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transcript
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
09
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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Some Insights (cont.)
Sales Force size decision affects companyprofitability
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Some Insights (cont.)
Phased Growth is rarely optimal
Sales & Profit Consequences of Three year sales force scale up strategies
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Some Insights (cont.)
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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Some Insights (cont.)
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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How To Size Your Sales Force ToSuccess?
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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How To Size Your Sales Force ToSuccess?
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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How To Size Your Sales Force ToSuccess?
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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How To Size Your Sales Force ToSuccess?
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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How To Size Your Sales Force ToSuccess?
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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How To Size Your Sales Force ToSuccess?
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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How To Size Your Sales Force ToSuccess?
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!