The Strategic Role of Information in Sales Management

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The Strategic Role of Information
in Sales Management

McGraw
-
Hill/Irwin

Copyright © 2009 by The McGraw
-
Hill Companies, Inc. All rights reserved.

IT in Perspective

Source: HR Chally Group (2007), The Chally World Class Excellence Research Report:

The Route to the Summit. Dayton, OH: HR Chally Group.


Tools enable rather than transform


Implement successful business
processes


Support w/new technology

Late 19
th

Century

Mid 20
th

Century

Late 20
th

Century

5
-
2

5
-
3

5.1


Market potential, sales
potential, and sales
forecasting process

5
-
4


Discuss differences between market
potential, sales potential, sales forecast, and
sales quota


Understand methods by which sales
managers develop sales forecasts


Outline process of setting a sales quota


Explain types of quotas used in sales
management


Discuss approaches to determining sales
force size


Describe sales territory design process


Understand importance of sales analysis


Conduct sales analysis

5
-
5

Information for Managers


Sales forecasts


Territory estimates


Quotas


Sales force size


Sales territory design

5
-
6

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

5
-
7

5.2

Classification of sales forecasting methods

5
-
8

Subjective Sales Forecasting


User expectations


relies on
buyers’ expressed intention


Sales force composite


sales force
opinions


Jury of executive opinion
-

key
experts’ opinions


Delphi technique


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

5
-
9

Objective Sales Forecasting


Market test


places product in
select areas


Time series analysis


relies on
historical data to develop
predictions


Statistical demand analysis


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

5
-
10

Objective Time Series Analysis


Moving average


averages sales
results over previous time periods
to forecast


Exponential smoothing


type of
moving average where most recent
years given more weight


Decomposition


applied to
monthly or quarterly data where
seasonal pattern is evident

5
-
11

5.3

Forecasting Techniques

Subjective

Objective

User expectations

Market test

sales force composite

Time series analysis

Jury of executive opinion

Statistical demand analysis

Delphi technique

5
-
12

5.4

Example of a moving average forecast

5
-
13

5.5

Graph of actual and forecast sales using moving averages

5
-
14

5.6

Calculation of a seasonal index

5
-
15

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

5
-
16

Effects of Territory Estimates


Design of sales territories


Procedures for identifying
potential customers


Establishment of sales quotas


Compensation and
subcomponents


Evaluation of salesperson
performance

5
-
17

Planning Tools


North American Industry Classification
System (NAICS)


Developed by US Bureau of the Census,


Organizes reporting of business information


Each U.S. 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

5
-
18

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

5
-
19

Process for Setting Quotas


Identify types of quotas to be
used


Select level of each type of
quota

5
-
20

Quota Purposes


Provide incentives for sales
representatives


Provide measures to evaluate
salespeople’s performance

5
-
21

Good Quota Characteristics


Attainable


Easy to understand


Complete


Timely

5
-
22

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


5
-
23

Sales Volume Quotas


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

5
-
24

Activity Quotas


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

5
-
25

5.7

Common types of

activity quotas

Number of…

1. Calls on new accounts.

2. Letters to potential customers.

3. Proposals submitted.

4. Field demonstrations arranged.

5. Service calls made.

6. Equipment installations supervised.

7. Displays arranged.

8. Dealer sales meetings held.

9. Meetings and conventions attended.

10. Past
-
due accounts collected.

5
-
26

Financial Quotas


Direct salespeople to more
profitable products and customers


Common bases


Gross margin


Net profit


Selling expenses


Calculation not straight
-
forward


Profit produced affected by factors
beyond a salesperson’s control

5
-
27

Quota Level Considerations


Territory available potential


Quota’s impact on motivation


Long
-
term company objectives


Short
-
term profitability impact

5
-
28

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

5
-
29

Determining Sales Force Size


Breakdown method


Workload method


Incremental method

5
-
30

Breakdown Method

(N)umber of
sales personnel
needed

Estimated
(P)roductivity
of each
salesperson

Forecasted
(S)ales volume

=

5
-
31

Workload Method

Total #
salespeople
required

# Hours
available to
each
salesperson

Total # hours
required to
service market

=

5
-
32

5.8

Steps to determine sales
force size by the
workload method

5
-
33

Incremental Method


Add salespeople until
incremental profit produced
equals incremental cost


Decreasing returns associated
with addition of salespeople

5
-
34

5.10

Stages in territory

design


5
-
35

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

5
-
36

Evaluation Systems


Determine how analysis will be
conducted


Simple


Comparative


Basis for comparison?


Reporting and control system?

5
-
37

5.14

Differences between simple sales analysis and comparative analysis


5
-
38

Sources of Information


Decisions


Types of comparisons


Integration of sales reports with
other reports


Sales invoice


ERP


links bid estimation, order
entry, shipping, billing, other
work processes

Sales Invoice Information


Customer name, location


Products, services sold


Transaction volume, dollar amount


Salesperson/agent


Product end use


Shipping/use location


Industry, trade class, distribution
channel


Terms of sale, discount


Freight costs


Shipment point


Shipping transportation

5
-
39

5.15

Other sources of
information for sales
analysis


Warranty

cards

Credit

memos

Financial

records

Individual

customer/

prospect

records

Salesperson

expense

accounts

Salesperson

call reports

Cash
register
receipts

Sales

analysis

5
-
40

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