Sales Management - Part I

Sales
Management
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Chapter 1: Introduction to Sales Management
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• Discuss the objectives of sales management
• Understand the definition, process, strategies, and resources of
sales management
• Describe how the selling of services is different from the selling
of tangible products
• Discuss the role and function of sales management within an
organisation
• Describe the duties and responsibilities of a sales manager
• Discuss the skills and competencies required by a sales manager
• Understand management functions in sales management
• Describe the difference between selling and marketing
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SALES AS A FUNCTIONAL AREAS OF
MANAGEMENT
FUNCTIONAL
AREAS OF
MGMT
FINANCE HR IT LOGISTICS PRODUCTION MARKETING
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WHAT IS MARKETING ?
According to management guru Peter Drucker,
“The aim of marketing is to make selling unnecessary.”
Marketing must be understood not in the old sense of making a sale—“telling and
selling”—but in the new sense of satisfying customer needs.
The simplest definition of marketing is: Marketing is engaging customers and

managing profitable customer relationships.
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MARKETING
LANDSCAPE
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Marketing Management Orientations
• Marketing management wants to
design strategies that will engage Societal
Productio
target customers and build profitable Marketing
n Concept
Concept
relationships with them. This is done
by adopting marketing management
Marketin Product
orientations. g Concept Concept
• There are five alternative concepts

Selling
under which organizations design and Concept
carry out their marketing strategies
namely-
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❑ Production Concept
• The production concept holds that consumers will favour products that are available
and highly affordable.
• Therefore, management should focus on improving production and distribution
efficiency. This concept is one of the oldest orientations that guides sellers.
• The production concept is still a useful philosophy in some situations.
• Companies adopting this orientation run a major risk of focusing too narrowly on
their own operations and losing sight of the real objective—satisfying customer
needs and building customer relationships.
• Example: both personal computer maker Lenovo and home appliance maker Haier
dominate the highly competitive, price-sensitive Chinese market through low
labour costs, high production efficiency, and mass distribution.
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❑ Product Concept
• The product concept holds that consumers will favour products that offer the most
in quality, performance, and innovative features.
• Under this concept, marketing strategy focuses on making continuous product
improvements.
• Product quality and improvement are important parts of most marketing strategies.
• However, focusing only on the company’s products can also lead to marketing
myopia.
• Innovations in the scientific laboratory are commercialized and consumers get an
opportunity to know and use these products. This is called "Technology Push
Model".
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❑ Selling Concept
• Many companies follow the selling concept, which holds that consumers will not buy
enough of the firm’s products unless it undertakes a large-scale selling and promotion
effort.
• The selling concept is typically practiced with unsought goods—those that buyers do
not normally think of buying, such as life insurance or blood donations.
• These industries must be good at tracking down prospects and selling them on a
product’s benefits.
• It focuses on creating sales transactions rather than on building long-term, profitable
customer relationships. The aim often is to sell what the company makes rather than to
make what the market wants.
• It assumes that customers who are coaxed into buying the product will like it. Or, if
they don’t like it, they will possibly forget their disappointment and buy it again later.
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❑ Marketing Concept
• The marketing concept holds that achieving organizational goals depends on
knowing the needs and wants of target markets and delivering the desired
satisfactions better than competitors do.
• Under the marketing concept, customer focus and value are the paths to sales and
profits.
• Instead of a product-centered make-and sell philosophy, the marketing concept is a
customer-centered sense-and-respond philosophy.
• The job is not to find the right customers for your product but to find the right
products for your customers.
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MARKETING VS SELLING
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❑ Societal Marketing Concept
• The societal marketing concept questions whether the pure
marketing concept overlooks possible conflicts between
consumer short-run wants and consumer long-run welfare. Is
a firm that satisfies the immediate needs and wants of target
markets always doing what’s best for its consumers in the
long run?
• The societal marketing concept holds that marketing strategy
should deliver value to customers in a way that maintains or
improves both the consumer’s and society’s well-being.
• It calls for sustainable marketing, socially and
environmentally responsible marketing that meets the present
needs of consumers and businesses while also preserving or
enhancing the ability of future generations to meet their
needs.
• Even more broadly, many leading business and marketing
thinkers are now preaching the concept of shared value, which
recognizes that societal needs, not just economic needs, define
markets. The concept of shared value focuses on creating
economic value in a way that also creates value for society
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Objectives of Sales Management
• Whilst some objectives are unique to each organisation, all organisations pursue objectives of profitability, sales
volume, market share, growth, and corporate image.
• The management of the sales function influences all of these objectives. Thus, the sales management objectives
of an organisation are concerned with:
▪ Achieving desired sales volume
▪ Achieving desired profits
▪ Promoting growth
• The objectives of sales management integrate various sales functions.
• They must be realistic and achievable and expressed as much as possible, in quantifiable terms.
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Objectives of Sales Management
• The scope of sales management in an organisation includes both quantitative and qualitative objectives as
shown in following below:
Establishing
Sales Developing
Rewards, Sales Fixing Sales
Forecasting Sales
Recognition, and Budgeting Quotas
and Planning Objectives
Remuneration
Establishing Collecting
Sales Sales Directing the
Sales Customer
Promotion organisation Sales Team
Territories Feedback
Planning, Coordinating
Managing
Recruiting, and and
Distribution
Training of the Monitoring the
Channel
Sales Force Sales Team
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Sales Management Definition, Process, Strategies & Resources
• Sales management may be defined as the process of developing a sales force, coordinating sales operations, and
implementing sales strategies that enable an organisation to achieve its sales targets consistently. Sales
management involves several activities as given below:
▪ Creation of sales plan and strategies to execute the plan such as strategies for account management, sales
force compensation, etc.
▪ Implementation of the above strategies
▪ Sales research, price fixation, and co-ordination of sales
▪ Hiring of the sales force
▪ Setting targets and regular monitoring of sales activities
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• The process of sales management involves developing a sales force, organising/managing sales operations and
implementing sales techniques which allows a business to constantly hit and even surpass its sales target.
• The sales management process includes the management of three key aspects of sales:
▪ Sales operations
▪ Sales strategy
▪ Sales analysis
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Key elements of sales

• As discussed in the previous section, sales management process involves three steps and elements,
lets understand each step in detail:
Sales Operations
• Sales operations include those activities and processes that support the business strategies and
objectives of a sales organisation and help in its effective functioning.
• The first step in the management of sales operations is to build a sales team, starting with a
competent sales manager and moving on to expanding the team.
• Once new talent has been taken on board, they should be properly trained to develop their skills.
They should be able to completely understand the product or service they are selling and also the
customers of the organisation. This will bring them all on the same page regarding the objectives and
expectations and make them work as a cohesive unit.
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• After proper training, provide the sales team with targets that are high yet realistic. This helps to monitor and
measure performance in the future.
• The next step is to delegate roles and responsibilities to the relevant team member.
Sales Strategy
• A sales strategy is concrete, detailed plan for selling products or services to generate and increase revenue
consistently.
• A sales strategy is different from a marketing strategy as it focuses on actually selling the product or service
whereas a marketing strategy focuses on improving the visibility of the product or service.
• A sales strategy defines the sales process to generate real, quantifiable profits. It allows the sales team to
understand how to actually conduct the sales.
• A sales cycle is a series of activities that helps the offering of a firm reach its customers.
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• A sales pipeline or sales funnel is a visual sequence of activities to achieve with each prospect, from
the initial lead to the completion of the sale. It helps members of a sales team stay organised and
achieve their goals.
Sales Analysis
• Sales analysis is an assessment that reveals the trends regarding an organisation’s sales.
• A sales analysis report helps a business evaluate the effectiveness of current sales efforts and
identify what more efforts might be needed.
• Sales analysis is performed using various sales metrics that are measurable indicators that specify
the performance of different elements of the sales operations and indicate whether or not sales
targets are being met.
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Sales Management: KPI’s
• Some KPIs that can be considered for a sales analysis include:
Sales targets
Sales leads/opportunities
Average purchase value
Sales per representative
Quote to close ratio
Net sales
Sales lead to close ratio
Sales-to-date
Sales growth
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Resources
• There are several resources available online to help with the sales management process and the most widely-
used ones are given below:
Sales plan templates
Sales email templates
Sales compensation calculator
Online sales training
Sales enablement guides
Sales meeting checklist
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Contemporary Sales Management Practices
• Some sales management practices used by today’s firms are:

▪ One-on-one coaching: One-on-one coaching of their team by sales managers helps to increase productivity
and helps firms see a growth in their annual revenue.
▪ Continued training: Regular training helps to keep the sales manager updated and also helps to continue
building the sales team’s skillset.
▪ Use of technology: Technologies such as cloud-based CRM improves collaboration and helps teams become
more agile. Modern businesses can integrate several technologies to increase productivity.
▪ Creating specific goals and tracking progress: Though it is your job to keep track of your sales team’s
progress, you need to keep track of your own goals and progress as well.
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Contemporary Sales Management Practices
▪ Identifying the sales team’s barriers to success: Identifying the barriers that prevent the sales team from
achieving the specified goals helps to determine ways to overcome them. Common barriers include fear of
rejection, poor communication, lack of exposure to digital marketing, etc.
▪ Creating effective sales plans: Creating sales plans that work at both the individual and team levels helps to
ensure consistency and progress, better time management, and improve prioritisation strategies.
▪ SWOT analysis: A SWOT analysis is a composition of company’s strengths, weaknesses, opportunities and
threats. The primary aim of a SWOT analysis is to enables the organisation to have a thorough awareness of
all the factors involved in making a business decision.
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Selling: Services VS Tangible Products
• Selling services is different from selling products because,

in the latter, organisations sell physical, tangible entities,
whereas, in the former, organisations provide value through
intangible skills and expertise.
• Various characteristics differentiate services from products
such as intangibility, inseparability, heterogeneity,
perishability, and there is no transfer of ownership. As a
result, the marketing techniques and costs of selling the
two are quite different.
• In case of tangible products, it is easier for a customer to
determine the value of their purchase and if it was worth
the money they spent.
• The complexity of the price/quality relationship also makes
it difficult to measure the actual costs of a unit of service.
Services cannot be produced beforehand and inventoried.
• Businesses need to forecast demand and understand how
they can customise and personalise the service to satisfy
their customers.
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PRODUCT SERVICE CONTINUUM
Creating Value in the Service Economy - Why

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Study Services?
CHARACTERISTICS OF SERVICES
1. Intangibility
2. Inseparability of production and consumption
3. Heterogeneity
4. Perishable
5. Customer contact.
6. No Ownership
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Characteristics of services
1. Intangibility:
•Necessary to make it more visible
•Physical aspects associated with service is important
•Intangibility more problematic when mktg services
•How to overcome intangibility?
•Visualization (Example: Open Kitchen, Website)
•Association (Example: Amitabh Bachan – ICICI Bank)
•Physical representation
A) Uniforms
B) Colors
C) Logos – Example: ISO 9001
D) Documentation – To Build credibility
Cont….
1– 29 29
UNIFORM
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INTANGIBILITY
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2. Heterogeneity:
•Same level of services may not be provided at all time
•Service cannot be standardized as performed by Humans
•Thus service organization to maintain consistency
•Example: Mc Donald's
Ways to Overcome Heterogeneity:

▪ Training of Internal Customers
▪Recruitment & Selection of Internal Customers
▪Training external customers
▪Automation
Cont….
1– 32 32
HETEROGENEITY
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3. Inseparability:
•In Selling Tangible Product, Manufacturer need not be present everywhere
•In Service – Production & consumption – simultaneous
• Even if one is absent, service transaction cannot take place
•Example: Hotel – server & customer
•Opportunity Loss: Earning Capacity of a Service Provider becomes ltd as he
can be at only one place at a time. In goods simultaneous consumption is
possible
•Example: Doctors, Teachers – have hiked their remuneration, factoring the cost
of the lost opportunities
•Ways to overcome Inseparability
•Training internal customer (Example: Teaching assistants)
•Video Conferencing
Cont….
1– 34 34
INSEPERABILITY
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4. Perishability:
•Services cannot be inventoried or stored for future consumption
•Example: Hotel room.
• Example: Multiplex – capacity of 300 & only 200 sold. 100 cannot
be carried forward)
•Ways to Overcome Perishability:
• Over Marketing - Example: Airlines
•Managing Demand – (Estimation & Forecasting)
•Managing Supply
Cont….
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PERISHABILITY
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NO OWNERSHIP
• Customers obtain temporary rentals, hiring of personnel, or access

to facilities and systems
• Pricing often based on time
• Customer choice criteria may differ for renting vs. purchase--may

include convenience, quality of personnel
• Can’t own people (no slavery!) but can hire expertise and labor
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CLIENT-BASED RELATIONSHIP
• Success depends on satisfied customers in the long-run
• Customer relationship maintenance is critical.
• Retaining a group of satisfied customers essential.
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PRODUCTS AND SERVICES
• Goods - things you can touch - “tangible”
• Services - things you can’t touch - but you can see their effect
“intangible”
 SERVICES
 PRODUCTS
 can’t see
 touch
 can’t touch
 see
 can’t smell
 taste
 can’t taste
 Smell
•Service Example
•Product Example •Haircuts
•Soap •Tuition
•Car •Massage Parlors
•Mobile •Courier Services
•Books •Office Cleaning Services
•Delivering Fresh Flowers 42
GOODS VS SERVICES
PHYSICAL GOODS SERVICES
Tangible Intangible
Homogeneous Heterogeneous
Production And Distribution Are Separated Production, Distribution And Consumption

From Consumption Are Simultaneous Processes
A Thing An Activity Or Process
Core Value Processed In Factory Core Value Produced In The Buyer-seller

Interaction
Customers Do Not Participate In The Customers Participate In Production
Production Process
Can Be Kept In Stock Cannot Be Kept In Stock
Transfer Of Ownership No Transfer Of Ownership
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Role and Function of Sales Management within an Organisation
• Sales management has several roles and functions within an organisation as shown below:
Helps in achieving sales targets
Improves profits
Promotes organisational growth
Fixes price
Motivates the sales force
Improves distribution
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Duties & Responsibilities of Sales Manager
• Sales management plays a critical role in deciding whether a business

will be a success or a failure. Hence, a sales manager has a very
important role in an organisation.
• A sales manager is the person who guides an organisation’s sales team
and establishes their sales quotas and goals whilst steering them in
the right direction.
• A sales manager has the following duties and responsibilities:
Setting Developing
Achieving Sales team
individual and sales strategies
sales volume supervision
team targets and techniques
Building
Sales team Generating Brand Maintaining
client
coordination leads promotion records
relationships
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Skills & Competencies Required by a Sales Manager
• Skills needed to become a successful sales manager are:
Analytical skills
Planning skills
Leadership qualities
Communication skills
Mentoring and motivational skills
Ability to allocate duties and responsibilities
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Sales Man
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FORD VS FERRARI
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Personal
Selling
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Meaning and Evolution of Personal Selling
• Personal selling is defined as the exchange of products or services between a customer and a seller for a certain
amount of money.
• Personal selling is a two-way form of communication, often face-to-face, where a salesperson attempts to
persuade the prospective buyer to buy the company’s products or services.
• The salesperson uses their knowledge and skills to inform, assist, and persuade the buyer to participate in a
transaction from which both parties derive value.
• For the customer, this value is obtained from the benefits of the product or service, while for the salesperson
and the company, from the financial benefits.
• With advances in telecommunication, personal selling can now be performed using telephones, via
videoconferencing, or the Internet.
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Advantages of Personal Selling

• The advantages of personal selling are the following:
▪ Personal selling involves direct and personalised communication
that allows salespeople to interact with potential buyers. It is a two-
way form of communication where the transmission of information
and getting feedback occurs simultaneously.
▪ Personal selling helps the salesman reach out to prospective buyers
that cannot be reached through other promotional measures.
▪ Personal selling allows salespeople to be more perceptive of the
buyers’ inclinations and responses and is flexible enough to adjust
the message depending on the reaction of the buyer.
▪ Personal selling allows demonstrations of the product’s features and
handles objections right away.
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SELL CaCO3
SELL CaCO3
Types of Purchase Situation
1. Straight Rebuy:
✓ This is the simplest buying situation. Only the purchasing department is involved.
✓ Information from Inventory Control Department to Purchase Department to

reorder particular materials, components, etc
✓ Purchase department invites quotations from suppliers (In suppliers: Suppliers

already empaneled. Out suppliers: Other potential suppliers)
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2. Modified Rebuy:
✓ Occurs when changes have been made in the routine buying procedures, requiring
the buying agent to consider alternatives.
✓ May be regular supplier does not have the required product in stock or stopped
manufacturing
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3. New task buy:
✓ This buying situation arises when the organisation is thinking of buying a

product or service for the first time.
✓ Best opportunity for suppliers to be a part of the approved vendor list
✓ Purchase department to involve lot of people in purchase decision (I time)
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• There are a few limitations of personal selling, such as those given below:
▪ Personal selling involves substantial costs of travel, training, samples, etc. It is, therefore, not
preferred by small companies.
▪ Personal selling can only be effective when salespeople are motivated enough and properly trained.
Situations Conducive to Personal Selling

• Certain situations are more conducive to personal selling in a company:
▪ Product situation: Personal selling is more relevant and effective in situations where:
✓ The product is of a high unit value
✓ The product is in an introductory stage and demand needs to be generated
✓ The product needs to be customised according to specific consumer needs
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✓ The product’s features need to be demonstrated
✓ The product requires after-sales service
▪ Market situation: Personal selling can prove to be more effective in the following
market situations:
✓ The firm needs to cater to a small number of large-size buyers
✓ The firm sells in a small local market, a government market, or an

institutional market
✓ There is a lack of intermediaries for indirect selling
▪ Company situation: Personal selling can be more effective in situations where:

✓ The company is unable to identify and apply an appropriate non-personal
communication channel
✓ The company does not have huge funds required for regular advertising
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▪ Consumer behaviour situation: Personal selling is a more economical option when:

✓ The consumer’s purchases are not that frequent but valuable
✓ The consumer needs their queries to be resolved immediately
✓ The consumer needs to be persuaded due to stiff competition
✓ The consumer needs active engagement in the exchange process
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Personal Selling
&
B2B Marketing
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ORGANIZATIONAL CONSUMERS
Concept of B2B Marketing
✓ B2B marketing is a process of selling different types of goods and services to businesses or
organisations. (Business market)
✓ These goods and services are used for:

✓ Producing final goods or
✓ Reselling to other consumers (Wholesaler selling to Retailers).
✓ Thus, B2B marketing is about fulfilling the demands of other businesses, while the demand for
the products made by these businesses may likely be driven by customers in the consumer
market.
✓ Example: Automobile manufacturers do not manufacture all components of vehicles. Components

manufactured & supplied by different companies
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EXAMPLE
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Types of Demand in B2B Markets
1. Derived demand:
✓ Any demand for a business product is derived from the primary demand of consumer
products.
✓ Example: Parts used in manufacturing PCs:

▪ Computer manufacturing organisations generally purchase parts from different
organisations
▪ Parts purchased depends on the demand for computers
✓ End users help in stimulating the demand for diversed components manufactured by
business firms in B2B markets…
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DIRECT DEMAND
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DERIVED DEMAND
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2. Fluctuating demand:
✓As the demand for business products and services is derived, any change in customers’
buying preferences may have a major effect on the supply chain network.
✓Example: Reduction in mortgage rates results in: ↑ in rate of new home construction &
also boost sales of home appliance
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FLUCTUATING DEMAND
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EXAMPLE
DECREASE IN
RATE OF INTEREST
CAN:
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DEMAND FOR HOME INCREASES
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INCREASE IN DEMAND FOR CONSUMER
DURABLES
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3. Stimulating demand:
✓ In many instances, business marketers develop marketing strategies and campaigns that
target final users directly.
✓ Example: Aluminum manufactures communicating advantages of using aluminum containers

over plastic containers
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Characteristics of B2B Marketing
✓ Nature and size of customers: small number of potential customers
✓ Professional buying decisions:

▪ Buying decision-making process is time consuming and complex in nature.
▪ This is because it involves decisions on part of every party in the supply chain, (suppliers, wholesalers
and distributors)
✓ Complexity of buying:
▪ Involve a huge amount of money.
▪ Executives from different levels involved
▪ Example: Supply chain managers, production manager, CEO may be involved for purchase of machinery
for production purpose…
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Characteristics of B2B Marketing
✓ Choice criteria: economic and technical selection criteria as they are accountable for their
purchases
✓ Example: New machinery purchased: Operations interested to know the output. QC department
interested to know capabilities in meeting specified quality norms
✓ High risks: In business markets, buyers and suppliers usually enter into contracts before
producing or manufacturing final products. Once a supplier is selected, there are long-term
contracts signed for products that are still at the development stage.
✓ Trust between buyers and sellers: In most cases, business buyers set product specifications and
ask their suppliers to make a customised product that meets their specifications. In such a case,
the element of trust is of utmost importance.
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Types of B2B Customers
✓ Producers:
✓ Purchase goods and services from other organisations and use these products and services
as raw materials to produce final products.
✓ This category includes both manufacturers and service providers.

✓ Example: Maruti needs spare parts to produce cars
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TATA – PRODUCER OF NANO
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✓ Resellers:
✓ Involved in selling goods and services that are manufactured by other firms without materially changing them.
✓ Example: Wholesalers, Brokers or Retailers. Big Bazaar…
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BIG BAZAAR RESELLER
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✓ Governments: (largest business buyers). Uses two purchasing strategies:

▪ Formal advertising: Government tries to obtain bids from appropriate sellers in those
cases when the product is standardized and has straightforward specifications.
Example: Personal computers with pre-defined specifications
▪ Negotiated contracts: These contracts are used for purchasing those goods and services
for which the price is not only a differentiating factor. (other factors are quality, service
& brand image)
✓ Institutions: Institutional markets generally comprise non-profit organisations. Example:

Schools, hospitals, health care centres, libraries, etc.
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GUESS?
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GUESS?
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Contributors in the Business Buying Process
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1. Initiator:
✓ Identify the need for a particular product.
✓ They initiate the buying decision process by requesting the concerned
departments to purchase the product.
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2. Users:
✓ Those individuals in the DMU who will actually use the product. & evaluate its
performance
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3. Influencers:
✓ These individuals may or may not use the product, but they help to set the
technical specifications for the proposed purchase.
✓ They have the necessary experience and expertise to improve the purchase
decision process…
✓Example: In the case of high technology purchases, consultants with the

required technical expertise may be hired to complete a purchase when the
customer (organisational buyer) lacks relevant experience and expertise.
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4. Deciders:
✓ Deciders are individuals who make the actual buying decision.

✓ They are difficult to identify as they are not formally authorised to make a buying
decision. They may or may not be purchasing managers.
✓ The decider may also be the buyer in repetitive buying activities.
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5. Buyers:
✓ Often also called purchasing managers, buyers make a list of potential suppliers
and supervise the buying process.
✓ Purchasing managers may not make the buying decision, but they do influence it.
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6. Gatekeepers:
✓ Example: If a vendor wants to do business with a large organisation like Walmart, it

just cannot go to the purchasing agent sitting in the company’s corporate headquarters.
✓ The vendor will have to get past a number of gatekeepers.
✓ These gatekeepers are individuals who decide whether you are eligible to get access to
the buying centres of such large corporations.
✓ Gatekeepers control the type and flow of information to the members of the buying
centre.
✓ In the buying unit, gatekeepers include assistants, technical personnel, secretaries, etc.
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Steps in Personal Selling

• Regardless of the product being sold, there are seven steps in the personal selling process as shown below:
Prospecting
Presentation and
and Pre-approach Approach
demonstration
qualifying
Closing the Overcoming

Follow-up
sale objections
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Theories in Personal Selling
AIDAS Theory
• A very popular theory in personal selling, AIDAS stands for Attention, Interest, Desire, Action, and
Satisfaction. It is a customer-oriented theory that focuses on the customers’ needs and problems.
• The theory states that the prospect goes through five different stages before giving a satisfactory response to a
product. Let us see what each of these stages means:
▪ Attention: In this stage, the customer becomes aware of the product as well as the brand image. This stage is
very important to the salesperson because this is where they attempt to catch the attention of the customer.
Different ways in which to capture the attention of the prospect include catchy phrases in written
communication, emails, etc.
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▪ Interest: In this stage, prospects maintain an interest in the product. This stage is of utmost importance to
the salesperson where they communicate the benefits of the product to the prospect to maintain their
interest.
▪ Desire: In this stage, prospects develop a liking towards the product or brand. A desire can be created by
using influencing and persuasion techniques such as adding an emotional element to the sales
communication, making prospects aware of what they stand to lose if they do not act on their desires.
▪ Action: In this stage, prospects become convinced of making a purchase or engages in a trial. Sales persons
can use different promotional measures to ensure action.
▪ Satisfaction: In this stage, the salesperson has to reassure the customer that they made the right decision in
buying the product.
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Buying Formula Theory of Selling

• The buying formula theory is again buyer-oriented. It revolves around the needs and problems of the buyer and
the role of the salesperson is to help the buyer find solutions. It is a schematic depiction of a set of responses.
• This theory attempts to explain the cognitive process that goes on in the mind of the prospect when he decides
whether or not to buy.
• The buying formula theory emphasises the internal factors that influence the prospect’s responses and downplay
the external factors believing that the salesperson will not neglect the external factors.
• The buying formula provides a useful way to help the salesperson to remember the internal factors.
• Simplistically, the buying process can be said to be comprised of three elements:
Need (or problem) → Solution → Purchase
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• A fourth element is added because the outcome of purchase influences the chance of a continuing relationship
between the buyer and the seller so that the formula becomes:
Need (or problem) → Solution → Purchase → Satisfaction
• The solution element in the above sequence consists of two parts: the product or service and the brand name.
The buying formula thus becomes:
Need (or problem) Product or Service or Brand name Purchase Satisfaction/ dissatisfaction
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• For the buyer to make a purchase, they must consider the product or service and the brand name to be adequate
and also derive a pleasant feeling expecting satisfaction from the purchase. When these are included, the buying
formula becomes:
• In this buying formula, the central solid lines of the formula represent the primary elements in a well-established
buying habit while the dotted lines represent the reasons and pleasant feelings i.e., the elements of defence in the
buying habit.
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• The goal of the salesperson is to encourage direct associations to ensure repeat purchases.
• According to this theory:
▪ The salesperson should create and emphasise the need
▪ The salesperson should emphasise the relation between the need and offering
▪ The salesperson should create the brand image
▪ The salesperson should create an association between the need, the offering, and the brand name.
▪ The salesperson should emphasise brand loyalty and the satisfaction derived from the purchase.
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Behavioral Equation Theory

• The behavioural equation theory proposed by J. A. Howard uses a stimulus-response
model and combines with it the findings from behavioural research.
• The learning process is a part of the stimulus-response model and has four essential
elements: drive, cues, response, and reinforcement as shown below:
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Right Set of Circumstances Theory

• Sometimes called the situation-response theory, the right set of circumstances theory
states that the particular circumstances occurring in a given selling situation result in
the prospect responding predictably.
• The right set of circumstances theory is a seller-oriented theory and argues that if the
salesperson can successfully grab the prospect’s attention and maintain their interest,
and also present the right stimuli, it will result in the desired response i.e., the sale.
• The circumstances can be both internal and external to the prospect.
• Supporters of this theory suggest that external circumstances should be given more
emphasis than internal ones.
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• This theory tends to overlook internal factors that are not readily
manipulated and can therefore encounter problems as internal factors are
important in most selling situations.
• While this theory emphasises the importance of the salesperson
controlling the situation, it fails to handle the internal factors that
influence the interaction and is unable to assign a suitable weight to the
buyer’s response.
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Sales Organisation
104
Different Types of Sales Organisation
• The sales organisation is the unit of an organisation that is responsible for the sales and
distribution of goods and services.
• A sales organisation comprises a group of individuals who handle different aspects of the sales
function such as selling, distribution, advertising, etc.
• The sales organisation works towards increasing sales volume and maximising revenue for the
firm. It helps to define and allocate the responsibilities and duties of the sales force. It promotes
coordination of activities of the sales department and its interaction with the other departments
such as advertising, promotion, and distribution.
• As stated earlier, the structure of a sales organisation refers to the segmentation of the sales team
into specialised groups. This structure is decided by various factors such as the region, the number
of products and services, the size of the sales force, and the customer categories.
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Functions in an Sales Organisation
• A sales organisation performs the following functions in an organisation:

▪ Detailed market analysis, including products and competitor research
▪ Developing appropriate sales policies
▪ Sales forecasting based on relevant data
▪ Advertising and marketing decisions
▪ Pricing decisions
▪ Branding and positioning decisions
▪ Decisions regarding distribution channels
▪ Selection, training, motivating and controlling the sales force
▪ Decisions regarding sales quotas and compensation plans
▪ Allocation of sales quotas, sales duties, and territories
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▪ Maintenance of sales and salespersons data

▪ Purchase related decisions
▪ Creation of demand for products
▪ Processing and handling of the orders received
▪ Collection of dues for credit sales
• The structure of the sales organisation is critical for the success of a selling enterprise.
• A proper structure allows the firm to make the most of individual skills and knowledge whilst
ensuring that the right sales reps are targeting the right customers.
• The salesperson is a critical component of the sales organisation and is responsible for several
activities in a sales company.
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• A sales organisation is structured in a manner that helps to easily identify the activities performed by an
individual or group.
• The structure helps to clearly define the roles and responsibilities and promotes coordination that allows those
involved to work efficiently and achieve the sales goals of the company.
• Sales organisations are generally modelled in the three ways as shown below:
The
The Pod
Island
The Assembly
Line
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The Assembly Line Sales Organisation Structure

• In the assembly line model, sales teams are divided based on the job description of each
salesperson. It is so named because of the similarities between sales operations under
this model with manufacturing assembly lines.
• Like a manufacturing assembly line, specialised salespersons help buyers navigate a
particular phase of the customer journey.
• In this model, account business development reps generate qualified leads that are then
handed to an account executive, who closes the sale.
• Once the sale is closed, a customer account manager takes over the customers and
manages the relationship throughout the customer’s life cycle.
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• Following figure represents the assembly line sales organisation structure:
Customer
Success
Account
Executives
Sales (Closers)
Developme
Inbound nt (Qualify
Leads Leads)
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The assembly line structure
• Its typical sales divisions or subteams are:

• Lead generation team: Involved in researching prospects, collecting leads through email or web
campaigns, organizing leads data, and sharing it with the sales development team.
• Sales development team: Qualifies prospects by cold calling them or doing additional research on
them. Next, shares the list of shortlisted prospects with the account management team.
• Account management team: Connects with the qualified leads to understand their challenges,
answer their queries, schedule and give demos, and finally close the sale. Also, shares the details of
all closed deals with the customer success team.
• Customer success team: Onboards new customers, keeps in regular touch with the existing ones to
reduce churn, identifies upselling opportunities, and helps increase customers’ engagement with your
business.
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• The benefits of Assembly Line Sales Organisation model are as follows:
Specialisation leads to increased operational efficiency
Increases the reps’ expertise in specific sales activities
Quicker sales process
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• The limitations of this model are the following:
Increased risk of running into silos
The numerous handoffs may decrease the quality of

customer experience
Costs may increase due to task specialisation
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The Island Sales Organisation Structure

• In the island model, every seller is unspecialised and possesses knowledge of several different areas. Here, the
same rep manages a single customer from prospecting to on boarding, i.e., the rep generates, qualifies, and
even closes leads.
• This type of sales organisation offers reps greater autonomy to build and grow customer relationships.
• Following figure shows the island sales organisation structure:
Founder
Salesperson 1 Salesperson 2 Salesperson 3 Salesperson 4 Salesperson 5
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• The benefits of this model are the following:

▪ It makes customer-seller relationships more
streamlined
▪ It maximises the individual output of the reps
▪ It promotes an individualistic and competitive
culture
▪ Managing numerous accounts at different
stages of the customer lifecycle can be quite
challenging
▪ Individual success may become more important
than collaboration
▪ It is harder to scale up this structure
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The Pod Sales Organisation Structure

• The pod model combines elements from both the island and assembly line models.
• Like the island model, a single pod manages a customer from prospecting to on boarding. But like the assembly
line model, reps of each pod specialise in a specific phase of the customer journey.
• The pod model is preferred by larger organisations that have a large sales force they want to organise because
it is easier to assign pods to certain product lines, geographies, accounts, etc. as needed.
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• Following figure shows the pod sales organisation structure:
Sales Development
Inbound Leads
(Qualify Leads)
Account Executives
Customer Success
(Closers)
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• The benefits of this model are the following:

▪ Less risk of silo formation between roles and functions
▪ Better customer experience due to smoother handoffs as a result of enhanced collaboration
▪ Sales team adjustments are more responsive
▪ Individual motivation may be tough
▪ Poor performers may ride on the achievements of performers
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Types of Sales Force Structure
• The sales force comprises all the human and material resources that an organisation uses for its selling
activities.
• The sales force’s structure determines how effective it is.
• For instance, if a company sells products that need specific technical knowledge, it would not be logical to sell
all products by area.
• Various factors such as budget, customers, and organisational culture decide the structure of the sales team
that is right for a firm.
• Supporting functions such as sales enablement and sales operations also influence the sales organisation
structure.
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• Managers need to consider the following factors when deciding the structure of the sales force:
▪ Nature of the product: The nature of the product is important in deciding the sales force
structure. For instance, products with shorter lifecycles will need different selling efforts than
those with longer lifecycles.
▪ Demand for product: The demand for a particular product plays a critical role in allocating
salespersons to a territory. For instance, a product with constant demand and high turnover
requires lesser selling effort than one with low or fluctuating demand and low turnover.
▪ Transport: The transport facilities available for a particular product also need to be considered
when dividing the sales force into a specific structure. For marketing and sales to be effective, a
region with poor transport facilities should be divided into smaller territories.
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▪ Competition: Highly competitive sales territories mean that the size of the sales territory is reduced. In
these territories, salespersons need to meet dealers and customers more often to maintain product demand.
Hence, in such territories, the sales force should be allocated to smaller territories.
• Following figure shows the commonly used sales force structures. These structures are based on the different
divisions in the organisation.
Product based
Geographic based
Customer based
Combination based
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Product Based
• In this type of division, the responsibilities of
the sales force are defined based only on the
product or product lines.
• If the reps gain expertise for a particular
product or service, they can better convey its
value and use to the prospects.
• Product type is suitable in case the
organisation has many products (/services)
and it can divide the departments according
to the products.
• It also makes sense to align salespeople to
products when a company sells highly-priced
products or technically-complex products.
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• Product-based sales force structures have the following advantages:

▪ Division according to product ensures that each product gets required attention.
▪ It enables sales reps to specialise in specific products.
▪ It allows managers to guide selling efforts.
▪ It allows managers to assign responsibilities to salespersons more effectively.
• Product-based sales force structures have the following disadvantages:
▪ Efforts may be duplicated within geographies and customer accounts, resulting in higher costs
▪ Coordination may become difficult between two product departments.
▪ Selling costs may be higher when dividing the sales force according to the products.
▪ Operational costs may be higher because each product is handled differently.
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Geographic Based
• This structure makes it easier for managers to
appraise their reps’ sales performances relative
to the potential of a particular territory or
region.
• Geographic-based sales force structures have the
following advantages:
▪ Transport costs are reduced since
responsibilities have been defined based on
areas.
▪ Customer services may be improved in
geographic-based sales force structures.
▪ It is easier to evaluate sales performances
according to zones.
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• Geographic-based sales force structures have the following disadvantages:

▪ Managers may find it difficult to coordinate the sales force for different markets.
▪ The chance of conflicts related to resource allocation between zones is higher.
▪ The possibility of sales reps working in silos is higher, preventing them from developing cross-functional
expertise.
Customer Based
• In this type, the sales force structure is organised based on the customers to whom the products are offered.
• Most firms have customer accounts of varying sizes and needs; by defining responsibilities accordingly, sales
reps can become familiar with each type and meet their needs better.
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• A customer-based structure is suitable when the

number of customers seeking specific services is
huge.
• It is also suitable when the target market comprises
premium customers who do not mind paying for the
services offered.
• Customer-based sales force structures have the
following advantages:
▪ Since the departments are divided according to
customers, each customer gets proper attention.
▪ Customer satisfaction is increased as customer
services are maximised.
▪ Sales planning and policies can be improved by
focusing on different customer categories.
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• Customer-based sales force structures

have the following disadvantages:
▪ Planning and developing the market
according to the customer can be
quite expensive for the firm.
▪ Managing resources may prove
difficult.
▪ Coordination of sales activities is
more difficult.
▪ Constant communication with team
members is needed to ensure all
customers are provided with the same
quality of service.
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Combination Based
• The combination-based approach of organising the sales force combines the other three approaches to structure
the sales force.
• This structure is suitable in organisations that offer a variety of products to different customer categories
spread over a big geographical area.
• This structure is also suitable when a company seeks to concentrate on different customers or products within a
specific location.
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Linking Sales and Distribution Management
• Sales refers to the exchange of products or services against some amount of money and is a firm’s only revenue-
generating function.
• Distribution is the process of making a product or service available for consumption by the end-user.
• Distribution management is used to supervise this process to ensure it is efficient and effective.
• Sales and distribution management are both elements of the marketing mix. Marketing mix is a set of
marketing tools that help to promote a product or service in the market. It is mainly centred around the 4Ps,
i.e., the product, price, place, and promotion.
• Sales management and distribution management are both a part of it and intricately linked, and one cannot
exist or operate without the other.
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• Sales management devises the strategy and action plans to achieve the sales goals of revenue and growth, and
the distribution management works towards the execution of these plans.
• Integration between the two functions is critical for customer satisfaction.
• The sales organisation is responsible for both the sales and distribution of goods and services.
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• Role of distribution management in some important sales management activities are:
Sales Management Activities Distribution Management Role
Policy for successful coverage of Follow call plan Make customer

markets and distribution channels calls productive Use multi-channel
approach
Policy for handling customer Quick action at the customer

complaints interface level Report to senior
management if the problem persists
or escalates
Planning of advertising and sales Coordination with distribution

promotion channels Responsibility of execution
with distribution channels
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SALES FORECASTING
132
Meaning & Nature of Sales Forecasting
• A forecast may be defined as an indicator of what is likely to happen in a given time

frame in the future, generally based on available data.
• From this definition of a forecast, we can say that a sales forecast is an indicator of the
amount of a product or service a business is likely to sell in a given time frame in the
future in a given market at a given price. That is, a sales forecast is an estimate of the
future sales potential of an organisation.
• Accurate sales forecasting allows an enterprise to produce the required quantity at the
right time. The sales forecast forms a basis for production targets. It also allows it to plan
ahead for budgets, raw materials, equipment, labour, pricing, etc.
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Elements of good forecast
Easy Accurate
to use Meaningful
Reliable Written Timely

• Sales forecasting plays the following role in an organisation:

▪ Help visualise the revenue goals: Sales forecasting provides all the stakeholders with a
good understanding of the revenue goals for the specified time frame. Visualisation of
the revenue goals helps to anticipate cash flow and growth of the organisation and
measure the performance against it. It also helps to prepare for any issues that may
occur down the line.
▪ Manage and monitor sales performance: Sales forecasts help to manage the sales team
and monitor its performance against the sales goals. It helps organisations develop and
execute a plan for the given period and adapt if things do not go according to plan.
▪ Help with high-level decisions: Accurate sales forecasts provide information that helps
the top management take decisions regarding expansion, growth, investments, etc.
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▪ Plan for the cash flow: Sales forecast aid the finance department in planning for the cash flow to
cover the expenses.
▪ Prepare for after-sales support: Sales forecasts prepare the customer service team for after-sales
support.
• Apart from the above, sales forecasting plays a very important role in manufacturing businesses as
it helps with the following:
▪ It helps to determine production volumes
▪ It helps to determine plant capacity, equipment, capital and manpower requirements, etc.
▪ It helps to establish the sales and production budgets
▪ It helps in pricing decisions
▪ It aids in advertising decisions
▪ It aids in decisions regarding expansion, production mix, etc.
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▪ It helps in making production and purchasing schedules

▪ It aids in developing strategies that will help in achieving the targets that have been predicted
by the sales forecasts
• Forecasting can be of the following two types:
▪ Short-term Forecasting: This type of forecasting is limited to a short period, usually up to one
year and aids in the following areas:
✓ Determining production schedules: Production schedules have to be developed according to
predicted sales volume to avoid the problem of both overproduction and under-production.
✓ Pricing decisions: Sales forecasts help to devise a suitable price policy
✓ Purchasing of raw materials: An understanding of sales in the immediate future allows firms
to estimate production scales and purchase raw materials as needed.
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✓ Setting sales targets: An understanding of future sales levels in the near future will
allow managers to adjust sales targets accordingly. If sales targets are set too high,
salespersons find them impossible to meet, whereas if sales targets are set too low,
the targets are met too easily, and incentives amount to nothing.
✓ Advertising and promotion decisions: An estimate of sales levels in the near future
allows firms to plan their advertising and sales promotion accordingly.
✓ Short-term financial requirements: Estimating sales and production scales allows
firms to estimate short-term financial requirements.
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Types of Forecasts by time horizon
Short-range • 1 day to 3 months

Forecast
Medium-range • 3 months to 2 years

Forecast
Long-range • Exceeds 2 years

Forecast
Short-range Forecasting
• Managers are interested in forecast for disaggregated demand (for specific product, for
specific geography etc.)
• Little time to react to errors in demand forecast, so the forecast need to be as accurate as
possible
• In absence of analytical data managers use judgment methods.
Medium-range forecasting
• Relates to aggregate planning.

• It is used to build up seasonal inventory.
• Time horizon is 3months to 2 years.
• It tends to be more accurate than long term forecast.
Long- range forecasting
• It is used for process selection, capacity planning, new product planning and location
decisions.
• It deals with more comprehensive issues and support management decisions.
• It tends to be less accurate than short/medium term forecast.
▪ Long-term Forecasting: This type of forecasting refers to a period of forecasting more than one
year. The element of uncertainty is higher in long-term forecasting. It is more relevant to the
planning of:
Expansion of an existing unit or opening a new

unit
Long-term financial requirements
Personnel requirements
Rate of maintenance of equipment and plant
Raw material requirements over a long-term
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• For any sales forecast, the following things must be factored in:
▪ Competition: Existing and new competitors’ offerings play an important role in deciding the
demand and thus, the future sales of a product or service.
▪ Technological advances: Technological advances introduce new products and new trends in the
market and change the demand for a product or service.
▪ Government policies: Sales of products and services are influenced by government policies and
regulations.
▪ Internal factors: Internal factors related to plant capacity, changes in product mix, etc., should
be factored in.
144
Methods of Sales Forecasting
• Several methods of sales forecasting are available, and the management can choose the one that will work best
for them depending on the following criteria:
Simplicity
Credibility
Economy
Availability
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• One must remember that predicting anything in the future, including sales, is often inaccurate, so one must
choose a method of forecasting and improve it such that the forecast is as realistic as possible.
• A good sales forecasting technique minimises the departure of the actual sales from the forecast.
• Forecasting methods can be of two types:
▪ Qualitative forecasting methods
▪ Quantitative forecasting methods
• Qualitative forecasting methods are based on opinions and intuition, whereas quantitative forecasting methods
use mathematical models and relevant historical data to generate a forecast.
146
• There are following major differences between Qualitative forecasting methods and Quantitative forecasting
methods:
Qualitative methods Quantitative methods
Relevant in situations where little to no Relevant in situations where historical

information exists data exists
Useful for new products and new Useful for existing products and
technology technology
Involves human judgement, intuition and
Involves mathematical techniques
experience
Their strength is objectivity, consistency
Their strength is to include the latest
and ability to handle huge quantities of
changes and access to inside information
data
Limited by being prone to personal bias Limited by their dependence on data
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Approaches to sales forecasting
• There are two approaches to sales forecasting
1) Top-Down Forecast:
• A top-down forecast looks at the overall market and uses this
information to identify your company demographics and target mark.
• Example: If your company has created an iPhone app, you might take a
Forecast of overall
look at the number of consumers who have purchased apps for their market
iPhones. If there are 80M active iPhone users and half of iPhone users
buy at least one app per month, you could estimate that of the 40M
active iphone users who purchase apps, 1% of these consumers will
purchase your app. That would give you 400K new customers.
Approaches to sales forecasting
2) Bottom-Up Forecast:
• This is the demand side of the forecasting process. A business can
only sell as much of a product or service as there exists demand
for it regardless of its capacity to create same
• Example: While creating iPhone app, instead of looking at the Demand side of
forecasting
market and its potential, you need to look at your own market (for
example, your existing customers or Twitter followers) and map
out how you can parlay your current standing into new sales.
SALES FORECASTING
METHODS
Qualitative methods Quantitative methods
Sales force composite Naïve approach
Expert’s opinion Moving averages
Exponential
Delphi method
smoothing
Survey of buyer’s
expectations Test marketing
Methods of Sales Forecasting: Qualitative Methods
Qualitative Methods - User Expectations, Salesforce Composite, Jury of Executive Opinion, Delphi
Technique, Market Test
• Qualitative forecasting methods are based on human factors, such as opinions and intuition.
User Expectations
• In this method, the business approaches its customers directly to determine their requirements in the near
future. The business asks its customers about the quantity and quality of the goods they will purchase, when
and where they will buy, etc.
• This approach is more suitable in the case of industrial goods instead of consumer goods because the potential
market has only a limited number of buyers and prospects.
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• The user expectations method has the following limitations:

▪ There is a chance that the expectations of the buyer may change in future.
▪ It works only for short-term forecasting.
▪ It does not work for making forecasts regarding consumer goods.
Sales Force Composite

• In the sales force composite method, salespersons are approached for their opinion regarding the sales trends in
their respective territories, and these opinions are consolidated to build the overall sales forecast.
• The sales personnel provides the estimates of the sales of a product or service in a particular sales territory,
during a given period.
• This method is the bottom-up approach wherein the sales force offers their opinion on sales trends to the top
management.
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• The strength of this method comes from the fact that salespersons have a good understanding of their sales
territories and customers.
• The weakness of this method is that it is prone to the personal bias of the salespersons. Moreover, salespersons
may not know how to use economic and statistical indicators correctly.
• They might only consider the microeconomic factors and neglect the macroeconomic environment.
• This problem can be somewhat remedied by training the sales force in forecasting techniques.
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Jury of Executive Opinion

• The jury of executive opinion is a widely used qualitative method of sales forecasting.
• The opinions of a small group of top-level managers and executives from different departments, such as sales,
finance, marketing and production are collected and used to predict sales for a given period.
• This method is usually employed when the issue is complex as the top-level executives have years of experience
in their field and a deep understanding of the organisation’s strengths and weaknesses and the risk factors and
opportunities in the relevant industry.
• They also better understand the macroeconomic factors that can influence the sales trend.
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• In the jury of executive opinion, the group of top-level managers and executives uses its managerial experience,
and sometimes also includes the results of statistical models.
• This method includes judgement and other soft human factors, such as personal opinions and intuition to make
predictions.
• The jury of executive opinion method can be of two types: the top jury method and percolated jury method.
• In the top jury method, only the top executives can participate and in the percolated jury method, a large
number of marketing sales executives participate.
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Advantages Disadvantages
• Forecasting can be done quickly and

easily. • It may not be reliable.
• It will be more accurate. • The success of forecasting depends

upon the competency of experts.
• Less expensive than other methods. • A broad outlook may be lacking.
Delphi Technique
• The Delphi method is a method of choice when a long-term forecast is needed on complex issues
where expert opinion is the only available source of information.
• The Delphi method works on the assumption that the combined knowledge of a panel of experts
will generate a forecast at least as good (and most likely better) as the one generated by a single
member.
• In this method, a panel of members with expertise in the given area are approached with a
questionnaire and their feedbacks are organised into a summary.
• If any expert’s answer deviates too much from the median, they offer an explanation that is added
to the summary. The updated summary is sent to all the panel members again.
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• They review the summary and if they think necessary, they can reconsider or revise their forecast given the
feedback of other members.
• The limitation of the Delphi method is that it can be a time-consuming process, especially if there is not much
consensus between panel members initially
• The steps in the Delphi method are given below:
▪ A questionnaire is sent to a panel of experts, either internal or external to the organisation, to obtain their
independent estimates of future sales.
▪ The independent estimates are organised in the summary and the summary report is submitted to panel
members for review.
▪ Experts can review the estimates made by other experts and if they think necessary, they may reconsider
or revise their estimates.
▪ The process is repeated for multiple round still the panel reaches a consensus on the forecast.
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Advantages: Disadvantages:
• Objective forecast is accurate. • Difficulty getting a panel expert.

• Useful for technology, new product,
and industry sales forecast. • Break down of forecast into product or
• Both long and short team forecasting territories is not possible.
possible.
Market Test / Test Marketing

• In the market test method, a sales forecast is made based on the outcome of a direct market test. It is
used more commonly by consumer goods marketers.
• When used by industrial goods marketers, this method is called a market probe.
• The market test helps to make sales forecasts for new product launches. It helps the firm decide if the
market will accept the product or not.
• In the market test method, the new product is first introduced in selected geographical areas that are
representative of the final market to estimate the product’s acceptance and demand in the selected areas.
• Based on the customer response, the firm can forecast the sales of the product and decide whether
commercialisation is a viable option or not.
• The market test is a quite reliable method, but care must be taken to select areas that truly represent
the overall market.
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• Despite being valuable as a sales forecasting tool, it is limited by the fact that it is a time-
consuming process since the results can only be reliable if the test is carried out for a
sufficient amount of time.
• It takes significant time to deliver results, during which market conditions may change
and the results may not be a true representation of the whole market.
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Overview of Qualitative methods
• Pool opinions of high-level executives,

Expert’s opinion sometimes augment by statistical
models.
Sales force • Estimation from individual
salespersons are reviewed for
composite reasonableness then aggregated
Delphi method • Panel of experts, queried iteratively
Survey of buyer’s
• Ask the customer
expectations
Methods of Sales Forecasting: Quantitative Methods
Quantitative Methods - Time Series Analysis, Moving Average, Regression & Correlation
• Quantitative methods for sales forecasting are different from qualitative methods as they make use
of mathematical tools and historical data.
• These methods are more objective than qualitative methods and usually more time and cost-
effective.
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1. Naïve Approach
• This method assumes demand in next period is the same

as demand in most recent period. Example: If May sales were 48,
then June sales will be 48.
• Sometimes cost effective and efficient.

• Next year’s sales = This year’s sales x This year’s sales
Last year’s sales
• Example: Assume that sales for next year is to be forecasted.
• Also assume that this year’s sales equaled ₹5,00,000 and that last year’s sales were worth
₹4,00,000.
• Thus, next year’s sales forecast equals ₹625000
Widely used quantitative methods are as follows:
Time Series Analysis

• Time-series analysis is one of the most widely used
methods for the prediction of long-term forecasting.
• The term time series refers to a sequential order of
values of a given variable at equal time intervals.
• A time-series depicts the relationship between two
variables, one being time and the other any
measurable variable. The quantified variable may
show an increase or decrease with reference to time.
• Time series analysis explains the reason behind the
values observed at different points in time.
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• A time-series model aims to identify patterns in historical data and extrapolate them into
forecasts.
• A time series is generated by collecting a series of information over given points in time.
• Time series data, such as the one above can be applied to a time series forecasting model
to make predictions, such as estimating the sales for February.
• A time-series problem has the following time-based key components:
▪ Level: Level is the average or baseline value in the time series.
▪ Trend: Trend is the long-term increase or decrease in the values of the target variable
with time. A trend can be upward, downward, or horizontal (no trend). It can be linear
or exponential.
167
▪ Cycles: This component accounts for the recurring pattern of data above and below the trend
line. This component exists when the data shows inclines or declines that are not of a fixed
period. Cycles differ from seasonal patterns because the average length of cycles is longer
(usually, more than one year).
▪ Seasonality: Seasonality exists when there is a tendency of patterns to repeat at regular
intervals.
▪ Irregularity/Noise: This component exists when there are random variations that can occur in
the data that cannot be explained through trends, cycles, or seasonality. It accounts for short-
term, unexpected and non-recurring factors that influence the time series data.
168
• In simple terms, the nature

of the key components of a
time series can be
represented as follows:
169
Moving Average
• Long-term forecasting of sales trends can also be done using the moving average or rolling mean
method.
• The moving averages method examines the underlying pattern of a set of data to provide an
estimate of future values.
• The moving averages method uses time-series data to smooth out random, short-term fluctuations in
the data set by creating a constantly updated average.
• The technique generates an average of a set of numbers in a given range whilst moving the range.
170
Moving averages
• In this method, the average value for a number years is taken and this average is taken as the
normal or trend value.
• The forecaster estimates sales based on an average of previous time periods.
• Averaging will lessen the fluctuations and will give a smoother curve.
• The period for moving averages, such as 3-yearly, 5-yearly etc will depend usually on the
length of the cycle.
Moving averages
• The 3-yearly moving average can be computed with the following formula:
a+b+c, b+c+d, c+d+e
3 3 3
Denominator= number of years
Numerator= value pertaining to those years
• The moving averages method can have the

following variations:
▪ Simple moving average (SMA): SMA is
an equally weighted mean of n records.
The formula for SMA is: Simple Moving
Average = (A1 + A2 +……+An) / n
Where Ai is the data point in the ith
period
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3. Exponential smoothing
• This method is similar to the moving averages forecasting method except that in the
exponential smoothing method the forecaster is allowed to vary the weights assigned to
past data points.
• It allowed consideration of all past data, but less weight is placed on data as it ages.
• This method is used to forecast only one period in the future.
3.Exponential smoothing
Formula:
Next year’s sales = a (This year’s sales) + (1-a) (This year’s forecast)
a = smoothing constant
Example:
Assume that this year’s sales were ₹50,000 and that this year’s forecast was ₹40,000.
Assume that a was given a value of 0.2
The forecast for next year’s sales would be
0.2 x (₹50,000) + (0.8) x (₹40,000) = 42,000
Regression & Correlation

• Correlation is the degree to which two or more variables are related. Correlation analysis is done using various
statistical tools and techniques to determine the degree of correlation between two or more variables.
• Correlation analysis helps to quantify the relationship between two or more variables.
• Correlation analysis estimates a sample correlation coefficient, denoted r, that ranges between -1 and +1.
• The correlation between two variables can either be positive (i.e., higher levels of one variable correlate to
higher levels of the other) or negative (i.e., higher levels of one variable correlate to lower levels of the other).
• The sign of r indicates the direction of the association, while the magnitude of the r indicates the strength of
the association.
176
• Correlation can be represented using graphs, such as the one shown in below that shows four hypothetical
scenarios where one continuous variable is plotted along the X-axis and the other along the Y-axis:
177
• In the graph:
▪ Scenario 1 shows a strong positive association (r=0.9)
▪ Scenario 2 shows a weaker association (r=0.2)
▪ Scenario 3 shows an absence of association (r ~ 0)
▪ Scenario 4 shows strong negative association (r = – 0.9)
• Regression analysis is a statistical tool to assess the relationship between a dependent variable and one or
more independent variables.
• The dependent variable Y is also known as outcome or response variable, and the independent variables
X1, X2 … are known as predictors, explanatory variables, or covariates.
• Linear regression is the most common form of regression analysis that uses a linear approach to assess
the relationship between a scalar response (dependent variable) and one or more explanatory variables
(independent variables).
178
• Linear regression is used to estimate the values of a random variable based on the values of a fixed variable.
• Simple linear regression is a regression with one independent variable, whilst a multivariate linear regression
has more than one independent variable.
• Most real-world scenarios involve multiple independent variables; therefore, linear regression often describes
the multivariate linear regression.
• A simple linear regression equation can be written as:
Y= a + bX
Where,
Y = Dependent variable
X = Independent variable
b = The slope of the line
a = the intercept (the value of y when x = 0)
179
Differences between correlation and regression analysis

• Correlation determines the degree to which two variables are associated
but it does not fit a line through the data points. On the other hand,
linear regression finds the best line that predicts the dependent
variable from the independent variables.
• Correlation analysis is applied when both variables are measured, while
linear regression is applied when X is a variable that is used to estimate
Y.
180
The Basis for Selecting a Suitable Forecasting Method
• Seeing the valuable role that forecasting plays in long-term business planning and the growth and
success of an organisation, it is critical to select the right forecasting method for your organisation.
• Forecasting enables managers to manage seasonality, changes in trends, sudden changes in pricing
or promotion strategies by the competition, sudden changes in the economy, etc.
• A forecast can only provide the right answers when the right questions are asked, and the right
techniques are applied.
• Over the years, many forecasting techniques have become available to managers.
• Each technique has its merits and limitations and the forecaster has to apply the right technique to
get the right answer. Therefore, in this section, we will discuss the selection of a suitable
forecasting method.
181
• The selection of a method depends on many factors as given below:

▪ The purpose of the forecast
▪ The cost/benefit of the forecast
▪ The availability of historical data
▪ The range of the forecast
▪ The time available for making the analysis
▪ In the case of a particular product, the stage of the product’s life cycle
• Let us now understand the factors that influence the selection of the forecasting method:
▪ The purpose of the forecast: The first and foremost criterion in the selection of a suitable method is the
objective behind doing the forecast. The reason behind the forecast determines how accurate the forecast
needs to be.
182
▪ The cost/benefit of the forecast: Forecasting techniques vary in their costs; therefore, the
forecaster must decide the level of inaccuracy they can accept as a trade-off between cost and the
value of accuracy in choosing a technique.
▪ The availability of historical data: The availability of historical data is important when
considering. It is also important to determine whether past data is relevant and how much.
Qualitative techniques use qualitative data, such as expert judgement while quantitative
techniques rely completely on historical data.
▪ The range of the forecast: The objectives can range from short term decisions, such as the
immediate requirements of raw material or transport to long-term decisions regarding
production capacity, expansion, financial requirements and policy.
▪ The time available for making the analysis: The selection of the forecasting method depends on
how much time is available to make the forecast.
183
• The stage of the product’s life cycle: If the forecast is to be made for a particular product,
the stage of the product’s life cycle is considered when selecting the method. This is
because the maturity of a product directly determines the availability of data and being
able to quantify the associations between the factors.
184
Benefits that companies get after implementing sales
forecasting
Optimal sales flow
Knowing when and how much to buy.
In-depth knowledge of customers and the products they order.
The ability to identify the pattern of trend of sales
Determine the value of a business above the value of its current assests.
Ability to determine the expected return on investment.

Sales Budgeting
186
Meaning & Purpose
• A budget refers to the estimation of revenue and expenses over a given period of time in the future.
• A budget is a formal plan for the execution of future activities stated in monetary terms.
• Budgets can be designed for specific units, departments, products, or the organisation on the whole. While
budgets are commonly expressed in monetary terms, they can also be quantified in terms of non-monetary
resources, such as time.
• A sales budget is a plan that specifies the allocation of resources in a way that will achieve the sales targets
predicted by the sales forecast.
• The objective of preparing a sales budget is to plan for optimisation of resources and achievement of sales
forecasts.
187
Meaning & Purpose
• A sales budget forms the basis of the other budgets of the organisation, such as the production budget. Hence,
the sales budget must be carefully prepared.
• CIMA defines budgeting as “the process of expressing the predicted costs and resources for a planned course of
action over a given time in the future.
• “Budgeting is a management tool expressed in quantitative terms to easily organise and prioritise complex or
competing activities in an organisation.
• Sales budgeting is a planning tool that helps to plan and prepare for how and when resources will be spent to
achieve the desired sales targets and maximise revenue.
• Sales budgeting is a means of control that helps to establish standards and benchmarks and measure actual
results against those. It is also a means of inter-departmental coordination.
188
Meaning & Purpose
• Budgeting can also be used as a means to appraise the performance of teams or individuals.
• Various managerial policies regarding long-term planning, cash flow, capital expenditure, etc. are decided based
on budgeting.
• Budgeting may thus be defined as the process of planning, preparing, organising, managing, and controlling
budgets.
Purpose of Sales Budgeting
• The purpose of sales budgeting is to plan and coordinate various sales-related activities and to ensure they are
effectively controlled and monitored.
189
Meaning & Purpose
• Following figure shows the role of sales budgeting in an organisation:
Planning
Control
Budgeting of other departments
Coordination
Measurement of performance
Fixing roles and responsibilities
Communication
Growth goals
Master budget
Financial goals
Motivation
190
Methods of Sales Budgeting
• Organisations have different ways in which they can approach sales budgeting.
• Most commonly used methods of sales budgeting are:
Affordability method
Percentage of sales method
Competitive parity method
Objective & task method
Zero base budgeting
191
Affordability Method
• It is the most straightforward method of sales budgeting.
• In the affordability method, the management develops the sales budget based on its ability to spend on sales
functions.
• The management decided how much it could afford to spend for selling its goods and used this figure as a basis
for budgeting. However, things often end up costing more than what was estimated, and there may not be
enough funds in the end.
Percentage of Sales Method
• In the percentage of sales method, firms set their sales budget as a specified percentage of current or expected
sales. This method is commonly used by firms involved in the mass selling of goods and or those governed by
finance.
192
• The percent of sales method is a quick method to develop a sales budget by closely correlating items to sales.
However, it is only possible to apply this method to line items that correlate with sales; any fixed expenses
cannot be projected using this method.
Competitive Parity Method
• The competitive parity method is commonly used by firms faced with tough competition.
• The competitive parity method is appropriate for sales budgeting for an industry that is characterised by a
large number of established competitors. It is a safe strategy in a competitive market: keeping the firm in
competition but avoiding a sales budget that is more than needed.
193
• The competitive parity method has the following merits:

▪ It ensures that the budget allocation is always optimum, avoiding both overspending that will lead to
unnecessary losses and underspending that will lead the firm to lose to the competition.
▪ It is a safer approach to budgeting when the firm does not have enough information to determine how it can
succeed in the market.
• Competitive parity has the following demerits:
▪ When a firm only follows a competitor, it may never have a competitive advantage in the market.
▪ In the case of products that have as pacific requirement for additional or lower spending, this approach may
lead to incorrect budget allocation.
194
Objective & Task Method

• In the objective and task method, managers develop their budgets by identifying the objectives of the sales
function and then determining the sales-related tasks to achieve those objectives. Once this is done, the cost of
each task activity is estimated to figure out the total budget.
• A typical objective and task method have three steps:
▪ Identifying objectives: In this step, the firm identifies the sales objectives and results it wants to achieve.
▪ Identifying tasks: In the second step, the firm determines the specific tasks that will help achieve the
desired objectives.
▪ Estimating costs: In the last step, the firm determines how much money is needed to complete each task and
then allocates that amount to the sales budget.
195
Zero Base Budgeting

• In the zero base budgeting method, the sales budget for each year is initiated from scratch or zero base.
• The managers reassess all the line items in the cash flow statement and then justify the expenses that would
be incurred along with the revenue that will be generated by the sales department of the firm.
• The zero base budgeting method does not automatically transfer any line item from the previous budget to the
new budget. It does not depend on previous budget data and requires justification for every line item.
• Traditional budgeting lays more focus on controls based on the expenditure, zero-based budgeting lays more
focus on the reason behind each expenditure. It focuses on identifying a task and its associated cost and then
allocating these expenses regardless of the current expenditure structure.
196
• Zero-based budgeting has the following merits:

▪ It helps to minimise costs by keeping expenditures in check and preventing the budget from expanding.
▪ It encourages the strategic allocation of resources.
• Zero-based budgeting has the following demerits:
▪ It can promote short-term thinking.
▪ It is more resource-intensive, time-consuming, and complex than traditional budgeting.
197
Types of Sales Budgeting
• In sales budgeting, there can be different types of budgets that enable an organisation to maximise its
resources, eliminate waste, and increase its revenue.
• Different types of sales budgets are as follows:
Sales Budget
• A sales budget estimates the sales in units and the revenue generated from sales.
• A sales budget specifies the amount of money a business is willing to spend on sales-related expenses for the
given time period. It covers various business expenses, ranging from sales taxes to the sales team’s salaries,
rent payments, and utilities.
• The format of the sales budget is generally monthly or quarterly; the sales budget can be presented in the
annual format but that way, too much information is grouped together.
198
• For a business with a large number of products selling spread over a bigger geographic area, it is better to
group expected sales into a smaller number of product categories or geographic regions.
• The purpose of a sales budget is to help a firm decide its expenditure on sales activities.
• A sales budget is a critical element of professional selling. A budget helps in the growth of a business by
determining what is needed and how much should be spent on it.
Selling Expense Budget

• The selling expense budget is the estimated amount that will be incurred on selling expenses in one accounting
period.
• Every firm has to spend a certain amount on selling and administrative expenses that are not dependent on the
manufacturing units.
199
• Selling expenses budget includes those expenses that are needed to achieve the objective of making sales such
as sales commissions, advertising and promotion, store displays, and distribution costs.
• Selling expenses are fixed costs that will be paid on monthly basis.
• Distribution costs include costs incurred in getting the product to the customer.
• The selling expense budget is prepared by the senior-level managers in the sales and marketing department. It
is aligned with the sales objectives of the organisation, i.e., the selling expense budget estimates the selling
expenses needed to achieve the desired sales goals.
200
• The important components of the total selling expenses budget are given below:
▪ Selling personnel costs: The salesperson is directly involved in selling the product, therefore, the salaries
and commission paid to the salesperson fall under selling expenses.
▪ Advertising and promotion expenses: Product placement done by advertising the product through various
platforms is important for selling the product. Hence, advertising and promotional expenses fall under
selling expenses. These are generally fixed.
▪ Variable selling expenses: Variable selling expenses include ordering costs, handling costs, and other selling
expenses that are incurred only when sales are made and the product needs to be distributed to the
customer.
▪ Additional selling expenses: Various expenses such as supplies, travel, etc. also fall under selling expenses.
201
Sales Department’s Administrative Budget

• The sales department’s administrative budget comprises an estimate of all selling, general, and administrative
expenses for an accounting period.
• The administrative budget only considers costs not directly associated with sales or production but needed to
run the sales function. It includes executive salaries, depreciation, amortisation, consulting, legal fees, rent,
insurance, and office supplies.
• An administrative budget helps the management to exercise control of the day-to-day activities of the firm.
• The administrative budget includes all the expenses that a business would incur even if there was no sales
activity.
• The information included in the administrative budget is not directly drawn from other budgets.
202
• The estimate of administrative expenses is derived from the overall corporate activity instead.
• To estimate costs for this budget, it is useful to determine the activity levels at which incremental costs may be
incurred and include them in the budget.
• Incremental budgeting is a simple way to derive the administrative expense budget, where the estimates are
based on the last budget and adjusting the figures by 5 or 10 percent and using the result as the current
budget.
203
Steps in Preparation of Sales Budget
• The budgeting process typically comprises the following steps:
Research and analysis to assess the market conditions
Preparing a sales forecast based on past data and market conditions
Prioritising the objectives determined in the planning process
Evaluating and quantifying the total available resources
Determining and quantifying the inputs and activities needed to achieve

the desired objectives.
Allocate a part of the total resources towards each input or activity
204
• There are two approaches for preparing the sales budget for a company:
Top-down budgeting
Bottom-up budgeting
Top-down Budgeting
• In the top-down budgeting method, the top management prepares a high-level budget based on the firm’s
objectives and allocates the amounts for the individual departments including sales.
• The sales department managers prepare their budget based on these numbers.
205
• The top management uses the previous year’s budget and financial reports, past data, current market
conditions, and macroeconomic factors to prepare the high-level budget.
• Top-down budgeting suits smaller business structures where the chain of command between the top
management and lower-level managers is shorter.
Top-down Budgeting Process

• The top-level budgeting process begins with top-level executives meeting to set targets for sales, expenses, and
profits.
• The finance department then allocates budgets to the other departments.
• The sales department now prepares its detailed budget, expressing the sales function in terms of resources.
206
• The detailed budget from the sales department is sent back to the finance department that then reviews it to
ensure that it is aligned with the company’s overall goals.
• The budget may need revisions, after which it is finalised and entered into the system.
Advantages of Top-down Budgeting
It helps to focus on the overall growth of the organisation.
It ensures that department managers are aware of the top-level

management’s expectations.
It aligns departmental targets to the overall goals of the organisation.
It is less time-consuming and less resource-intensive.
207
Disadvantages of Top-down Budgeting
Departmental managers are less

involved in the budget-making process,
potentially decreasing their motivation
to ensure its success.
Top-level managers may set unrealistic

targets which may be challenging for
lower-level managers to achieve.
Without inputs from the key people

involved, budgets can often be
insufficient or excessive.
208
Bottom-up Budgeting
• Bottom-up budgeting begins at the department level, moving up to the top level. Here the various departments
compile their targets and cost estimates for the given accounting period.
• All the individual estimates are then added to get the overall budget of the organisation.
• In this method, the managers of each department provide their inputs since they are more familiar with the
day-to-day operations of the company.
Bottom-up Budgeting Process

• In bottom-up budgeting, targets and resources are estimated at the most detailed level, reporting line item for
each unit or department.
209
• Once departments prepare their projections of activities and expenditures, the costs are added to arrive at the
total budget for the department.
• The budgets of all departments are then summed up to obtain the overall budget for the organisation.
• The top management reviews the budget to see whether the budget is aligned with the goals and objectives of
the firm for the accounting period. If the top management is not satisfied with the budget estimates, they may
ask the respective departments to revise the budgets and resubmit for approval.
• Once approved, the budget is sent to the finance department to allocate resources to individual departments.
210
Advantages of Bottom-up Budgeting
Estimates are more realistic and accurate because

department managers can understand the costs,
resources, and requirements of their respective
departments better.
There is more attention to detail regarding the

targets and resources needed to achieve those
targets.
When managers are involved in the budget-

making process, their motivation to achieve the
targets is higher.
211
Disadvantages of Bottom-up Budgeting
If errors occur at department levels in

the estimation, they can compound when
individual budgets are added up.
Sometimes managers can estimate more

resources than needed while keeping
targets low to improve their chances of
exceeding targets.
It generally takes more time than top-

down budgeting.
212
Sales Management – Session 5
Chapter 5 : Sales Quotas
213
Meaning & Purpose of Sales Quota
• A sales quota is defined as a quantitative sales target assigned to a particular sales unit for a specific period.
This unit may be a particular region, sales team, or individual salesperson.
• Sales quotas help to stimulate a sales unit to perform its best and support the sales objectives of the firm.
• Apart from motivating the salesperson or team, sales quotas also act as a basis for establishing incentives,
compensation plans, and standards for performance evaluation.
• Sales quotas enable managers to understand how productive their sales teams are and whether the sales
processes are functioning optimally.
• Sales quotas can be measured in various ways, such as net profits, sales volumes, or activity.
214
• Sales quotas have the following role in an organisation as shown below:
Provide targets,
Create standards
compensation
for evaluating
plans, and
performance
incentives
Control selling Highlight successful

activities salespersons
Monitor and
regulate selling
expenses
215
• Two methods are commonly used for creating sales quotas:

▪ Top-down Approach: In the top-down approach, the top management establishes the sales goals for the
specified time that align with the overall objectives of the firm and then assigns sales quotas to support
these goals.
▪ Bottom-up Approach: In contrast to the top-down approach, the bottom-up approach analyses the past sales
data of each salesperson or team and uses this information to generate sales quotas. The bottom-up
approach establishes a quota at the upper limit of sales that salespersons have achieved in the past and can
therefore set more realistic goals.
216
Types of Sales Quota
• Sales managers can use various types of quotas for their teams. The common types of sales quotas that
managers use are:
Sales
Activity
Volume
Quota
Quota
Expenses
Profit Quota
Quota
217
Sales Volume Quota

• The most widely used sales quotas are based on sales volume.
• Sales volume quota includes sales in terms of units sold over a specified period. It is typically established for
one year and the sales force needs to achieve their assigned quotas over the year.
• Sales volume quotas motivate salespersons to achieve certain targets over the year, for instance, register a
certain number of new users.
• Sales volume quotas help to even out the sales of slow-moving and fast-moving products and also the different
categories of customers per sales unit.
• The sales volume quota may be set in monetary or sales unit terms.
• Sales volume quotas in terms of sales units are more suitable for products whose unit price is high or in
markets where prices fluctuate significantly.
218
• Sales volume quotas in monetary terms are more suitable when multiple products are sold to one or different
categories of customers.
• Sometimes, sales volume quotas are set on a point basis, i.e., points are awarded when a specific level of sales
in units and monetary terms is achieved per product or customer.
Activity Quota
• While sales volume quotas are the most common types, another widely used alternative involves creating
quotas based on activity.
• Activity quotas help to ensure that important sales activities are performed within a given period.
• The common activities on which this quota is based include the number of sales presentations made, number of
prospect calls made, number of meetings, number of recovery calls made, number of sales closed, and number of
new clients acquired.
219
• Sometimes, activities that constitute the part of the sales process, but they do not translate directly into sales,
are also included.
• In a competitive market, the sales force may also need to perform activities related to market development to
build the reputation of the company.
• Activity quotas are useful because they motivate the sales force to perform not only the urgent selling activities
but also the non-selling market development-related activities that are important to the company, on time.
Profit Quota
• Profit quota is another common type of sales quota. Here, the sales force is expected to sell enough units or
subscriptions to generate a specified amount of profit for the given period.
• This type of quota is useful for companies that have products with a range of different profit margins.
220
• Profit quotas are, therefore, suitable for multiproduct companies, for example, FMCG companies, where
different products contribute to different levels of profits.
• They motivate the sales force to spend more time selling high-margin items and less time on less profitable
items.
Expenses Quota
• There are some companies that set quotas for expenses involving different sales levels achieved by the sales
team.
• The sales force is given a budget that is a percentage of a sales territory’s sales volume and is expected to spend
only that sum as expenses. This type of quota ensures that the sales force tries to keep selling costs within
acceptable limits.
• These quotas are difficult to set and may also demotivate the sales force.
221
Selling-by-Objectives Management
• Selling by Objectives (SBO) is a common concept in a selling organisation. Establishing sales quotas in a sales
organisation is an involved process and SBO management is a strategic management technique that aims to
improve the performance of the sales organisation by defining the selling objectives.
• SBO management is a managerial process where the management and sales persons come together to
determine the common objectives and agree on the anticipated results.
• The idea behind SBO is that when the management and employees together establish specific objectives, the
desired results, and the actions needed to achieve these results for the organisation in advance, it improves the
employees’ motivation to participate and commit to their work.
222
• SBO management sets future targets by treating the territory as a business and managing each account.
• SBO has the following key features:
▪ The salesforce is involved in setting the selling objectives of the organisation.
▪ Selling objectives are developed at both the qualitative and the qualitative levels.
▪ Selling objectives need to be both challenging and attainable.
▪ It aligns the overall objectives in the same direction.
223
• Following figure shows the advantages of SBO management:
Improves salesforce participation and motivation
Helps to set realistic and measurable goals
Improves communication and coordination
Improves productivity
224
Principles of Sales Quota
• The setting of sales quotas is a difficult process without a definite formula to follow.
• The key to establishing sales quotas is finding the right balance between being challenging and attainable.
• The principles of sales quota allow managers to create well-balanced sales quotas. These principles are shown
below:
Alignment
Objectivity Simplicity Accuracy Fairness
with strategy
Alignment
with
Attainability Flexibility Certainty Timeliness
compensation
plans
225

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Sales

FINANCE HR IT LOGISTICS PRODUCTION MARKETING

The simplest definition of marketing is: Marketing is engaging customers and

• There are five alternative concepts

Key elements of sales

• Some KPIs that can be considered for a sales analysis include:

Average purchase value

Sales per representative

Quote to close ratio

Sales lead to close ratio

Sales plan templates

Sales email templates

Sales compensation calculator

Online sales training

Sales enablement guides

Sales meeting checklist

• Some sales management practices used by today’s firms are:

• Selling services is different from selling products because,

Creating Value in the Service Economy - Why

2. Inseparability of production and consumption

•Same level of services may not be provided at all time

•Service cannot be standardized as performed by Humans

•Thus service organization to maintain consistency

Ways to Overcome Heterogeneity:

▪Recruitment & Selection of Internal Customers

▪Training external customers

•Services cannot be inventoried or stored for future consumption

•Example: Hotel room.

•Ways to Overcome Perishability:

• Over Marketing - Example: Airlines

•Managing Demand – (Estimation & Forecasting)

• Customers obtain temporary rentals, hiring of personnel, or access

• Pricing often based on time

• Customer choice criteria may differ for renting vs. purchase--may

• Success depends on satisfied customers in the long-run

• Customer relationship maintenance is critical.

• Retaining a group of satisfied customers essential.

PHYSICAL GOODS SERVICES

Production And Distribution Are Separated Production, Distribution And Consumption

Core Value Processed In Factory Core Value Produced In The Buyer-seller

Transfer Of Ownership No Transfer Of Ownership

Helps in achieving sales targets

Promotes organisational growth

Motivates the sales force

• Sales management plays a critical role in deciding whether a business

• Skills needed to become a successful sales manager are:

Mentoring and motivational skills

Ability to allocate duties and responsibilities

Advantages of Personal Selling

✓ Information from Inventory Control Department to Purchase Department to

✓ Purchase department invites quotations from suppliers (In suppliers: Suppliers

3. New task buy:

✓ This buying situation arises when the organisation is thinking of buying a

✓ Best opportunity for suppliers to be a part of the approved vendor list

✓ Purchase department to involve lot of people in purchase decision (I time)

Situations Conducive to Personal Selling

✓ The product is in an introductory stage and demand needs to be generated

✓ The product needs to be customised according to specific consumer needs

✓ The product’s features need to be demonstrated