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Sales Effort
SALES FORECASTING
Sales forecasting is the process of planning the sales of various items or
products during the year in advance
• Sales forecasting is normally done by the sales departments directly
involved in selling, since this in turn also sets the targets for the sales
person
• Sales forecasting is also the base for calculations of the financial figures
and budgets of the organisation
• It is therefore very important that every possible care is taken in
forecasting
Following are the sales forecasting methods;
1. Jury of executive opinion
BUDGETARY PROCEDURE
• Basically starts with sales department where the basic structure is
prepared with the revenue expected (of course based on the sales
forecast)
• Based on these figures, all departments prepare their expenses and other
activities for the year
Planning is either Top down or Bottom up
• In case of Top down, the top management sets the objectives and targets
which have to be followed and accordingly the budget is prepared
• This follows the ‘Theory X’ which says people need to be told what needs
to be got done, since they dislike work and shirk responsibility
• While bottom up follows ‘Theory Y’ where people like work and take
responsibility willingly and achieve objectives of the organisations.
SALES MANAGEMENT
Sales Effort
Errors in Budgets
• Conditions actually vary as compared to the time when prepared (change
in demand
• Sudden change in some raw material costs, and not necessarily be
passed on to the customers
• Change in technology
• Change in government policies
The organisations therefore must have a system to review the operations
regularly and in case of justified change in conditions, changes are accepted
and made. Sometimes even correction is made and revised accordingly.
Some companies even prepare flexible budgets because of not being able to
get accurate data of forecast. They therefore prepare alternate budgets based
on different estimates and assumptions
When the budget has errors due to faulty forecasting, the accepted
procedure is to alter estimates by applying standard ratios of costs to
the adjusted volumes of business. This practice is normally accepted by
most companies.
SALES MANAGEMENT
Sales Effort
QUOTAS
Quotas are the quantitative objectives assigned to an area, individual (a profit
centre, an individual sales man, an agent/distributor )
These then form the basis for appraising effectiveness, evaluation of the
performance levels, of all budgeted items such as;
• The volume of sales
• Expenses etc.
Quotas are therefore devices for directing and controlling operations
Management bases quotas on;
• The derived information from sales forecasts
• Market studies
• Sales potential and
• Cost estimates
SALES MANAGEMENT
Sales Effort
TERRITORIZATION
The placement of suitable staff/salesmen to look after a group of customers /
locations are an important task
This allocation of responsibility is called as territorization
The ultimate aim is to break the total market into smaller areas classified as
‘Territory’ which helps in planning and controlling the ultimate achievements
Territorization is aimed at;
1. Controlling selling expenses
• Good design of territory with deployment of proper sales force helps
in optimising the sales volume and expenses
• Salesman out on tour with minimum time spent per call or
• Maximising calls with highest output at lowest cost
1. Evaluation of sales personnel
SALES MANAGEMENT
Sales Effort