Ch.5 Sales Managment

Understandable Quotas

- Complex quotas can draw suspicions and cause mistrust among sales representatives. - Show salespeople exactly how quotas are derived

Decomposition

method of forecasting typically applied to monthly or quarterly data where a seasonal pattern is evident and the manager wished to forecast sales not only for the year but also for each period in the year; seasonal pattern is first determined and removes it impact to identity the trend. (1 of 3 Time Series Analyses)

Cyclical Factor

not always present b/c it reflects waves in a series; seasonal and random factors are removed; ups and downs occur over a long period of time, perhaps 2 to 5 years.

Territory Design Process

6 Stages STAGE 1: SELECT THE BASIC CONTROL UNIT STAGE 2: ESTIMATE MARKET POTENTIAL IN EACH BASIC CONTROL UNIT STAGE 3: FORM TENTATIVE TERRITORIES STAGE 4: PERFORM WORKLOAD ANALYSIS STAGE 5: ADJUST TENTATIVE TERRITORIES STAGE 6: ASSIGN SALESPEOPLE TO TERRITORIES

Exponential Smoothing

A type of moving average; a. Weights the most recent observations the heaviest, b/c recent observations contain the most info ration about what is likely to happen in the future. (1 of 3 Time Series Analyses)

Statistical Demand Analysis

Attempts to determine the relationship between sales and the important factors affecting sales to forecast the future. Advantages: objective, uncovers hidden factors affecting sales Disadvantages: factors must be accurately identified and must remain constant, sophisticated

Workload Method (Buildup Method)

Basic premise is that all sales personnel should shoulder an equal amount of work. Salespeople required = total # of hours required to service a marked/# of hours available to each sales person. (1 of 3 Methods to Determine Salesforce Size)

Account Analysis

2 Stages: - Sales potential for each customer and prospect in the territory is estimated (Account Analysis) - Sales potential estimate derived from the account analysis is then used to decide how often each account should be called on and for how long.

Sales Force Deployment

3 Interrelated Decisions to be made when determining sales force size: 1. Sales force size or the number of territories 2. Design of the individual territories 3. Allocation of the total selling effort to accounts

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.

Counties

Most commonly used basic control unit Advantages: Permits a more fine-tuned analysis of the market than do states or trading areas. Disadvantages: Some (x) are too large to use, which then have to be divided into smaller (x) or smaller Basic Control Units (Type of Basic Control Unit)

Timely Quotas

Quotas should be calculated and announced right away; delays may cause ambiguity and dilute the advantages of using quotas

Attainable Quotas

Should represent goals that can be achieved with normal or reasonable efforts. - Prevailing philosophy is that quotas should be realistic

Breakdown Method

Total Salesforce = Total forecast sales for company/sales likely to be produced by each individual - average salesperson is treated as a salesperson unit, and each salesperson unit is assumed to posses the same productivity potential. - the simplest (1 of 3 Methods to Determine Sales Force Size)

Zip Codes

Used by firms for which MSA boundaries are too large; Advantages: Often relatively homogenous w/respect to basic socioeconomic data; age, income, education, similar consumption patterns Disadvantages: boundaries change over time

Jury of Executive Opinion

a formal or informal internal poll of key executives within the selling company in order to gain their assessment of sales possibilities. - Separate assessments are combined into a sales forecast for the company; averaging of individual judgements or views are resolved through group discussions toward consensus. [Type of Subjective Forecasting Method (4)]

Regression Analysis

analysis used to help determine the relationship between sales and important factors; - Purpose is to identify those factors that have the most dramatic impact on sales and to then estimate the magnitude of that impact - Predictor variables are often historical indexes

Quotas

are goals assigned to salespeople. - help managers plan the amount of sales and profits that will be available at the end of the planning period and anticipate the activities of the sales team. - Often used to motivate sales people, thus must be reasonable

Activity Quotas

attempt to recognize the investment nature of a sales person's efforts. - Today, many ( ___ ) are necessary to support long-term client relationships. It is appropriate that these ( ____ ) be considered for quota development. - Common types of ( ___ ) quotas: (Calls on new accounts, letter s to potential customers, submitted proposals, field demonstrations, service calls made, equipment installations supervised, displays arranged, dealer sales meeting help, meetings and conventions attended, past due accounts collected) (1 of 3 Main Quota Types)

Incremental Method

basic premise is that sales representatives should be added as long as the incremental profit produced by their addition exceeds the incremental costs. (1 of 3 Methods Used to Determine Salesforce Size)

Smoothing Constant

between 0 and 1; high values give great weight to recent observations and little weight to distant sales; and vice versa. - low values used when sales change slowly. - high values used when sales experience rapid changes and fluctuations; used to increase response time

Subjective Forecasting

does not rely primarily on sophisticated quantitative analytical approached in developing the forecast.

Sales Force Composite

initial inputs is the opinion of each member of the field staff. Each person states how mow much he or she expects to sell during the forecast period. Advantage: fairly accurate, aids in directing and controlling the sales efforts Disadvantages: may be biased becaus of estimators vested interest [Type of Subjective Forecasting Method (4)]

Sales Volume Quotas

emphasize dollar sales or some other aspect of sales volume; often based of past sales; most popular. - are typically set to a level that is less than the sales potential in the territory and equal to or slightly above the sales forecast for the territory. - Related directly to market potential, and thereby be made more credible, are easily understood, and are consistent with what most sales people envisioned their jobs to be, that is to sell. - Can be expressed in dollars, physical units, or points. (1 of 3 Main Quota Types)

Financial Quotas

help focus sales people on the cost and profit implications of what they sell; attempt to direct the salespersons efforts to more profitable products and customers. - set to reflect the ( ___ ) goals of the firm Common Bases for ( ____ ) Quotas - Gross margin, net profit, and selling expenses

Metropolitan Statistical Areas (MSAs)

integrated economic and social units with a large population nucleus; developed by the U.S Census Bureau. Advantage: Heavy concentration of population, income, and retail sales. Disadvantage: greater heterogeneity (Type of Basic Control Unit)

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 (Used for a new product or an improved version of an old product) Advantage: provides ultimate test of consumers reactions to product Disadvantages: let's competition know what the firm is doing, invites competitive reaction, expensive, time consuming (1 of the 3 Main Objective Forecasting Methods)

Market

is a customer group in a specific geographic area

Sales Forecast

is an estimate of the dollar or unit sales for a specified future period

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.

Random Factor

is what is left after the influence of the trend, cyclical, and seasonal factors are removed.

Trading Areas

made of a principal city and the surrounding dependent area; Disadvantage: difficult to obtain data for this unit, which makes it expensive to use (Type of Basic Control Unit)

Sales Potential

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

Seasonality Factor

reflects the annual fluctuation in the series due to the natural seasons; factor normally repeats itself each year, although the exact pattern of sales may be different from year to year.

Trend Factor

reflects the long run changes experienced in the series when cyclical, seasonal, and random factors are removed. Assumed to be a straight line.

User Expectations

relies on answers from customers regarding their expected consumption on purchases of the products; useful for new product forecasting Advantages: forecasts estimates obtained directly from buyers,detailed information, insights aid in the planning of a marketing strategy Disadvantages: does not work well with consumer goods, expensive, time consuming, labor intensive [Type of Subjective Forecasting Method (4)]

Time Series Analysis

rely on the analysis of historical data to develop a prediction for the future; same forecast as previous period only used for a mature industry that is experiencing little growth or market turbulence; Advantages: utilizes historical data, objective, inexpensive Disadvantages: factors must be accurately assessed, technical skills and good judgment required (1 of 3 Main Objective Forecasting Methods; has 3 Sub Methods)

Objective Forecasting

rely primarily on more sophisticated quantitative (empirical) analytical approaches in developing the forecast. (3 Main Types x Forecasting Methods)

Complete Quotas

should cover the many criteria on which sales reps are judged; be specific

Moving Average

term is used b/c a new average is computed and used as a forecast as each new observation becomes available. (1 of 3 Time Series Analyses)

Basic Control Unit

the most elemental geographic area used to form sales territories (below); general rule, small geographic control units are preferable to large ones; w/large units, areas w/low potential may be hidden by their inclusion in areas w/high potential, primary reason for forming geographically designed sales territories; smaller units = more easy to adjust sales territories. - States, Trading Areas, Counties , MSAs, Zip Codes

Point Quotas

typically used when a firm wants to emphasize certain products in the line. - a certain number of points are given for each dollar or unit sale of particular products. - Can also be used to promote selective emphases. - Allow sales mangers to design quota systems that promote certain desired goals and is easily understood by the sales people.

Delphi Technique

uses an iterative approach w/repeated measurement and control of anonymous feedback, instead of direct confrontation and debate among the experts preparing the forecast. - Each individual involved prepares a forecast - Forecasts are then collected and an anonymous summary is prepared by the persona supervising the process - Summary is distributed to each individual participating; participants study the summary and submit a reviewed forecast - Several rounds until a consensus is reached or close enough number is agreed upon