trag 67 The sales department cannot do much about certain aspects of profit planning. It has no control, for example, over the cost of goods sold. Manufacturing cost accounting will define that element. It has no direct responsibility for general, ad¬ministrative, and overhead expenses. Costs of materials and labor for producing the product are accountable elsewhere.Therefore, most sales departments have two prin¬cipal concerns: (1) revenue produced, and (2) selling expense The difference between these two is the contribution to the organizations profit from the sales effort.These calculations should be projected into the future, not only for a year ahead at budget time but also for several years in advance as part of the strategic field sales plan. Chapter 5 discusses forecasting sales, so the important aspects of profit planning will not be fully discussed here. However, the accurate forecasting of sales and of the costs, or expenses, required to generate those sales is a major part of the sales strat¬egy plan. Remember that sales managers are thinking strategically (in multiyear terms) for the field sales organization, so projection of these revenues and expenses beyond the first year should incorporate the managers best estimates about the ef¬fect of changes in strategy, market plans, product innovations, enlargement in geo¬graphic markets, and sales forecasts. When sales managers begin operational planning for field sales, they should define these in shorter terms, including monthly and quarterly estimates and forecasts for the single year ahead. They should not be unduly worried about the precise accuracy of future years. Managers will do a forecast of three to five years ahead every year and can adjust it based on what they learned and experienced in the current year. These multiyear figures will help the firm find its best operating objectives. Thus, when top management sits down with the field sales managers, or sales reps if they are the next level down, they will have some specific targets at which to aim. SETTING NEXT YEARS SALES PLAN The basic objectives of the sales force are to make sales to customers and potential customers, to provide service to customers, and to transmit information received from customers to the firm. Given the general marketing plan, the sales managers job is to define the activities of the sales force in support of each product or group of products. A sales force strategy will help the sales manager use the sales force effi¬ciently to achieve the firms market-share objectives. Specific sales force objectives are usually derived from broader marketing and corporate objectives. Corporate objectives may be measured through market share, return on investment, or profit ratio, while the sales force might have objectives mea¬sured on the basis of the following: ■ Contribution to profits. The sales force obtains the products from the company at cost or at a percentage markup above cost. The sales force then sells the products at a markup. This margin (cost minus selling price), minus all costs related to selling the product, represents the sales forces contribution to corporate net profit. ■ Return on assets (ROA) managed by the sales force. The sales force makes capital investments in such things as automobiles, training mate¬rials, or demonstration product models.The return on these investments can be used as a measure of efficiency by subtracting current sales ex-penses—for instance, salary—from gross profit on sales volume. ■ Sales/cost ratio. This is the ratio of sales force expenses to dollar sales volume. ■ Market share. To use this measure, management must determine whether the sales force has the major impact on sales and not price, ad¬vertising, and so forth. Objectives such as gross margins, or ROA, will not by themselves manage the sales organization.They must be broken down and converted into objectives that tell trag 68 whether various sales units (for example, regions and districts) and individuals are contributing to those overall goals.The firms top sales management make such con¬versions and communicate them to lower ranks. For the field sales organization, dollar figures alone are of great value in measur¬ing overall results. However, they are only one part of the data needed for the key sales areas dealing with territories, accounts, sales calls, and self-management. The first class of objectives proposed—the regular, ongoing, and ordinary goals of the sales organization—consists mainly of experience-based numbers tailored to the person, the territory, the accounts, the calls, and personal self-management. Chap¬ter 6 discusses in some depth the criteria for setting individual objectives. For now, objectives must be relative to an output, not an activity. Also, a time period should be set for the completion of the objectives.Thus the salesperson who states his or her goals as making calls is stating an activity. Making an average of seven calls per day is an output-oriented objective. Some typical objectives a sales manager might use would include the following: Dollar volume per month ■ Volume of returned goods per month Gross profit as percent of ■ Number of new accounts per month sales per month ■ Share of market quarterly Dollar output per line per ■ Number of complaints per month month ■ Amount of training per quarter Dollar output per (days) salesperson per month ■ Days training per year Average order size per ■ Lost accounts per month month ■ Average monthly sales calls per rep Advertising as percent of sales per month ESTABLISH KEY OBJECTIVES From such a list, management determines the main goals for the sales force.With the key objectives identified and the environmental trends recognized, the sales manager is next in a position to lay out the objectives for the com¬ing year. Properly defined, the objectives will be measurable (otherwise, how will the manager know when they are accomplished?), will require a certain amount of stretch (if they are too easy, they are not worth it), and yet will be achievable (the man¬ager must believe they can be done). The objectives must state what is to be done but not how it is to be done.The how portion is what makes up the strategies and tactics. Assume you have examined your organization, identified what you consider to be the key objectives, and thought about any ongoing market trends. As such, you feel your present situation to be as shown in Table 3.3. TABLE 3.3 WE MUST FIRST ANALYZE OUR PRESENT SITUATION Your environment is fairly stable, with the exception of a growing number of new businesses that could use your products. So far, no new competitors have ap-peared, the existing competition seems stagnant, and nobody seems to be raiding your sales force—hiring your people.Your sales force is relatively young, and although it is fairly proficient, a few individuals are weak in technical knowledge, a couple of Sales volume $150,000,000 Number of customers 400 Number of salespeople 20 Cost of sales (as a percentage of sales) 6% Average calls per day per salesperson 5 Product returns as a percentage of sales 5% Percentage of sales force with good technical knowledge ,a couple of the newer ones could further develop their selling skills, and one individual in par¬ticular is near promotability.
Posted on: Sat, 15 Mar 2014 16:03:31 +0000
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