This establishes what the company's actual sales will be at a given degree of the company's marketing effort, while the sales potential assesses which sales are possible at various levels of the marketing effort, assuming certain environmental conditions exist..
Also called as, the technique that allows you to calculate sales projections in a fast and reliable way, using as data sources, either inventory transactions or invoicing of sales made.
It also allows estimating demand for the future, based on historical information generated by the movement of products from the Inventory Control module or by sales from the billing module.
Advantage:
Support for decision-making by Marketing, Sales and Production Management by providing them with consistent and accurate information, which is calculated using forecasting mathematical models, historical data on sales behavior and the judgment of executives representing each involved department of the company.
Greater security in handling information related to company sales.
Great flexibility in forecasting and creating and comparing multiple scenarios for projected sales analysis purposes.
Supports the decisions of the Sales department in an efficient and timely manner, by forecasting the guidelines of the products and the demands established within the Master Production Plan.
Generally accepted techniques for forecasting fall into five categories: executive judgment, surveys, time series analysis, regression analysis, and market testing. The choice of method or methods will depend on the costs involved, the purpose of the forecast, the reliability and consistency of the historical sales data, the time available to make the forecast, the type of product, the characteristics of the market, the availability of the necessary information and the expertise of those in charge of making the forecast. Typically, companies combine various forecasting techniques.
1- Executive judgment
It is based on the intuition of one or more experienced executives regarding products in stable demand. Its disadvantage is that it is based only on the past and is influenced by recent events.
2- Surveys
a) Customer Forecast Survey
Useful for companies that have few clients. They are asked what type and quantities of products they intend to buy during a certain period. Industrial customers tend to give more accurate estimates.
These surveys reflect purchase intentions, but not actual purchases.
b) Forecast Survey of the Sales Force
Sellers estimate expected sales in their territories for a certain period. The sum of the individual estimates make up the forecast of the Company or the Division. The downside is the tendency of sellers to make very conservative estimates that make it easier for them to obtain future commissions and bonuses.
c) The Delphi Method (Delphi)
Experts are hired to make initial forecasts that the company averages and returns to them to refine individual estimates. The procedure can be repeated several times until the experts - working separately - reach a consensus on the forecasts. It is a high precision method.
3- Time Series Analysis
Historical company sales data is used to uncover seasonal, cyclical, and random / erratic trends. It is an effective method for products with reasonably stable demand. Using moving averages, we first determine whether a seasonal factor is present. With a simple linear regression system we determine the trend line of the data to establish whether a cyclical factor is present. The random factor will be present if we can attribute erratic behavior to sales due to non-recurring random events.
4- Regression Analysis
It is about finding a relationship between historical sales (dependent variable) and one or more independent variables, such as population, per capita income or gross domestic product (GDP). This method can be useful when you have historical data that covers long periods of time. It is ineffective in forecasting new product sales.
5- Market Test
A product is made available to buyers in one or more test territories. Purchases and consumer response to different marketing mixes are then measured.
Based on this information, sales are projected for larger geographic units.
It is useful for forecasting the sales of new products or those of existing products in new territories. These tests are costly and time consuming, and they also alert the competition.
I- Objectives of the sales force. Sales force objectives should be based on the character of the company's core markets and the company's desired position in these markets. Person-to-person sales are the most expensive contact and communication tool the company uses.
On the other hand, person-to-person sales are also the most effective tool in the stages of the buying process, such as buyer education, negotiation, and closing stages. It is very important that the company carefully considers where and when to use sales representatives to facilitate the marketing effort.
Sales representatives perform one or more of the following tasks for their companies:
• Prospecting: they seek and cultivate new clients.
• Distribution: they decide how to distribute their scarce time between potential clients and already regulars.
• Communication: they skillfully communicate information about the company's products and services.
• Sales: they know the art of selling: approach, presentation, responses to objections and closing of sales.
• Service: they provide various services to clients: consulting, technical assistance, financing design, and expediting shipments.
• Information gathering: they carry out market research and recognition work and customer information.
• Assignment: they decide to which customers to assign products during periods of scarcity of the same.
Typically, companies define specific goals for their sales force. If no standards are established, sales reps can spend most of their time selling established products to existing accounts, and neglect new products and leads.
The job mix of sales reps varies depending on the state of the economy.
During times of product shortage, sales reps find they have nothing to sell. Some companies conclude that they need fewer sales reps. But this mindset does not consider the other roles the salesperson plays: assigning the product, consulting with dissatisfied customers, communicating the company's plans to remedy shortages, and selling other products that are not in short supply.
As companies move toward a more market-intensive orientation, their sales forces need to become more market-focused and more customer-oriented. The traditional view is that the salesperson should be concerned about volume and selling, and that the marketing department should be concerned about the strategy and profits of marketing. The latest perspective is that salespeople must know how to generate customer satisfaction and profit for the company. They must know how to analyze sales data, measure market potential, gather information from it, and develop marketing strategies and plans.
II- Role of the Sales Representative
• Development and management of sales in your geographical area.
• Monitoring of the sales of the client portfolio.
• Lead the commercial negotiation strategy with companies.
• Report to your sales manager
III- Sales force strategy
Companies compete with each other to get customer orders. They must strategically deploy their sales force to be able to reach the right customers at the right time, and in the right way. Sales representatives work with clients in a variety of ways:
• From sales representative to buyer.
• Sales representative to buyer group.
• Sales team to buyer group.
• Sales through conferences.
• Sales through seminars.
The current sales representative often acts as the "account manager," who contacts various people in the purchasing and sales organizations. Sales increasingly require teamwork and support from other human resources, such as senior management, technical staff, customer product representatives, and the office person.
The company can use a direct or contractual sales force. A direct (or company) sales force consists of part-time or full-time employees who work exclusively for the company. This sales force includes inland sales personnel, who conduct business from their office, and field sales personnel, who travel and visit clients. A contractual sales force consists of representatives of manufacturers, sales agents or intermediaries, who receive a commission based on their sales.
IV- Structure of the sales force
If the company sells a product line to a certain type of industry with customers in many places, the company uses a territorial sales force structure. If your company sells many products to many types of customers, you may need a product or market structure for your sales staff.
Structure options for the sales force:
Territorial structuring: in the simplest sales organizations, each representative is assigned an exclusive territory in which he will represent the entire line of the company. This type of organization has the advantages of:
- Generate a clear definition of the seller's responsibilities. Territorial responsibility increases the sales rep's incentive to cultivate local business and personal relationships. Travel expenses are low.
When designing the territories, the company looks for certain territorial characteristics: the territories are easy to manage, their sales potential is easy to calculate, they reduce the total travel time, and they provide a sufficient and fair total workload as well as the potential sales for each salesperson. These characteristics are achieved by deciding the size and shape of the territory.
Territory size: can be designed to provide the same sales potential or the same workload. Equal potential territories provide each sales rep with the same revenue opportunities and provide the company with a benchmark to assess efficiency. However, because the density of clients varies in each territory, territories with equal potential can vary widely in size.
As an option, the territories can be designed in a way that equalizes the workload.
Each sales representative can adequately cover their territory. However, this principle causes certain variations in the potential for territorial sales.
Territory Shape: Territories are formed by combining smaller units, such as counties or states, until they are added to a territory of a specific sales potential or workload.
The territorial design must take into account the situation of natural barriers, the compatibility of adjacent areas and the adequacy of transportation and similar factors. The form can influence the cost and ease of coverage and the satisfaction of sales representatives. The most common territories are circular, cloverleaf, or wedge-shaped.
Structuring by product: the specialization of products is guaranteed in a particular way where the products are technically complex, little related or very numerous. This specialization may not be the best method if the company's different product lines are purchased by the same customers.
Structuring according to the market: companies usually specialize their sales force according to lines of industries or clients. You can define separate sales forces for different industries and even for different customers. The most obvious advantage of market specialization is that each sales representative can gain insight into the specific needs of customers. The main disadvantage arises when the various types of clients are dispersed throughout the country.
Complex Structures - When a company sells a large number of products to many types of customers over a large geographic area, it often combines several principles of sales force structure. Representatives can specialize by territory - product, territory - market, product - market, etc. A sales representative can then report to one or more line managers and personnel managers.
V- Size of the sales force
Once the company clarifies the strategy and structure of its sales force, it is ready to consider its size. Sales representatives are one of the most productive and expensive assets in the company: increasing their number increases both sales and costs.
Once the company determines the number of customers it wants to reach, it can use a workload approach to establish the size of the sales force, which consists of the following steps:
to. Customers are grouped into size classes based on annual sales volume.
b. The desired frequency of calls is established for each class.
c. The number of accounts in each size class is multiplied by the corresponding call frequency to arrive at the total workload for the country, in sales calls per year.
d. The average number of calls a sales representative makes per year is determined.
and. The number of representatives needed is determined by dividing the total annual calls required by the average annual calls made by a sales representative.
VI- Compensation of the sales force
On the one hand, sales representatives prefer regular income, extra compensation for excellence in performance, and fair pay for experience and seniority. On the other hand, management wants to achieve control, economy and simplicity.
The level of compensation should bear some relation to the current market price for the type of sales work and skills required. Paying less would decrease the desired quantity or quality of applicants, while paying more would be unnecessary. However, the market price for sellers is seldom well defined.
The company must determine the components of the compensation: fixed amount, a variable amount and expenses and fringe benefits. The fixed amount can be a salary or expense account, it must satisfy the need for income stability of the representatives. The variable amount can be in commissions, bonuses or profit sharing, intended to stimulate and reward the effort. The expense account allows the representative to meet the expenses derived from travel, lodging, food and entertainment. And fringe benefits, such as paid vacations, sickness or accident benefits, pensions, and life insurance, are intended to provide job security and satisfaction.
Sales management must decide on the relative importance of these components in the compensation plan. A popular rule estimates that 70% of the seller's total income is fixed, with the remaining 30% allocated to other items. Fixed compensation is given more emphasis in jobs with a high ratio of sales duties to non-sales duties, and in jobs where the sales work is technically complex and requires teamwork. Variable compensation is given more emphasis in jobs where sales are cyclical or dependent on the initiative of sales staff.
