensation and subcomponents •Evaluation of salesperson performance

Evaluation Systems

•Determine how analysis will be conducted -Simple -Comparative •Basis for comparison? •Reporting and control system?

Financial

•Direct salespeople to more profitable products and customers •Common bases -Gross margin -Net profit -Selling expenses •Calculation not straightforward •Profit produced affected by factors beyond a salesperson's control •examine financial criteria such as gross margin or contribution to overhead

Sales Analysis

•Gathering, classifying, comparing, studying company sales data •Highlights sales concentration in products, customers, orders, territories •80:20 principle •Decisions -Evaluation system -Sources of information -Information aggregation type

Sales Quotas

•Goals assigned to salespeople •Apply to specific periods •Tool for planning and controlling field selling activities and results •Benchmark for evaluating sales effectiveness •Motivate sales people •Provide incentives for sales representatives •Provide measures to evaluate salespeople's' performance Process •Identify types of quotas to be used •Select level of each type of quota •Attainable •Easy to understand •Complete •Timely

Market Opportunity Analysis

•Market potential - estimate of possible sales for an entire industry in a market during a stated period under ideal conditions •Sales potential - portion of market potential the firm can expect to reasonably achieve •Sales forecast - estimate of dollar or unit sales for a specified future period •Sales quotas - sales goals assigned to a marketing unit to manage sales efforts

Sales volume

•Most popular •Often based on past sales •Related directly to market potential, thus credible and easily understood •May be expressed in dollars, physical units, or points •emphasize sales or some aspect of sales

Choosing a Forecasting Method

•No method remains superior under all conditions. •Apply multiple forecasting methods to a problem •Scenario planning prepares "what-if" questions and produces possible outcomes

Planning Tools

•North American Industry Classification System (NAICS) -Developed by US Bureau of the Census, -Organizes reporting of business information -Each US industry is assigned a two-digit number •Buying Power Index (BPI) -Published by Sales Marketing Management Magazine -Considers income, population and retail sales -Most useful with low-priced convenience goods

Information Aggregation Type

•Possible groupings -Region -Product -Customer -Market -Method of sale -Order size -Financial arrangement •Considerations -Company size -Product diversity -Sales area -Number of markets/customers -Management level/type to receive report •Hierarchical reports most effective

Activity

•Reflect territorial conditions •Require a detailed analysis of work required for effective territorial coverage •Customers influence activity quotas through: •Account and order size •Purchasing patterns •Support required for satisfaction •focus on certain sales activities •Calls on new accounts. •Letters to potential customers. •Proposals submitted. •Field demonstrations arranged. •Service calls made. •Equipment installations supervised. •Displays arranged. •Dealer sales meetings held. •Meetings and conventions attended. • Past-due accounts collected.

Sales Force Deployment Considerations

•Sales force size or number of territories •Design of individual territories •Allocation of total selling effort to accounts •Simultaneous decisions implemented through software

Information for Managers

•Sales forecasts •Territory estimates •Quotas •Sales force size •Sales territory design

Quota Types

•Sales volume - emphasize sales or some aspect of sales •Activity - focus on certain sales activities •Financial - examine financial criteria such as gross margin or contribution to overhead

Quota Level Considerations

•Territory available potential •Quota's impact on motivation •Long-term company objectives •Short-term profitability impact

IT in Perspective

•Tools enable rather than transform •Implement successful business processes •Support w/new technology

Decomposition

•applied to monthly or quarterly data where seasonal pattern is evident

Statistical demand analysis

•attempts to determine the relationship between sales and factors that influence sales

Moving average

•averages sales results over previous time periods to forecast

Sales forecast

•estimate of dollar or unit sales for a specified future period

Market potential

•estimate of possible sales for an entire industry in a market during a stated period under ideal conditions

Jury of executive opinion

•key experts' opinions

Delphi technique

•participants prepare estimates which are compared anonymously and iteratively to reach consensus

Market test

•places product in select areas

Sales potential

•portion of market potential the firm can expect to reasonably achieve

User expectations

•relies on buyers' expressed intention

Time series analysis

•relies on historical data to develop predictions

Sales force composite

•sales force opinions

Sales quotas

•sales goals assigned to a marketing unit to manage sales efforts

Exponential smoothing

•type of moving average where most recent years given more weight


Kaugnay na mga set ng pag-aaral

SYSTEMS OF LINEAR AND EXPONENTIAL EQUATIONS

View Set

NUR 212: Final Exam Study Questions

View Set

Science 7.2 Study Guide, îf gèt 100 yôùr â gód,

View Set

Newborn Skull - Sutures & Fontanelles

View Set

Chapter 22 Origins and Spread of Christianity

View Set

Chapter 54- Drugs Acting on the Upper Respiratory Tract

View Set

IBM 3012 CH 14, 15, 17,18 Study Guide

View Set

Olds Maternal-Newborn nursing ch 29

View Set