Professional Documents
Culture Documents
MANAGEMENT
Sales Budget
(Module III)
Sales Budget
Sales Budget predicts sales quantities
Customers tastes
Production and advertising strategies
Competitors
Production capacity
Changes in the economy
Types of Budget
Financial statement that outlines firms intended
actions and the resulting cash flow
consequences. Most sales budgets covers a
period of one year, but they are often broken
down into quarterly or even monthly targets.
Sales budget projection of revenue computed from
expense
budget
determine
By
P VIKRANTKUMAR,
AGBS,to
HYD
gross profit.
Budgeting Approaches
Top-down budgeting
Bottom-up budgeting
Top-Down Budgeting
Top Management Sets the
Spending Limit
money.
2. Historical Method
Historical information is the source for this
3. Percentage-of-Sales
Method
The funding level is found by multiplying the sales revenue by a
Advantages:
Financially safe
Reasonable limits
Stable
Disadvantages:
Reverse the cause-and-effect relationship between advertising and sales.
Misallocation
Difficult to employ for new product introductions.
Sales
Budget AGBS, HYD
By P VIKRANTKUMAR,
4. Competitive-Parity
Method
This method uses competitors budgets as
Competitive-Parity Method
Advantages:
Take advantage of the collective wisdom of
the industry
Spending what competitors spend helps
prevent promotion wars.
Disadvantages:
5. Return on Investment
(ROI)
Some sales managers have begun to use this
Bottom Up Approach
Objective and task method: Budget
Sales Budgeting
Procedures
1. Situational Analysis sales managers have to look at the
Sales Budgeting
Procedures Cont.
6. Specification of Resource Requirement the resources
that will be required to implement the specified activities and
achieve the objectives.
7. Completion of Projections here all the input and
requests from various units of the sales function are
assembled and tied into a comprehensive package.
8. Presentations and Review present and defend its sales
budget proposal to the management.
9. Modification and revision sales managers have to
engage in a series of compromise sessions. Here the sales
targets and budgets might be adjusted by the higher
management, reflecting both to the needs of the corporation
and the true potential of the marketplace.
10.ByBudget
approval
final levels are eventually approved
P VIKRANTKUMAR,
AGBS, HYD
and authorized for both the sales and the selling expense
better
performance
evaluation
of
sales
force
Build-up method,
or
Break-down method
4. Assignment
of Sales personnel to
territories
*Unnecessary & expensive for consumer
By P VIKRANTKUMAR, AGBS, HYD
products
Procedure in Build-up
Method
Decide customer call frequencies
Calculate total customer calls in each
control unit
Estimate workload capacity of a
salesperson
Make tentative territories
Develop final territories
Procedure in Breakdown
Method
Estimate company sales potential for total
market
Forecast sales potential for each control
unit
Estimate sales volume expected from each
salesperson
Make tentative territories
Develop final territories
Assigning Salespeople to
Territories
Sales Manager should consider two criteria:
(A)Relative ability of salespeople
()Based on key evaluation factors:
Management of Territorial
Coverage
It means: How salesperson should cover
Routi
ng
Routing is a travel plan used by a salesperson
of
routing
depends
on
the
application:
) Nature of the product Important for FMCG
) Type of jobs of salespeople Important for
territory map
Classify each customer into high, medium, or low
sales potential
Decide call frequency for each class of customers
Build route plan around locations of high potential
customers
Computerized mathematical models are
developed
Base
C
patterns are:
(B) Commonly used routing
1
B
B
C
5
C
4
C
3
C
2
Circular
Clover
Leaf
Schedul
ing
Scheduling is planning a salespersons visit time
Management
Tools
To help outside salespeople* to manage their
time efficiently and productively, the tools
available are:
) High-tech equipment like laptop computers
and cellular phones
) Inside
salespeople to provide clerical
support,
technical
support,
and
for
prospecting, and qualifying, as they remain
within the company
) Outside salespeople can then spend more
time getting more orders & building
relationships with major customers
*Outside salespeople travel outside the
By P VIKRANTKUMAR, AGBS, HYD
organisation
Sales Quota
Sales Quota is a sales goal assigned
Sales
Quotas
What are Sales Quotas?
) Sales quotas are sales goals or targets set by a
Sales Volume
Quotas
Profit
Quotas
Expense
Quotas
Activity
Quotas
Quota
Combinations
Cont.
Sales Volume
Quota
Sales Volume Quotas
Sales
Valume
Quotas
Product line
Product range
Sales division
Sales territories
Sales districts
Branch offices
Sales force (Individual)
Cont.
Financial
Quotas
Financial quotas control (a) gross margin or net profits,
Activity Quota
Activity Quotas
These quotas set objectives for job-related duties useful for attaining
salespeoples performance targets. Activity quotas are required to make
the sales force perform other activities which have long-term
implications on the goodwill of the firm. A sales organisation must set a
target level of performance for salespersons. Some common types of
activity quotas prevalent in Indian companies are as follows
Number of sales presentations made
Number of service calls made
Number of dealers visited
Number of calls made for recovery
Number of new accounts opened
Common
Types of
Activity
Quotas
Activity quotas typically should not be a basis for rewards. Rather, their
attachment helps the manager better understand why salespeople do or
do not meet their sales volume quota.
Quota Combinations
Many companies use a combination of these quotas. The two most
commonly combined are sales volume and activity quotas. These quotas
influence selling and non-selling activities.
By P VIKRANTKUMAR, AGBS, HYD
sales quotas
) In practice, companies use more than one of
the following methods to increase their
confidence in sales quotas
Territory potential
Past sales experience
Executive judgement
Salespeoples estimates
Compensation plan
Territory Potential
Method
1)
2)
3)
4)
Example
If the total sales estimated by a firm for a
own quotas
) Many salespersons either set very high or
too low sales quotas
By P VIKRANTKUMAR, AGBS, HYD
Attainable
II. Easy to understand
III. Fair
IV. Complete
V.
Timely
VI. Accurate
I.
Quotas
3. Securing & maintaining Sales Personnels Acceptance
of Quotas
I.
II.
III.
Sales Audit
Sales Audit is a systematic,
SALES ANALYSIS
Sales analysis is the detailed
Coverage of Sales
Analysis
Sales Volume Analysis
Cost Analysis
Profitability Analysis
Productivity Analysis
loss statement.
Examine sales by product lines, territories, key
accounts, and general classes of customers.
Two approaches:
1. Hierarchical Sales Analysis
2. Effectiveness Analysis
lower level.
Example of
Hierarchical Sales Analysis
M a in O ffic e
R e g io n 1
$ 4 0 ,0 0 0 ,0 0 0
R e g io n 2
$ 4 5 ,0 0 0 ,0 0 0
D is tr ic t 1
$ 7 ,0 0 0 ,0 0 0
R e g io n 3
$ 3 5 ,0 0 0 ,0 0 0
D is tr ic t 2
$ 8 ,0 0 0 ,0 0 0
T e r r ito r y 1
$ 7 0 0 ,0 0 0
D is tr ic t 3
$ 7 ,5 0 0 ,0 0 0
D is tr ic t 4
$ 4 ,0 0 0 ,0 0 0
T e r r ito r y 2
$ 8 0 0 ,0 0 0
T e r r ito r y 3
$ 7 5 0 ,0 0 0
T e r r ito r y 4
$ 8 5 0 ,0 0 0
T e r r ito r y 5
$ 2 0 0 ,0 0 0
A d d it io n a l A n a ly s i s
By P VIKRANTKUMAR, AGBS,
HYD
Effectiveness Index
Examine territory performance relative to
potential
Variance Analysis
Variance represents the difference between
Profitability Analysis
Return on Assets Managed (ROAM)
Measures how productively the assets in
Productivity Analysis
Additional productivity analysis may be