Sales Management - An Overview

The art of meeting and exceeding the sales goals of an organization through effective
planning, controlling, budgeting and leadership refers to sales management.

Sales Management helps the organization to achieve the sales targets efficiently.

Process of Sales Management

1. Sales Planning
 Marketers must plan things well in advance for the best results. It is essential
to have concrete plans. Mere guess works do not help in business.
 Know your product well. Sales professionals must know the USPs and
benefits of the product for the consumers to believe them.
 Identify your target market.
 Sales Planning makes the products available to the end users at the right time
and at the right place.
 Sales Planning helps the marketers to analyze the customer demands and
respond efficiently to fluctuations in the market.
 Devise appropriate strategies to increase the sales of the products.
2. Sales Reporting
 Sales strategies are implemented in this stage.
 Check the effectiveness of the various strategies. Find out whether they are
bringing the desired results or not.
 The sales representatives should be aware of their roles and responsibilities in
the organization.
 It is essential for the organization to evaluate the outcome of proposed
strategies for any particular department. Organizations depend on KPI also
called Key Performance Indicator or simply Performance Indicator to measure
the effectiveness of implemented strategies.
 Ask the sales team to submit reports of what all they have done throughout the
week. The management must sit with the sales team frequently to assess their
performance and chalk out future course of actions.
 Mapping individual performance over time is essential.
3. Sales Process
 Sales representatives should work as a single unit for maximum productivity.
A systematic approach results in error free work.
 The management must make sure sales managers follow a proper channel to
reach out to the customers. It pays to adopt a step by step approach.

Sales professionals should follow the below mentioned steps for maximum sales and
better output. Do not ignore any step.

i. Initial Contact/Lead
 Collect necessary data of potential customers once the target market is
decided.
ii. Information Exchange
 Inform the customers about various product offerings.
  Make the customers aware of your brand and its benefits.
 The information exchange can be either:

Over the telephone or

Face to face interaction with the potential customer.

iii. Lead Generation

 Make a list of the people who show inclination towards purchasing your
organization’s products or services.
 The sales representatives must identify those who have the potential to buy
their products.
iv. Need Identification
 Fix a meeting with the prospective buyers. Sit with the client and try to find
out more about his needs and expectations.
 Suggest them various options which would fulfill their demands.
v. Qualified Prospect
 Identify individuals who are keen on purchasing your company’s products or
services.
vi. Proposal
 Once the buyer agrees to purchase particular products, the seller presents a
written proposal to him quoting the rates as well as other necessary terms and
conditions. Such a document is often called a proposal.
vii. Negotiation
 Negotiation is a stage where two parties (buyer and seller) discuss and
negotiate for the best deal beneficial to all.
viii. Closing of Deal
 This is the stage where the transaction between the seller and buyer takes
place. The selling happens in this stage.
ix. After Sales Service
 Keep in touch with the customers even after the purchase for higher customer
retention.

Sales Management: Functions and

Importance of Sales Management
Sales management facilitates the directions of activities and functions which are involved in
the distribution of goods and services. According to Philip Kotler, “Marketing management is
the analysis, planning implementation and control of programmes designed to bring about
desired exchanges with target markets for the purpose of achieving organisational objectives.

It relies heavily on designing the organisations’ offering in terms of the target markets needs
and desires and using effective pricing, communication and distribution to inform, motivate
and service the market.”

Sales or marketing management is concerned with the chalking out of a definite programme,
after careful analysis and forecasting of the market situations and the ultimate execution of
these plans to achieve the objectives of the organisation. Further their sales plans to a greater
extent rest upon the requirements and motives of the consumers in the market aimed at.
To achieve this objective the organisation has to give heed to the right pricing, effective
advertising and sales promotion, discerning distribution and stimulating the consumer’s
through the best services. To sum up, marketing management may be defined as the process
of management of marketing programmes for accomplishing organisational goals and
objectives. It involves planning, implementation and control of marketing programmes or
campaigns.

Functions:

(i) Sales research and planning.

(ii) Demand creation.

(iii) Sales costs and budget.

(iv) Price fixations.

(v) Development of products.

(vi) Establishing sales territories.

(vii) Co-ordination of sales.

These functions differ from company to company according to their size and the nature of
their products.

Importance of Sales Management:

Sales management has gained importance to meet increasing competition and the need for
improved methods of distribution to reduce cost and to increase profits. Sales management
today is the most important function in a commercial and business enterprise.

The following are the other factors showing importance of the sales management:

(i) Introduction of new products in the market.

(ii) Increasing the production of existing products.

(iii) Reducing cost of sales and distribution.

(iv) Export market.

(v) Development in the means and communication of transportation within and outside the
country.

(vi) Rise in per capita income and demand for more goods by the consumers.

The Process of Personal Selling (6 Steps)

1. Prospecting:

Searching for prospects is prospecting. Here, prospect is a person or an institution who is

likely to be benefited by the product the salesman wants to sell and can afford to buy it.

Prospecting is the work of collecting the names and addresses or persons who are likely to
buy the firm’s products and services. Provide encompasses even the discovery of special
needs and multiplying the sales with existing clientele.

While collecting the details, ‘suspects’ must be separated from ‘prospects’ to avoid or reduce
waste of time, treasure and talent. There are definite methods of prospecting.

The most popular ones are:

1. Endless chain method,

2. Centre of influence method,

3. Personal observation method,

4. Spotter’s method,

5. Cold-canvas method;

6. Direct mail and

7. Telephone method.

2. Pre-approach:

Pre-approach is to get more detailed facts about a specific individual to have effective sales
appeals on him or her. It is a record round effort to get details regarding the prospect such as
his ability, need, authority, accessibility to buy; it is a closer look of prospects, likes and
dislikes, tastes, habits, financial status, social esteem, material status, family background and
the like.

The objectives of pre-approach are to providing additional qualifying information; to design

an effective approach strategy; to better the planning information; to avoid serious errors and
to build-up confidence.

The sources of information are his fellow salesmen, customers, local newspapers, special
investigators, sales office, directories, observation and the prospect.

3. Approach:

Approach means the meeting of the prospect in person by the salesman where he makes face
to face contact with prospects to understand them better. Approach is such a delicate and
critical stage of the sales process that the sales are either won or lost.
Approach is stepping stone for sales presentation. It is because of this delicacy that sales are
likened to a chain where break of one link will break it into useless lump of hooks.

Success follows the salesman who possesses courage, courtesy and confidence. The
objectives of approach are: To help the salesman to make a favourable impression; to amplify
the detailed information obtained by the salesman at pre-approach level; to convert the
favourable attention of the prospect easily and smoothly into the sales proposition.

4. Presentation and demonstration:

Presentation implies an array and decoration of articles in the shop. It is the heart of selling
process. Effective presentation has the capacity to convince the customer of his sales
proposition. It creates and holds the interest of customers towards the products. It would be
wrong to assume that all those who enter the shop do buy the products.

Normally, most of the prospects visit the shop to see prior to their decision to buy. This
casual visit can be a commitment visit provided products are displayed, presented and
demonstrated by the salesmen in an appealing manner. Demonstration is a part of
presentation because, more description is not enough.

Demonstration is the crucial task of providing the proofs and providing the statements about
quality, utility, performance and service of a product by evidences of experiment, operation
or a test.

The significance of demonstration lies in reducing the sales talk, facilitating the comparison,
appealing to senses, fortifying the sales talks and convincing the fastidious customers. Here,
A-I-D-A approach works wonders.

5. Overcoming objections:

For a creative and persuasive salesman, the process of selling really starts when the prospect
raises objections. In absence of sales resistance the salesman is merely an order booking
clerk. For every action of salesman there is prospect’s pro-action or reaction that is, approval
or disapproval.

Each salesman should understand the reasons as to why prospects raise objections because;
each objection has its roots in the buying decision. An objection is the expression of
disapproval of an action taken by salesman; it is an adverse reason or an argument indicating
clearly that the prospect is not yet ready to buy.

These objections may be genuine or mere excuses. Overcoming objections is really a delicate
stage that makes or mars the unbroken chain of selling process.

Being a very crucial aspect, the experts have a set procedure for overcoming the objections
namely, listen to the prospect cushion the jolt anticipate the objections and prevent their
occurrence. It is the creative task of bringing the customer to the sales track once again.
6. Closing:

All the earlier stages of sales talk namely, prospecting, pre-approach; approach, presentation
and handling the objections have been designed to induce the prospect to make decision to
buy so that a sale can be concluded.

The success in earlier stages will lead to the last stage of closing the sale and clinch the deal.
Here, ‘close’ means the act of actually getting the prospect’s assent to the sales proposal or he
gets an order.

The underlying point of closing sale is to persuade the prospect to act right now than
postponing or delaying the action. It is here that the prospect is turned into a customer desire
into demand.

Though it sounds very easy, it is the most difficult task. It is the positive attitude and self-
confidence that plays a decisive role in converting wish into desire and desire into demand. A
poor closer is a poor salesman and salesman who cannot close well will have to close the line.

The Evolution of Personal Selling

Definition of Personal Selling

Person-to-person communication with a prospect for building personal relationships with

another party which salesperson attempts to persuade a buyer to make a purchase, that results
in both parties obtaining value. Personal selling is also a part of the Consultative Selling
Model (Manning 2014).

Personal selling is a process of:

 Developing relationships

 Discovering needs

 Matching products with needs

 Communicating benefits

Involves three prescriptions:

 Adopt the marketing concept

 Value personal selling
 Assume the role of problem solver or partner

Marketing concept

It refers to the business decision-making, organization and management of marketing

activities, which is a corporate business philosophy. It is an idea, an attitude, or a corporate
way of thinking. The key to achieving organizational goals is to correctly determine the target
market needs and wants, and more effectively than the competition. by study how to adapt
and stimulate consumer demand, and then to meet this needs and wants by transferring goods
or services to consumers, and finally achieve the sale.

Reason of Personal Selling Evolved

 Increased competition
 Increased customer demand

Selling has moved from peddling to long-term relationships, consultative selling, and value-
added partnering (Manning 2014). These changes have been prompted by the emergence of a
marketing concept. Modern marketing concept is showing a trend of diversification
objectives, not only the pursuit of quantity of goods sold, but also the pursuit of more high-
quality targets, such as identifying prospects, positioning your product, handling objections,
establishing commitment and building relationships that lead to future sales.

Production Orientation (early 19thcentury).

During this period, those companies organize and make use of all resources, focus on
everything in its power to increase productivity and expand distribution reach, and reduce
costs. Production-oriented organization will focus primarily on increased production and
lower costs through mass production and in order to create economies of scale.

Characteristics

• The basic strategy is reducing product costs and increase profit purposes.

• Marketing myopia: Short sighted and inward looking approach to marketing that focuses on
the needs of the firm instead of defining the firm and its products in terms of the customers'
needs and wants (Levitt 1960).

‘If You Built It, They Will Come’

The line in the movie was "If you build it, he will come" (Field of Dreams, 1989). And it was
said by a voice telling a corn farmer. He then interprets this as an instruction to builds a
baseball field in the middle of his cornfield. When the field is done, Thousands of people
come from miles away to see the games. This business philosophy showing that if you
believe the impossible, the incredible can come true.

Obviously, the typical production concept is "what we produce, we sell what." which guiding
the marketing activities. Consumers are forced to accept goods on the market, thus forming a
seller's market. In a seller's market conditions, producers do not have to worry about product
sales do not go out. Therefore, the main concern to the operators are not sales but production.
Although the production-oriented concept formed in the early development of commodity
economy, but lack of overall marketing awareness.

Selling Orientation (mid 19thcentury)

At this stage the total commodity production has exceeded market demand. Objective is to
sell as many products as they could, often ignore a clear margin. Products are "sold" rather
than "bought." Salesperson are committed to the promotion of products and advertising
campaigns, in order to persuade, and even force the consumer to buy.

Characteristics

• The specific performance: "I will sell anything, just trying to get people to buy anything."

• Actively selling and heavy promotion to induce consumers to buy products.

Commoditization emerged

The product life cycle shows that, as product categories mature, they reaches a commodity
status. Some customers get used to the great quality and service provided and begin to view
the product as a commodity. Once this happens, the salesperson’s perceived value is
diminished and price became the distinguishing competitive advantage. Value-added services
is used to keep customers focused on value rather than price.

Limited opportunity for salespeople of competing products to persuade consumers that they
should switch model or brand by providing relevant comparative information and, perhaps,
by providing risk-reducing guarantees. Salespeople are requires to demonstrate a differential
advantage of one of their products over the competition.

Effect of Competition

Competition has greatly increased in most product areas, and demand for quality, value and
service by customers has risen sharply. In fast moving consumer goods (FMCG) markets, it
tends to be driven by competitive or retailer pressures. Pricing decision, particularly short-
term tactical price changes, are often made as a direct response to the actions of competitors

To gain further market share, salesperson must use other pricing tactics such as economy or
penetration. This method can have some setbacks as it could leave the product at a high price
against the competition (Kent 2004).

In today’s competitive world, it is more important than ever to implement a market orientated
strategy. In this digital age customers are able to research the products available on the
market fairly quickly. If an organization does not offer customers what they are looking for
(product and customer service), they will buy from a competitor that does. The customer
defined the business (Drucker 1964).

Marketing Orientation (late 19thcentury - present)

Formed in the 1950s. The concept that the key to achieving business goals is to discovering
and understanding the target market's needs and desires, and more effective than its
competitors, and salesperson do everything possible to satisfy the needs and desires of target
market.

Characteristics

• Marketing orientation refers to a business or organization based on market demand to

develop a operational plans.
• The corporation’s goal should be to meet the customer's needs and desires

Difference between Production orientation and marketing orientation

Marketing orientation is the history of enterprise marketing management thinking, a huge

breakthrough, compared with the traditional concept of operations, with the following
differences:

1. The production orientation places the production and sales center, marketing
orientation places customer demand for the center;
2. The production orientation strengthening sales functions, sell products to achieve
profits, but marketing orientation marketing by fully meet customer demand;
3. The production orientation is a short-term stimulus, to obtained large number of sales
profits in short-term, marketing orientation meets customer needs through a
comprehensive, long-term stability of the profits earned.

Sales marketing Interface

Scholars have pointed to many problem areas that may af¬‚ict this interface. For example,
researchers point to interfunctional con¬‚icts, differences in goal orientation, tension
regarding standardization and adaptation, and marketers’ disconnectedness from market
conditions as problem areas. Similarly, scholars indicate that turf barriers and differences in
culture or thought worlds pose challenges within this interface and strain the relationships
between sales and marketing (Dewsnap and Jobber 2000; Homburg and Jensen 2007).
Scholars also emphasize that better collaboration between sales and marketing can enhance a
¥rm's ability to provide better customer value (Guenzi and Troilo 2007)

The relationship between sales and marketing

The sales efforts influence, and are influenced by, decisions taken on the ingredients of a
company’s marketing mix, which in turn affect its overall marketing efforts. It is essential,
therefore, that sales and marketing be fully integrated.

In addition to changes in organizational structure, the influence of the marketing function and
the increased professional approach taken to sales has meant that the nature and role of this
activity has changed. Selling and sales management are now concerned with the analysis of
customers needs and wants, with the provision of benefits, to satisfy these needs and wants
(Kotler, Philip and Keller, L. Kevin 2012).

As with all parts of the marketing mix, the personal selling function is not a stand-alone
element, but one that must be considered in the light of overall marketing strategy. At the
product level, two major marketing considerations are the choice of target market and the
creation of a differential advantage. Both of these decisions impact on personal selling.

Marketing Concept Yields Marketing Mix

The marketing mix is a set of controllable, tactical marketing tools that consists of everything
the firm can do to influence the demand for its product (Don E. Schultz 2005). These
possibilities can be organized into four groups:
PRODUCT: Branding and brand image in particular are important as these provide
reassurance for a customer and facilitate relatively easy brand choice. Many products are
standard building materials but adding value to the product is important to personal selling.

Methods: price levels, credit terms, price changes, discounts

PRICE: Adjusting the price has a profound impact on the marketing strategy, and depending
on theprice elasticityof the product, often it will affect thedemandand sales as well.
Salesperson has to set the appropriate price which is the amount of money the customer
willing to pay for the products and services.

Methods: features, packaging, quality, range

PROMOTION: To allow the customer aware of the presence in market to enhance

popularity of the company. Provide information to the customer such as function and feature
of the product and how to get the product. To encourage the purchase or sale of a product.

Methods: advertising, publicity, sales promotion, personal selling, sponsorship

PLACE: Involve all those activities required to move goods and materials into the factory,
through the factory and to the final consumer. It often take place through intermediaries. The
channel can be used as a sales strategy that will be focusing on the high quality products
offered and the ability to offer customer satisfaction.

Methods: inventory, channels of distribution, number of intermediaries

Important Role of Personal Selling

Every salesperson must decide how much time and money to invest in each of the four areas
of the marketing mix. Since the beginning of the marketing concept, personal selling has
evolved (Manning 2014).

Evolution of personal selling

Sales and Marketing Emphasis Selling Emphasis
Marketing Era Begins
 More organizations recognize
(1950s)
salesperson is in a position to collect
product, market, & service
Organizations determine needs and wants of
information concerning the buyer’s
target markets and adapt themselves to
needs
delivering desired satisfaction; product
orientation is replaced by a customer
orientation
Consultative Selling Era Emerges
 Buyer needs identified thru two-way
communication
(Late 1960s to early 1970s)
 Information giving & negotiation
tactics replace manipulation
Salespeople are becoming diagnosticians of
customers’ needs as well as consultants
offering well-considered recommendations;
mass markets are breaking into target markets

Consultative Selling

In, the late 1960s and early 1970s, is an extension of the marketing concept (Manning 2014).
The sales person assumes the role of consultant and offers well-considered recommendations.
Negotiation replaces manipulation as the salesperson sets the stage for a long-term
partnership. The salespeople who have adopted consultative selling possess a keen ability to
listen, define the customer’s problems, and offer one or more solutions.

Service, retail, manufacturing, and wholesale firms that embrace the marketing concept
already have adopted or are currently adopting consultative-selling practices. Features of
consultative selling are as follows:

 Customer is a person to be served, not a prospect to be sold.

 Two-way communication identifies customer’s needs; no high-pressure sales
presentation.
 Emphasis on need identification, problem solving, and negotiation instead of
manipulation.
 Emphasis on service at every phase of the personal-selling process.

Conclusions

The evolution of personal selling have been outlined and discussed as an extension of the
marketing concept. As selling and sales management face increasing competition and
shorter deadlines, salesperson must discover more effective ways to meet the needs and
wants of the customer.

Sales efforts influence and are influenced by, the marketing orientation of an
organization. The implications of consultative selling has emerged as a form of personal
selling within the marketing orientated organization for sales activities and the role of
selling in the marketing program have been demonstrated.

Structure of the Sales Organisation:

The following factors are to be taken into consideration while designing the structure of
a sales organisation:

1. Nature of the market

2. Sales policies of the enterprise

3. Nature of the product

4. Number of products

5. Availability of financial resources

6. Level of distribution system

7. Size of the company

8. Price of the product

9. Ability of the professionals

10. Position of competitors’ Products.

Sales Organization Structure

Sales can have many organization structures, but the most typical corporation organizational
structure consists of the shareholder, board of directors, the officers and employees.

Though there are many forms of sales organization structure, creating the suitable one can be
difficult and challenging.

Companies can have many organization structures, but the most typical sales organizational
structure consists of the shareholder, board of directors, the sales supervisor, distribution
manager, business manager, promoting supervisor, logistics supervisor and employees.

This following image represents a basic sales organization structure for an enterprise.
Sales Forecasting: Meaning, Factors,
Importance and Limitations
Future is uncertain. Man thinks about future. He may be a businessman, a broker, a
manufacturer, a commission agent etc. All guess about the future in their respective field of
interest. We try to know, through a clear imagination, what will be happening in the near
future—after a weak, month or year. It can be called forecast or prediction. The process of
forecasting is based on reliable data of past and present. Forecasting is not new, as it has been
practiced from time immemorial.

Forecasting is one of the important aspects of administration. The comer-stone of successful

marketing planning is the measurement and forecasting to market demand. According to
American Marketing Association, “Sales forecast is an estimate of Sales, in monetary or
physical units, for a specified future period under a proposed business plan or programme and
under an assumed set of economic and other forces outside the unit for which the forecast is
made.”

A sales forecast is an estimation of sales volume that a company can expect to attain within
the plan period. A sales forecast is not just a sales predicting. It is the act of matching
opportunities with the marketing efforts. Sales forecasting is the determination of a firm’s
share in the market under a specified future. Thus sales forecasting shows the probable
volume of sales.

“Sales forecast is an estimate of sales during a specified future period, whose estimate is tied
to a proposed marketing plan and which assumes a particular state of uncontrollable and
competitive forces.” —Candiff and Still

Factors influencing a Sales Forecasting:

A sales manager should consider all the factors affecting the sales, while predicting the firm’s
sales in the market.

An accurate sales forecast can be made, if the following factors are considered carefully:

1. General Economic Condition:

It is essential to consider all economic conditions relating to the firm and the consumers. The
forecaster must see the general economic trend-inflation or deflation, which affect the
business favourably or adversely. A thorough knowledge of the economic, political and the
general trend of the business facilitate to build a forecast more accurately. Past behaviour of
market, national income, disposable personal income, consuming habits of the customers etc.,
affect the estimation to a great extent.

2. Consumers:

Products like, wearing apparel, luxurious goods, furniture, vehicles; the size of population by
its composition-customers by age, sex, type, economic condition etc., have an important role.
And trend of fashions, religious habits, social group influences etc., also carry weights.
3. Industrial Behaviours:

Markets are full of similar products manufactured by different firms, which compete among
themselves to increase the sales. As such, the pricing policy, design, advanced technological
improvements, promotional activities etc., of similar industries must be carefully observed. A
new firm may come up with products to the markets and naturally affect the market share of
the existing firms. Unstable conditions—industrial unrest, government control through rules
and regulations, improper availability of raw materials etc., directly affect the production,
sales and profits.

4. Changes within Firm:

Future sales are greatly affected by the changes in pricing, advertising policy, quality of
products etc. A careful study in relation to the changes on the sales volume may be studied
carefully. Sales can be increased by price cut, enhancing advertising policies, increased sales
promotions, concessions to customers etc.

5. Period:

The required information must be collected on the basis of period—short run, medium run or
long run forecasts.

Importance of Sales Forecasting:

1. Supply and demand for the products can easily be adjusted, by overcoming temporary
demand, in the light of the anticipated estimate; and regular supply is facilitated.

2. A good inventory control is advantageously benefited by avoiding the weakness of under

stocking and overstocking.

3. Allocation and reallocation of sales territories are facilitated.

4. It is a forward planner as all other requirements of raw materials, labour, plant layout,
financial needs, warehousing, transport facility etc., depend in accordance with the sales
volume expected in advance.

5. Sales opportunities are searched out on the basis of forecast; mid thus discovery of selling
success is made.

6. It is a gear, by which all other activities are controlled as a basis of forecasting.

7. Advertisement programmes are beneficially adjusted with full advantage to the firm.

8. It is an indicator to the department of finance as to how much and when finance is needed;
and it helps to overcome difficult situations.

9. It is a measuring rod by which the efficiency of the sales personnel or the sales department,
as a whole, can be measured.
10. Sales personnel and sales quotas are also regularized-increasing or decreasing-by
knowing the sales volume, in advance.

11. It regularizes productions through the vision of sales forecast and avoids overtime at high
premium rates. It also reduces idle time in manufacturing.

12. As is the sales forecast, so is the progress of the firm. The master plan or budget of a firm
is based on forecasts. “The act of forecasting is of great benefit to all who take part in the
process, and is the best means of ensuring adaptability to changing circumstances. The
collaboration of all concerned leads to a unified front, an understanding of the reasons for
decisions, and a broadened outlook.”

Types of Sales Forecasting:

The Economic Forecast:

This type of forecast is important to understand the general economic trend through a careful
study of Five Year Plans, Gross national products. National income, Government
expenditure, Unemployment, Consumer spending habits etc. This is in order to have an
accurate forecast. Big companies, in India, adopt this method.

The Industry Forecast:

The future market demand is calculated through industrial forecast or market forecast. The
expected sales forecasts of all the industries, in the same line of business are combined.
Market demand may be affected by controllable-price, distribution, promotion, etc., and
uncontrollable-demographic, economic, political, technological development, cultural
activities etc. The executive must take into account all these conditions while forecasting.

The Company Forecast:

The third step goes to the firm concerned to look into the market share, for which forecast is
to be made. By considering both controllable and uncontrollable, based on chosen marketing
plans within the firm, with that of other industries, steps are taken in formulating forecasts.

There are three classes of sales forecasts:

1. Short-run Forecast:

It is also known as operating forecast, covering a maximum of one year or it may be half-
yearly, quarterly, monthly and even weekly. This type of forecasting can be advantageously
utilized for estimating stock requirements, providing working capital, establishing sales
quotas, fast moving factors. It facilitates the management to improve and co-ordinate the
policies and practice of marketing-production, inventory, purchasing, financing etc. Short-run
forecast is preferred to all types and brings more benefits than other types.

2. Medium-run Forecast:

This type of forecast may cover from more than one year to two or four years. This helps the
management to estimate probable profit and control over budgets, expenditure, production
etc. Factors-price trend, tax policies, institutional credit etc., are specially considered for a
good forecast.

3. Long-run Forecast:

This type of forecast may cover one year to five years, depending on the nature of the firm.
Seasonal changes are not considered. The forecaster takes into account the population
changes, competition changes, economic depression or boom, inventions etc. This type is
good for adding new products and dropping old ones.

Limitations of Sales Forecast:

In certain cases forecast may become inaccurate. The failure may be due to the
following factors:

1. Fashion:

Changes are throughout. Present style may change any time. It is difficult to say as to when a
new fashion will be adopted by the consumers and how long it will be accepted by the
buyers. If our product is similar to the fashion and is popular, we are able to have the best
result; and if our products are not in accordance with the fashion, then sales will be affected.

2. Lack of Sales History:

A sales history or past records are essential for a sound forecast plan. If the past data are not
available, then forecast is made on guess-work, without a base. Mainly a new product has no
sales history and forecast made on guess may be a failure.

3. Psychological Factors:

Consumers’ attitude may change at any time. The forecaster may not be able to predict
exactly the behaviour of consumers. Certain market environments are quick in action. Even
rumours can affect market variables. For instance, when we use a particular brand of soap, it
may generate itching feeling on a few people and if the news spread among the public, sales
will be seriously affected.

4. Other Reasons:

It is possible that the growth may not remain uniform. It may decline or be stationary. The
economic condition of a country may not be favourable to the business activities-policies of
the government, imposition of controls etc. It may affect the sales.

The methods of forecasting discussed above have respective merits and demerits. No single
method may be suitable. Therefore, a combination method is suitable and may give a good
result. The forecaster must be cautious while drawing decisions on sales forecast. Periodical
review and revision of sales forecast may be done, in the light of performance. A method
which is quick, less costly and more accurate may be adopted.

How to Design Sales Territories

1.
Step 1 – Baseline Existing Territory Performance. Study your organization’s current
territory performance. Assure you understand which reps are hitting target, where
are margins and sales strong, etc.
2. Step 2 – Analyze Existing Customer Spend. Perform account segmentation for your
customer portfolio. In this step, it is crucial that you study and determine the drives
for customer spend in your business. It could be a particular geography, seasonality
factor, type of industry, revenue or employee size, or perhaps all of these factors
culminating in the sweet spot for you business. Ultimately, you will understand
which firmographic drivers contribute to sales. Your firm’s ideal customer profile will
be identified.
3. Step 3 – Determine Market Potential. Once you understand the drivers to customer
spend, forecast market potential. Our blog discusses various techniques to tackle this
process in detail in several blogs: Ultimately, upon the completion of this step you
should have an estimate for total market size. Oftentimes, the marketing organization
will have some rough estimates you can leverage in building this out.
4. Step 4 – Map Prospects & Customer Data to Territories. This step is the actual
territory creation. Decide the right balance among pure prospects, existing customers,
and qualified opportunities in each of your territories.
5. Step 5 – Produce Territories. In this step you will decide upon the final vertical or
geographic boundaries for each patch.
6. Step 6 – Review and Refine Territory Assignments. After the final territories are
drafted, it is crucial to walk through historical and probable opportunity conversion
and customer win rates, and compare the opportunity to each sales person’s quota.
Ask yourself, “Does each territory actually allow the rep to hit his or her quota under
reasonable performance expectations?” If there answer is no, you might want to
iterate back and review your territory design decisions. Perhaps a boundary needs to
be shifted to move more potential away or to a particular territory.