Sales potential method

Sales potential method
 This method is based on the assumption that performance of the set of
activities contained in the job description represents one sales personnel unit.
 Generally it is observed sales descriptions are constructed on management’s
assumption that they describe what the average sales person with average
performance will accomplish.
S
N = --------------- + T (S/P)
P
By simplifying above equation we get
S
N = --------------- (1+T)
P
Where, N = Number of sales personnel units.
 Incremental method
 The incremental method is the best approach to determine sales force size.
 It is based on one proposition that net profit will increase when additional
sales personal are added.
 To apply this method an organization needs two important items of
information namely...
(g) Incremental revenue.
(h) Incremental costs.

Designing sales territories
 In reality, sales planning are done on the basis of sales territory.
 The emphasis in the sales territory concept is upon customers and prospects
rather than upon the area in which in individual sales person works.
 Definition
 Sales territory is a grouping customers and prospects assigned to an
individual sales person.
 Reasons for establishing sales territories
 The reasons for having sales territories…
1) Market coverage. 4) Control selling Expenses
2) Evaluating sales personnel 5) Sales force morale
3) Aid in the co-ordination
 Steps involved in setting up sales territories
 There are four major steps …
Geographical control unit
Sales potential
Adjusting for coverage
Combining control units into tentative
Developing the sales forecasts and sales budgets
 Sales forecasting is the estimation of future sales of a company in a given
period.
 Method of sales forecasting
a) Jury of executive opinion f) Exponential smoothing
b) Delphi technique g) Survey of customer buying plans
c) Poll of sales force opinion h) Regression analysis
d) Projection of past sales I) Economic model building & simulation
d) Time series analysis
 Sales Budget
 The sales budget is a statement of projected sales revenues and selling
expenses.
 The sales budget is a composite of quotas for sales, profits and expenses.
Budget is a valuable tool for control.

Fixing sales quotas/targets for individual sales territories / salesman
 Sales quotas are quantitative objective assigned to sales organizational
units i.e. to individual sales personnel.
 In some company’s sales management sets quotas for middlemen, such as
agent, wholesalers and retailers.
 Objectives of fixing sales quotas
 Objectives also which are as follows :
To provide quantitative standards
To obtain tighter sales and expenses control
To motivate desired performance
To use in connection with sales contents
 Type of sales quotas and quota setting procedures
 There are two types of sales categories, they are………
Sales volume
 Sales volume quotas communicate management’s expectations as to how
much for what period, sales volume quotas are set for geographical areas,
product lines or marketing channels or for one or more of these in
combination.
 Sales volume quotas are subdivided into following categories :
1) Rupees sales volume quotas
2) Unit sales volume quotas
3) Point sales volume quotas
 Procedures for setting sales volume quotas
a) Sales volume quotas derived from Territorial sales potential.
b) Sales volume quotas derived from Total market estimates.
c) Sales volume quotas based on sales experience alone.
d) Sales volume quotas based on Executive judgment alone.
e) Sales volume quotas related only to Compensation plan.
f) Letting Sales personnel set their own sales volume quotas.