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DIY Sales Management

December 3rd, 2011 | Posted by paths in DIY Management | General | Sales Management

DIY Management Series, Free For Personal Uses
By Professor Thaweesakdhi Suvagondha , Thammasat Business School, Thailand

THE SALES MANAGEMENT PROCESS (SM 02)
THE SALES PLANNING
The Business Analysis

  • The Target Customer Market
    Sustainable growth, an ultimate goal of a business enterprise, come from the ability of the Sales Department to generate sales from the current customer market with an existing product and/or from the new business ventures.However, a new business venture comes occasionally. Therefore, the sales executive and his or her own sales force should concentrate in developing profitable growth from the current business of the existing product from the current target customer market.  In order to serve the current customer efficiently and effectively, the sales executive should develop two related sets of information : the macro-segment and the micro-segment of the target customer market. Both segments are dynamics, which the sales executive and the sales force have to monitor closely and constantly updating the information. The updated information will be used for changing and adapting of the the new sales tactics and/or the stratagems.Macro-segment

    General Information: market size, number of target customers, number of company’s active customers, geographic location, market potential, sales history, trend, business practices, laws, rules, regulations, economic and political environment, etc.

    Specific Information under Macro-segment:

    • Ultimate Consumers (primary demand): demographic, behaviors, evolutional trend,etc.
    • Business Customers (derived demand): by industry,trade group, location, position along the supply chain ( manufacturer or a processor or a marketing or trading intermediary).
    • Competition: a direct or an alternative, it’s market share sales, trend, practices, ranking, strengths and weaknesses; new and known potential competitor, it’s marketing plan, etc.

    Micro-segment (A Single Customer)

    • Category: company’s active customer, used to be a customer and will be a customer.
    • Classification: V(very important ), A (average) and D (developing).
    • Buying Situation : rebuy, new condition rebuy, reactivation and new buy.
    • Buying Objectives: benefit sought, problem solving, etc.
    • Buying and Decision Making Process: criteria, stage and detail of persons involved such as his or her authority, roles and duties, attitude, motivation and personal characteristics.
    • Customer Consumption: by volume and value, usage or output rates, identification of real user, etc.
    • Customer Geographic Location and Accessibility.
    • Competition and Market Share of Direct Competitors.
    • Other Information: credit rating, trading practices, etc.
    • Business Enterprise: public or private company, organization structure, CEO and key personnel, financial performance (available for public), product/service lines new product in the pipeline, etc.
    • Government Unit: structure, budget available for a particular project and/or product/service, laws, rules and regulations involved,  etc.

     

  • The Sales Force Planning
    The Sales Organization StructureThe Objective : To efficiently and effectively serve the company’s target customers.The Designing of the Sales Organization

    To design an efficient sales organization, the following factors should be taken into consideration.

    1. The evolution of the business life cycle (BLC) which could be divided into four stages : launching of a new business venture, business in a growth or a mature or a declining stage.
    2. Each stage in the business life cycle has a different combination of customer category : an active customer (a.c.), used to be a customer (u.c.) and a new customer (n.c.). For example, there will be more new customers during the launching stage, etc.
    3. Each customer category requires different number of sales calls and/or attention.
    4. The structue of the sales organization also depending on the company’s marketing policy : to ‘push’ or to ‘pull’ or a combination of both push and pull.

    The field sales force will be disposed to push the product(s) to  the customers. The sales person in a counter will serve a customer whom is pulled to the product by the company’s promotional activities.

    The following is an example of a sales organization structure of a company which employs both push and pull policies.
    (click here)

    The Number of the Sales Personnel

    The following is an example of a company,which has two types of the sales forces and is in a growth stage, on how to come up with the number of the sales personnel.

    The Field Sales Force

    Category Classification No. of call per year No. of customers Total calls
    A.C V 72 50 3,600
    A 24 150 3,600
    D 12 20 240
    U.C 12 10 120
    N.C 24 12 240
    Total 240 7,800

     

    Each sales person can make an average about five sales calls per day. Each year, based on 210 field working days, a sales person can make about 1,050 calls. There are a total of 7,800 calls required to cover the company’s target customers. The company needs to employ 7.4 sales persons.

    Then, management has to decide, based on the financial or budget constraints together with the competitiveness, whether to employ seven sales persons and ask the current sales force to increase sales call to about 5.3 calls per day or to employ eight sales persons and ask them to increase calls, for example to create more new customers.

    The Number of A Counter Sales Personnel

    Last year Current year Growth Budget year Growth
    Total Sales Value 200 240 20% 300 25%
    Number of Sales Persons 4 4 5 20%
    Sales per Sales Person (Productivity) 50 60 20% 60

    Prior to make a decision on the number of the sales person, management should conduct a time and productivity study to find out how a sales person allocates his or her time for customers and on administrative tasks such as making reports on sales, inventory, etc.

    Other Criteria in Designing A Sales Organization Structure

    1. Flexibility : the sales force size should be able to reduce or to expand in according to changing circumstances.
    2. Sales department is an operating unit which require close cooperation and coordination with other departments, such as credit control, accounting, marketing, logistic, technical support, etc.
  • The Territory DesignedIn case of the territory designed is required, the following factors should be taken into consideration;
    1. Traveling time with in territory and to and from the office or head quarter
    2. Traveling and other expenses including lodging, meals, etc.
    3. Safety of the traveling sales personnel
    4. Criss crossing and territories over lapping must be avoid.
    5. Accessibility to supplies, such as goods and promotional materials. Example: A direct selling company has set up retail stores cum supply depots to serve both ultimate consumers and the sales persons in a particular area.
  • The Sales Budget
    The sales budgetary is a proactive business management. It is an operating plan directed to meet the company’s  growth objective and goals in generating a specific level of revenues, to obtain an optimum gross margin from the product or the business mixes, market shares; at a reasonable and affordable expenses;and to get a satisfactory profit (or loss) before tax level; during a specific period.Profit and Loss (P&L) StatementThe sales executive must understand the importance as well as the concept and the procedure and the process in developing the P&L statement.

    The folloing is an example of the P&L statement:

    Budget Actual Devisations
    Revenue 100 120 20%
    Cost of Revenue 50 65 30%
    Gross Margin 50 55 10%
    Total Expenses 30 35 17%
    Profit (Loss) 20 20

    The sales executive must be able to analyse the deviation of actual financial performance with the budget in order to take the right decision, with other executives and the CEO, to correct or to change the strategy  or the tactic or to continue with the current sales practices.

    Excercise:  The readers are invited to take the roles of a sales executive to analyse the deviations between the actual performances and the budget from the above example.

    The Sales Forecast

    Developing A Sales Forecast. The sales executive has to work with the marketing executive in developing a sales forecast and a sales plan for a specific period. For example, the company plans to launch a new business venture, such as launching of new products or to enter the new markets with existing products or new products.
    The following is an example of a format in making a sales forecast;

    Product Line Target Markets
    Existing Markets New Markets
    Current Products M1..M2..M3 NM1..NM2
    P1
    P2
    P3
    New Products M1..M2..M3 NM1..NM2
    NP1
    NP2
    Total Sales Revenue

    The forecast of the current products and the existing markets will be based on the historical and the current sales data together with the situational analysis, such as the market trend and it’s evolution, the competitions, etc.

    The forecast of the new business ventures will be based on the estimation of the market  potential from the market research, etc.

    The Sales Forecast Will Be Used For

    1. The sales forecast is a starting point for other business functions, such as finance, human resources, accounting, logistics, production, etc.
    2. It will used for setting performance standard for the  sales force. Please see the section: SM06 : CONTROLLING AND EVALUATING OF THE SALES ACTIVITIES

    Making the Sales Forecast

    There are two methods in making the sales forecast;

    1. Top down from managements
    2. Bottom-up.  A well trained and experienced sales person will be allowed to make her or his own sales forecast. It will used as a personal development tool prior to promote the sales person to the next level or to give her or him a new assignment.

    The Cost of Goods (COG) and the Gross Margin

    The Cost of Goods (COG)

    In setting up a price for a particular product or a service by a Pricing Committee, of which a sales executive is a member, must take the following factors into consideration.

    1. The External Factors
      1. It must be affordable by the customers in the target market.
      2. It must be competitive
    2. The Internal Factors. The following questions should be conscientiously  answers,
      1. Is the cost component realistic when compare to its rivals?
      2. Are there any political issues involving in allocating of fixed cost among the business units or the product marketing groups?
      3. If the cost is unrealisticly high by any reasons, the company has to raise price which may give the negative impact to the sales performance.

    The sales executive should have a proper knowledge about the structure of the COG and on how to set a price.

    The Gross Margin (GM)

    After deducting the cost of goods or a cost of sales (COS) from the revenues or net sales, it will be an operating gross margin which will be spent in generating sales and for other expenses.

    This article will be focused only on the selling expenses.

    The Selling Expenses (

    The selling expenses could be divided into two groups:

    1. The Fixed Expenses. It comprises of;
      1. The sales force expenses, such as salary and benefits, insurance, communications, etc.
      2. The sales administration expenses, such as salary and benefits, insurance, communications, traveling and entertainment, conference, etc.
      3. Other expenses, such as depreciation and or rental, utilities, maintenance and repairs, security and other profession services.
        These expenses will remain constant regardless of sales volume and value.
    2. The Variable Expenses such as bonuses, incentives, commission, travelling and entertainment , lodging and meals (if applicable), field communication , travelling insurance, gasoline , etc. These expenses will be tied to the sales values and volume, and other selling activities. Bonuses, commission and incentives may be paid to the entired sales department , if it had achieved a predetermined sales goals.

    ORGANIZING A SALES FORCE
    Recruitment and Selection of A Sales Person
    Compensations
    Training and Development
    Technology Aspect in Sales Management

    DISPOSING OF ACTION
    Leading the Sales Force
    Motivating the Sales Person
    Customer Creation Process

    • Sales Presentation and Negotiation

    Customer Management

    CONTROLLING AND EVALUATING OF THE SALES
    ACTIVITIES
    Regular Monitoring and Coaching
    Periodical Performance Evaluation
    Taking Constructive ActionThe Target Customer Market
    The Sales Force Planning
    The Sales Organization Structure
    The Sales Budget
    Profit and Loss Statement

    ORGANIZING A SALES FORCE
    Recruitment and Selection of A Sales Person
    Compensations
    Training and Development
    Technology Aspect in Sales Management

    DISPOSING OF ACTION
    Leading the Sales Force
    Motivating the Sales Person
    Customer Creation Process
    Sales Presentation and Negotiation
    Customer Management

    CONTROLLING AND EVALUATING OF THE SALES
    ACTIVITIES
    Regular Monitoring and Coaching
    Periodical Performance Evaluation
    Taking Constructive Action

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