Chapter 5 Sales Force Management

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Transcript of Chapter 5 Sales Force Management

Chapter 5

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The Strategic Role of Information in Sales Management

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Learning Objectives0011 0010 1010 1101 0001 0100 1011

Discuss the differences between market potential, sales potential, sales forecast, and sales quota. Understand the various methods by which sales managers develop sales forecasts. Outline the process of setting a sales quota. Explain the various types of quotas used in sales management. Discuss key approaches to determining sales force size. Describe the sales territory design process. Understand the importance of sales analysis for managerial decision making. Conduct a sales analysis. 2

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Key Terms0011 0010 1010 1101 0001 0100 1011

market potential sales potential sales forecast sales quotas subjective forecasting methods user expectations method sales force composite jury of executive opinion Delphi technique objective forecasting methods market test time-series analysis moving average exponential smoothing decomposition seasonality statistical demand analysis scenario planning

North American Industry Classification System (NAICS) sales volume quotas activity quotas financial quotas sales force deployment breakdown method workload method incremental method account analysis sales analysis 80:20 principle enterprise resource planning (ERP) Buying Power Index (BPI) iceberg principle isolate and explode

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Key Terms0011 0010 1010 1101 0001 0100 1011

Market potential (pg. 141) 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. Sales potential (pg. 141) The portion of the market potential that a particular firm can reasonably expect to achieve. Sales forecast (pg. 141) Estimate of the dollar or unit sales for a specified future period. Sales quotas (pg. 141) Sales goals assigned to a marketing unit for use in managing sales efforts. 4

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Key Terms0011 0010 1010 1101 0001 0100 1011

Subjective forecasting methods (pg. 143) Do not rely primarily on quantitative (empirical) analytical approaches in developing the forecast. User expectations method (pg. 143) Also known as the buyers intentions method because it relies on answers from customers regarding their expected consumption or purchases of the product. Sales force composite (pg. 143) Forecasting sales using the opinion of each member of the field sales staff. Jury of executive opinion (pg. 145) Formal or informal internal poll of key executives within the selling company in order to gain their assessment of sales possibilities. Delphi technique (pg. 145) Uses an iterative approach with repeated measurement and controlled anonymous feedback, instead of direct confrontation and debate among the experts preparing the forecast. 5

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Key Terms0011 00101010 1101 0001 0100 1011 Rely primarily on sophisticated quantitative (empirical) analytical approaches in

Objective forecasting methods (pg. 145)

developing forecasts. Market test (pg. 145) 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. Time-series analysis (pg. 146) Relies on the analysis of historical data to develop a prediction for the future, with the relationship between sales and time as the basis of the forecast for the future. Moving averages (pg. 146) Relies on the analysis of historical data to develop a prediction for the future, sometime using an average of several years. Exponential smoothing (pg. 146) Type of moving average, but instead of weighting all observation equally, exponential smoothing weights the most recent observations heaviest. Decomposition (pg. 148) 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. Seasonality (pg. 148) Change in demand based on seasons of the year. Statistical demand analysis (pg. 149) 6 Attempts to determine the relationship between sales and the important factors affecting sales to forecast the future.

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Key Terms0011 0010 1010 1101 0001 0100 1011

Scenario Planning (pg. 149) Involves asking those preparing the forecast a series of what-if questions, where the what-ifs reflect different environmental changes that could occur.

NAICS or North American Industrial Classification System (pg. 150) A system that has replaced the former system of Standard Industrial Classification (SIC) codes.

Sales volume quotas (pg. 152) Activity quotas (pg. 153)

These quotas emphasize dollar sales or some other aspect of sales volume.

Attempt to recognize the investment nature of a salespersons efforts in a letter to a prospect, the product demonstration, and the arrangement of a display that may not produce an immediate sale, but may influence a future sale.

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Key Terms0011 0010 1010 1101 0001 0100 1011

Financial quotas (pg. 153) Help salespeople to focus on the cost and profit implications of what they sell. Most commonly used financial measurements are gross margin, net profit, and selling expenses to determine profitability of product sales.

Sales force deployment (pg. 155)

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.

Breakdown method (pg. 155)

Sales force size is determined by the average salesperson treated as a salesperson unit, and each salesperson unit is assumed to possess the same productivity potential.

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Key Terms0011 0010 1010 1101 0001 0100 1011

Workload method (pg. 156) Sales force size is determined by assuming all sales personnel should shoulder an equal amount of work, and management estimates the work required to serve the entire market.

Incremental method (pg. 158)

Sales force size is determined by assuming sales representatives should be added as long as the incremental profit produced by their addition exceeds the incremental costs.

Account analysis (pg. 163) Sales analysis (pg. 166) 80:20 principle (pg. 166)

Sales potential for each customer and prospect is estimated for a proposed territory.

The gathering, classifying, comparing, and studying of company sales data. 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.

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Key Terms0011 0010 1010 1101 0001 0100 1011

Enterprise resource planning (ERP) (pg. 169) Software that links processes such as bid estimation, order entry, shipping, billing systems, and other work processes.

Buying Power Index (pg. 172) A percentage denoting regional sales potential.

Iceberg principle (pg. 176)

So named because only about 10 percent of an icebergs 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.

Isolate and explode (pg. 177)

A sales analysis technique where the most significant discrepancies between actual and standard are identified, or isolated, and then examined in detail, or exploded.

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Information Drives Management Decision Making and Planning 0011 0010 1010 1101 0001 0100 1011 Sales forecasts Territory estimates Quotas Sales force size Sales territory design

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Market Opportunity Analysis Market potential estimate of possible sales 0011 0010 of a 1101 0001 0100 1011 1010 commodity, a group of commodities, or a service for an entire industry in a market during a stated period under ideal conditions Sales potential the portion of the market potential that the firm can expect to reasonably achieve Sales forecast an estimate of the dollar or unit sales for a specified future period Sales quotas sales goals assigned to a marketing unit for use in managing sales efforts

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McGraw-Hill/Irwin

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Copyright 2006 by The McGraw-Hill Companies, Inc. All rights reserved.

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Subjective Methods of Sales Forecasting0011 0010 1010 1101 0001 0100 1011

User expectations buyer indicates intention to purchase Sales force composite sales force opinions Jury of executive opinion - key experts opinions Delphi technique each participant prepares an estimate, and these are compared anonymously and iteratively

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Objective Methods of Sales Forecasting0011 0010 1010 1101 0001 0100 1011

Market test place product in select areas Time series analysis relies on historical data to develop predictions for the future Statistical demand analysis attempts to make a comparison to determine the relationship between sales and factors that influence sales

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Forms of Time Series Analysis0011 0010 1010 1101 0001 0100 1011

Moving average averaging sales results over previous time periods to forecast into the future Exponential smoothing a type of moving average where most recent years are given more weight Decomposition applied to monthly or quarterly data where seasonal pattern is evident A critical adjustment is that of seasonality and