Chapter 5
Planning and Controlling Revenues:
Sales and Service
The comprehensive sales planning is necessary because:
1. It provides the bases for the marketing program.
If we are increasing our sales budget, we must
support
it with an increased marketing budget.
2. It must be realistic because the entire PPC program is based on sales
3. It incorporates the strategic and tactical sales plans
4. It helps to reduce uncertainty about future revenues. We as a
company strive towards our goals. If we are aggressive, we will achieve our goals. This
becomes self fulfilling prophecy.
5. It helps to guide managerial decisions. When we set clear goals and objectives, this
helps in decision making.
6. It helps to guide the control of the sales plan
Sales plan vs. Forecasting
Forecasting is a statement about the future based on some assumptions.
It is not a plan. The forecast is actually only 1 part of the sales
plan. Forecasting is a technical staff
function.
The sales plan incorporates the forecast with management decisions about sales volume,
marketing, financing, production, prices, and sales
efforts. It represents a
commitment of the resources. It is
aggressive.
Strategic and Tactical Plans
Strategic Plans -1-5 years
Long term plans are affected by what is happening NOW.
These plans are usually clumped together by annual amounts (by product line).
Future Market potentials must be investigated:
1. population changes
2. economy
3. new products
4. new technologies
5. new distribution channels
6. Etc
Tactical Plans 1 year
Usually 12 months (Quarterly)
It must provide detail for other functional managers
(Production, Marketing, etc.)
Developing a comprehensive sales plan:
1. Developing Management
Guidelines for
sales Planning
Policies, etc.- as well as product emphasis,
pricing, major market thrusts.
There should be some review of the overall objectives of the company.
2. Prepare Sales Forecasts
Forecasts are used to predict sales (Forecasts
are used to
describe what can happen based on the past)
For example: If sales are forecasted to drop next year, sales planning
will provide for a means to reduce this drop (new products, new markets, etc).
3. Assemble other relevant
data
A. Capacity
Participation with the Plant manager is
absolutely
imperative. You cannot exceed plant capacity.
The sales plan may show that you need to add capacity.
This will influence your capital budget.
B. Sources of Raw Materials
Are the RM readily available?
What are the price? Delivery schedules? Quality?
C. Availability of Labor
What is the labor market like? Quantity? Quality? How much training is
needed?
D. Capital Available
CASH, CASH CASH!!!!!!!
E. Available distr. channels
4. Develop the Strategic and Tactical sales plan
A. Maximize the motivation of the sales force.
Participation of the sales force is imperative.
They are the people on the road. They know how well the product will
move in the market.
Participation will be the motivational emphasis of meeting the sales plan.
B. Realism
There are 4 degrees of sales participation:
A. Sales force composite- Basically a full participation
process starting with the sales personnel. It is
distributed upwards for review and consideration.
B. Sales Division Mangers- Sales managers make most the sales
plan. The sales managers should be in tune
with the sales people.
C. Executive Decision-Basically,the executives make decisions
either based on their opinions or through representatives.
You hope that the executive has the proper amount of knowledge to make
these decisions. This sometimes
becomes a culture
issue or structure issue (Centralized
vs. decentralized)
D. Statistical (Capacity, GNP, Housing starts, etc.
5. Secure managerial commitment
This is the most important aspect of the plan!!
There are Several problems which contribute to the
uncertainty of the sales plan:
1. Price-Cost -Volume
Two basic problems:
A. How will sales demand change with different
price levels?
B. How does unit cost change with production
levels?
Review Exhibit 5.3
Review Exhibit 5.4
2. Product -Line Considerations
Product mix considerations
Product lines with the highest
contribution margin should
be pushed.
The BCG matrix might be considered at this
point.
Control of sales and related expenses
If the plan is created, it must be reached. Therefore, the sales activities must be
monitored and controlled.
Performance reports must be reviewed.
Sales quotas should be consistent with sales plan.
There are a number of standards that should be considered:
-# of sales calls
-# of qualified prospects
-# of new customers
-Dollars of direct selling expense
-Average sales order
-# of orders not honored
-# of orders per call made
Periodic sales performance reports are necessary (Control function)
Planning sales in a non-manufacturing company
Non-manufacturing companies focus on a variety of different units
(services)
Two basic approaches to sales planning:
1. Unit price approach-
The company designates the units to be sold as well as unit price.
2. Sales dollar approach
Plans the sales budget around sales departments
Non-manufacturing companies usually make sales projections:
1. Projection of total company sales dollars.
2. Projection of sales by sales departments.
Consideration must be given to:
1. External Environment:
A. Business Conditions
B. Population trends
C. Inflation /
Deflation
D. Competition
E. Technological trends
2. Internal Environment
A. Promotions
(Marketing)
B. Merchandising
C. Credit Policy
KEY POINTS
CHAPTER 5
SALES PLANNING
1. FORECASTING VS. SALES PLANNING
2. SALES PLANNING STEPS
3. PRICE COST VOLUME DECISIONS
4. PRODUCT LINES
5. CONTROL OF THE SALES PLAN
6. NON-MANUFACTURING
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