Sales Planning, Forecasting

UNIT 11 SALES PLANNING, FORECASTING and Budgeting

AND BUDGETING
Objectives
After reading this unit you should be able to:
 design the product-wise / brand-wise sales planning for a company
 design an effective territory planning for the salesmen.
 plan the total expenses on effective coverage of your area
 exercise effective controls
 explain the role and importance of sales forecasting in sales management
function
 describe some of the managerial issues concerning sales forecasting
 understand the importance of sales budget and control in sales-
management
 examine methods and approaches used for preparing sales budgets
 discuss various methods of sales control.

Structure
11.1 Introduction: Meaning and Scope
11.2 Sales Planning Process
11.3 Product-wise Sales Planning
11.4 Sales Programme Planning
11.5 Planning Sales Manager’s Itinerary
11.5.1 Proper Market Coverage
11.5.2 Effective Deployment of Sales Force
11.5.3 Parity in Sales Potential
11.5.4 Efficient Customer Service
11.5.5 Improving Selling and Marketing Productivity
11.5.6 Frequency of Calls in a Month
11.5.7 Estimating Sales Potential
11.6 Sales Forecasting : Meaning, Purpose and Scope
11.6.1 Qualitative
11.6.2 Extrapolative
11.6.3 Quantitative
11.7 Qualitative Sales Forecasting
11.8 Managing Sales Forecasts
11.9 What to do When Sales Forecasts Differ?
11.10 Sales Forecasting for New Products
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Sales Planning and Control 11.11 Meaning and Importance of Sales Budgeting
11.12 Purpose of the Sales Budget
11.13 Methods of Sales Budgeting
11.14 Preparation of Sales Budget
11.14.1 Review and Analysis of Marketing Environment
11.14.2 Communicating Overall Objectives
11.14.3 Setting a Prliminary Plan for Allocation of Resources and Selling Efforts to
Different Activities
11.14.4 Selling the Sales Budget to Top Management
11.15 Budget Implementation and Establishment of Feedback Mechanism
11.16 Flexibility in Budgeting
11.17 Summary
11.18 Key Words
11.19 Self-Assessment Questions
11.20 References/Further Readings

11.1 SALES PLANNING : INTRODUCTION

MEANING, AND SCOPE
Sales planning is an integral part and it is at the heart of overall sales department
management function in every organization. Sales planning is planning for
sales in a particular time period depending on the firm’s policies and procedures.
The period for planning may vary for a single day to a finacnical year etc. This
also involves looking at the volume (units/reaches/count etc.) or value terms (in
Rs. etc.).
In addition, sales planning estimates the market potential versus realistic
achievement plans. It also looks at the sales resources required to achieve those
plans. Converting the typical sales plan into easily executable actions. Sales
planning involves setting the objectives to have clarity on which goal is to be
achieved. Next is the tasks to be actioned which would lead to meeting of the
objectives followed by arranging the resources required for the completion of
the tasks. Subsequently, the implementation of the tasks as per objectives set at
the planning stage will eventually lead to another important task of measuring
the results against the desired actions. Then it becomes vital to re-evaluate and
affect necessary corrections for tasks where there was a deviation from the
originally planned tasks.
Sales planning is preceded by the company deciding its corporate business
objective and goals. What business we are in? Where do we want to go from
here? A good way to go about is to keep the customer at the centre of everything
and ask ‘What customer needs are we fulfilling rather than what products and
services we are producing for selling? Interestingly, as more and more goods
were produced, the differentiation between the similar goods of different
manufacturers started becoming more and more difficult. Thus a need for the
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specialized job functions of advertising, promotion, marketing research, etc. was Sales Planning, Forecasting
and Budgeting
felt. Though initially all these functions (now assigned to Marketing Management)
were assigned to Sales Management, later on, separate specialized functional
departments for these functions were created and grouped under the Marketing
Manager rather than a Sales Manager.

Thus, we can very well infer, that the meaning of Sales Management has been
changing over the years. Initially, it meant the market expansion and the
management of the sales force. Later on, all the marketing activities like
advertising, sales promotion, marketing research, pricing, etc. were also
assigned to it. But still, later the term Marketing Management was used to
define the broader Concept and the term Sales Management was defined as
“Planning, Direction, and control of personal selling, including recruiting,
selecting, equipping, assigning, routing, supervising, paying and motivating
the sales force.” When looked at from the top and given an overall view, the
Sales Management is responsible for organizing the sales process, both within
and outside the company. Inside the organization, it builds an informal
organizational structure that ensures effective communication not only inside
the sales department but also in its relations with other organizational units.
And outside the company, the Sales Management has to serve as the company’s
representatives with the customers and other external organizations. Apart from
the responsibilities listed above, Sales Management is responsible for some
other important functions too. Some of these functions are important in making
some key marketing decisions such as budgeting, deciding the objective, sales
force size, territories, etc.

While performing all these important tasks of sales effort management and
personal selling effort, the Sales Managers have to plan. This planning consists
of sales territory planning, product-wise sales planning, manpower planning etc.
which are being discussed in each every unit of this course where ever it is
appropriate and relevant.

Every actvitiy in sales management function does involve a well defined steps /
stages and sales planning is no exception.Below we discuss the various steps
involved:

11.2 SALES PLANNING PROCESS

The sales planning process can be best described by the acronym MOST (mission,
objective, strategy, tactics).
For the sales plans to be effective, they should broadly align with the corporate
strategic marketing plan. Only then the sales activities will complement rather
than compete with other marketing activities. Sales strategies and planning can
only happen against a framework of organization-wide broad strategic objectives
and plans. Establishing a marketing plan: There is no unique way of preparing
a marketing plan. Each organization has its unique circumstances Broadly three
steps are involved/important
 Objectives: Where do we want to go?
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Sales Planning and Control  Strategies: How do we reach the goals?
 Tactics: Detailed plan for achieving those goals

Fig 1 : Planning process (Sales Management by Jobber & Lancaster; Page 1)

11.3 PRODUCT-WISE SALES PLANNING

Product-wise sales planning entails planning the unit-wise sales for various
products of a company. This is done, usually in organizations, on annual, quarterly,
and monthly bases. Once, the product-wise planning is completed for the
organization, it can then be divided into zones, regional, area, and territory-wise
planning. An example of the Product-wise sales planning for a company having
6 products can be as follows:

Company XYZ
Product-wise Sales Planning for the Financial Year 2022-23

Sl. Product Unit-wise Value Per Total Sales Value

No. sale plan Unit (Rs)

1 A. 10,000 1,000 1,00,00,000

2 B. 1,10,000 100 1,10,00,000

3 C. 20,000 50 10,00,000

4 D. 75,000 25 18,75,000

5 E. 1,00,000 35 35,00,000

6 F. 50,000 80 40,00,000

3,13,75,000

Once this Product-wise Sales Planning is acceptable to the Top Management,

the same can be divided into zonal, regional, area-wise, and territory-wise sales
planning.

While determining the sales plan for each product, the Sales Management has to
derive the Market Potential, Sales Potential, and Sales Forecast for their products.
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Market Potential is defined as the total number of units of a product that can be Sales Planning, Forecasting
and Budgeting
sold by all the companies in a given market at a given time. For example, the
market potential of 10 million cars in India, would indicate that the combined
sales of all the car manufacturers will not be more than 10 million cars in a year
in our country. Sales potential, on the other hand, would indicate the maximum
units of product that a single manufacturer can sell in a given market in a year.
For example, the sales potential of 5 million cars for country’s leading car
manufacturer Maruti, would indicate that the company can sell a maximum of 5
million cars in India in a year.

Sales Forecast indicates the number of units of a product that a single manufacturer
plans to sell.

For example, the Sales Forecast of 2.5 million cars of Maruti, would indicate
that this company plans to sell 2.5 million cars out of the total sales potential of
5 million cars that it can sell. A company goes for a lower sales forecast than its
sales potential, because of various reasons like lower production capacity, limited
working capital, scarce availability of raw material, etc.

While deciding on Sales Forecast, the sales management team should try and
find out the answers to the following questions.

1. What is the number of its customers? This should include the present
customers as well as the potential or planned or future customers (planned
or future customers would be the ones that sales management wants to
include in the year for which the sales forecast is being made).

2. What is the size of the customers (The ABC Analysis of the customers
in terms of their sales turnover, profit, etc.)

3. What products will they purchase?

4. Why do they buy such products or what are their needs to buy such
products.

5. How many quantities do they buy for a particular product?

6. How many times, in a year do they buy such products.

7. Under what conditions do they buy. Whether they buy on cash or

credit.

8. What is the competition doing in these product markets or even what the
competition is expected to do?

Realistic and fact-based answers to all these questions plus the information on
what marketing activities our own company is going to perform will help
determine the product-wise sales.

Activity 1

Plan the product-wise sales planning for the company ABC Limited with six
products/ brands with the help of the following data.
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Sales Planning and Control
Sl. Brand Value Per Unit Market Sales Forecast
No. (Rs.) Potential as Percentage of
Market Potential

1. A 10,000 100 Units 25%

2. B 100 1,00,000 Units 10%

3. C 5,000 500 Units 50%

4. D 2,500 1,000 Units 20%

5. E 3,000 200 Units 25%

6. F 5,00 5,000 Units 60%

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11.4 SALES PROGRAMME PLANNING

While undertaking sales planning activities , the Sales Manager plans as to what
each of his salesmen should do and when should he do it. All this is planned with
the objective of meeting the objectives i.e. the sales targets. The sales planning
activities should also include the future sales promotion lined up in the near
future.

Primarily, this planning includes the activities like.

a. Putting up point of sales material like danglers, posters, stickers,

billboards etc. at

b. Improving shop window display like arranging product packs attractively

in the glass windows at retail shops.

c. Conducting outside the shop promotion like distributing gifts to the

customers who purchase their product or distributing coupons for some
discounts or free goods to customers.

d. Conducting demonstrations like demonstrating the actual performance

of a product like a Juicer, Mixer Grinder, at a shopping complex.

e. Sampling programme like distributing free samples of the product ( a

new detergent) to some housewives in a colony.

f. Presentation on the performance and benefits verbally to a group of

potential customers.
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 Sales Planning, Forecasting
11.5 PLANNING SALES MANAGER’S ITINERARY and Budgeting

For achieving the product-wise and thus value-wise sales planning, the Sales
Manager should plan his tour or work plan quite objectively. Before he goes on
tour or to work with a salesman, he should find answers to questions like
a) Why is he going there ?
b) What is he going to do there ?
c) What he will achieve?
d) What has been the performance of the salesman he is going to work
with?
e) What are his developmental objectives for the salesman?
Generally, in any given area, 60 percent of the members of a team are average
performers of sales, 20 percent are above average and 20 percent are below
average performers. Usually the Sales Managers work more with either the above
average or below average performers. In the process, they neglect the average
performers who bring about the major chunk of the business. Therefore, the
sales managers should concentrate more of their time on this group of salesmen
who will mostly do an adequate job.
Apart from this, a sales manager should have a TOUR PLAN, which should
elaborate on who is he going to visit, why and how many days he will spend with
each salesman. It need not necessarily be a standard of two days, work with each
salesman, it should be four days with one and only one day with other salesman,
depending upon the performance and development objectives for each salesman.
A Sales Manager should circulate his tour plan to other departments within the
organisation. This will enable other departments to voice their concerns to be
discussed with a particular salesman. This way a lot of unnecessary
correspondence can be avoided and full advantage of Sales Manger’s tour can
be taken by the organisation.
In a nutshell, while planning his own tour plan, the Sales Manager should know
WHERE there is a problem and he should go there, WHY there is the problem,
he should investigate when he is there, and HOW & WHEN to solve it.
Therefore, what is needed for a high level of Sales Planning is
 Customer definition and classification
 Product-wise emphasis - which products should receive high priority.
 Self - training in selling skills and product knowledge.
 Optimum usage of promotion material like posters, dangles, coupons
etc.
 New business activity.
 Objectivity in self tour plan.
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Sales Planning and Control As the sales manager’s itinerary involves planning and scheduling the calendar
of activities for the month including his to and fro travel , his tour in the territory,
meeting his sales force working in those locations.
Permanent journey plan for one salesman for one month

Date Name of Description Time Time Order Payment Payment Competitor

Salesman (From) (To) Value due (Rs) collected information
(Rs) (Rs)

01-05-2022 Ramesh Retailer M/s 09:00:00 9:20:00 20,000 25,000 24,000 None
Ram Nath
visit

01-05-2022 Ramesh Retailer 9:40:00 10:40:00 1,00,000 0 1,00,000 Rs 20,000 for

M/s Rang painter meet
Sagar promised by
Asian Paints

01-05-2022 Ramesh Distributor 11.00.00 12:00:00 75,000 35,000 35,000 Rs 10,000 for
M/s Ahmad shop
& Company. renovation
promised by
Kansai
Nerolac

01-05-2022 Ramesh

01-05-2022 Ramesh

02-05-2022 Ramesh

03-05-2022 Ramesh

04-05-2022 Ramesh

05-05-2022 Ramesh

06-05-2022 Ramesh

31-05-2022 Ramesh

Sales Person’s Branch Manager’s

Signature signature

Figure 2: Salesperson’s itinerary for a month

Sales Planning Involves :

The following mentioned below are other aspects that are an intergral part of
sales planning function which are to considered very carefully and meticulously
at every stage of the whole actyivity.
 Proper Market Coverage:
 Effective Deployment of Salesforce:
 Parity in the sales potential
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  Efficient Customer Service: Sales Planning, Forecasting
and Budgeting
 Improving Selling and Marketing Productivity:
 Frequency of Calls per Month
 Estimating sales potential

11.5.1 Proper market coverage

The sales have to come from all the territories of the marketplace. All the areas
should be covered up depending on the strategic plan.

11.5.2 Effective deployment of sales force

Usually experienced people are given larger business territory and at times
difficult accounts to handle. The newer salespeople are given smaller territory
or are asked to shadow experienced salespeople.

11.5.3 Parity in Sales Potential

The sales potential of the area should also be nearly equal. There should not be
too much skew in the potential of that territory. This ensures similar motivation
for all salespeople. The geographical coverage and the difficulty in getting
business from the area should be nearly the same.

11.5.4 Efficient customer service

The customers or accounts in sales should receive adequate attention. No
customer or retail store/counter should be left out.

11.5.5 Improving selling and marketing productivity

This is ensured by making sure that salespeople do not sit idle throughout the
day. Based on their actual performance they are advised the selling tips and
tricks to ensure optimum output throughout the day.

11.5.6 Frequency of calls in a month

Typically the sales outlets can be assigned to the ABC category. With A-type
counters calling happens more frequently than in the B category. B category
calling happens more frequently than C. Typically working days in a month are
decided by reducing the off days and the leaves from the monthly calendar.

11.5.7 Estimating sales potential

Typically the sales potential is based on two important factors:
1) Count of the users for the product
2) Maximum expected purchase rate
This is typically done based on secondary sales data available. The sources of
secondary sales data are furnished below for your ready reference:
1) Trade associations (FICCI, PWD, CII), market research agencies (IMRB,
ORG Marg, A-C Nielson, Kantar Research, R.K.Swamy BBDO, etc.) 221
Sales Planning and Control 2) Database like Dun & Bradstreet (https://www.dnb.co.in/sales-and-
marketing-solutions/dnb-optimizer), India art, etc.
3) Historical sales data of the company
4) Data collected through census (NSSO: National sample survey
organization) conducts socio-economic survey pan India every 10 years
5) Departments like housing, social security, electoral records, tax records,
etc.
6) Internet searches, libraries
7) GPS (Global positioning system, remote sensing)
8) Log data of kilometers travelled
9) Journal papers, magazines
10) Government data for various ministries, various trade promotion boards,
and various export promotion councils of India
In addition, to the aforementioned companies have to come up with their estimates
of the potential demand by consumer type, geography, and industry type.
Generally firms do have their databases which are usually available for a fee and
can be mined for potential demand information. Purchase rates are usually
available from tender documents, trade associations, Govt. publications. This
can also help to derive the ratio of the current sales to the number of households
or the per person purchase rate (Rs spend/person or Unit(s) bought/person).
Average demand per household for new products can be based on conversion
rates with similar products. For example, if apparel is sold in 4% of households
in India then a similar demand estimate of apparel by a different organization is
also likely to be sold in 4% of households.
Sales planning typically involves the top to bottom of the sales team in an
organization. The guidance is usually given from the top and the junior team
follows it with not much room for negotiation.
For example Sales production in a factory = (Retail market size X Market share)
+/- Retail inventory in the outlets. Marketing executives estimate market sales
based on pricing, advertising and promotion plans, distribution plan, product
improvements, and new product launches
Supporting Sources of Secondary Data for Sales Planning:
The following global secondary data sources help in looking at the the sales
potential available for the company from various dimensions vis a vis the
competition both for domestic business and also the possibility of tapping the
overseas/global markets. However, while adopting or using these data the
company should carefully examine the nature, relevance and the applicability
for the firm in question.
Buying power index method: This is a yearly publication by Sales and
Marketing Management Magazine. This combines estimates of population,
income, and retail sales to give a composite indicator of consumer demand. It
has 0.5, 0.3, and 0.2 weightage for income, retail sales, and population. The
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buying power index is given by the following equation: BPI = 0.5 (market Sales Planning, Forecasting
and Budgeting
percentage of U.S. effective buying income) + 0.3 (market’s percentage of U.S.
retail sales) + 0.2 (the market’s percentage of the U.S. population) Fig 4 gives us
the BPI for a county in the USA.
Data used to calculate buying power index

2001 effective 2001 total retail Total population

buying income sales

Amount % of Amount % of Amount % of Buying

($000,000) US ($000,000) US (‘000) US Power
Index

Total $4,436,178 100 $2,241,319 100% 2,62,313 100% 100

United %
States

Sacramento 25,572 0.58% 12,414 0.55% 1,482 0.57% 0.5674

Metro

Fig 5 : (Page 61, Sales Management by Cron & Decarlo)

NAICS method for business markets: This data is available through the data
built up from the US census of manufacturers. This data is available every 5
years. Fig 6 explains the NAICS with an example.
NAIC Industry Production Number of machines Market
code employees* used per 1000 workers ** potential

(a) (b) (axb /

1000)

3112 Grain milling 878 24 21.1

3122 Tobacco mfg. 9571 15 143.6

3121 Beverages 3538 3 10.6

175.3

*The production employee data is from the 2002 Economic census of

manufacturing, Geographic area series, North Carolina, p.NC1&2

** Estimated by manufacturers from past sales data

Fig 6 : (Page 62, Sales Management by Cron & Decarlo)

Sales planning also involves meeting the sales team in an elaborate exercise to
plan for the next year. The current year’s sales data versus budget or last year’s
actual is also tracked religiously to see the progress vis the budget. This also
helps to have an update of the growth/ degrowth vis a vis the industry growth
and the growth of its competition. Mostly sales planning for the year is an
annual affair mostly done at outbound camps to motivate the sales team. This
help to give a collective direction to the team by the leadership at one go
simultaneously.
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Sales Planning and Control
11.6 SALES FORECASTING: MEANING, PURPOSE
AND SCOPE
The term Sales forecasting implies predicting future demand. These predictions
are useful for the planning sales and budgeting process. For new product launches
which have no historical data mostly executive judgment is used along with
salespeople inputs, pilot tests, and some market surveys.
Sales forecasting is an estimation of projected sales for a time period. Simply
speaking, the process of sales forecasting involves reviewing performance, history
of the product or service, and relates it to the marketing and sales effort of the
firm within the anticipated market environment (economic, competitive,
technological, public policy etc.) and buyer behaviour.
Sales forecasts are time span related and therefore are termed as, short term
forecast - covering time period of upto a year, medium team forecasts-for a time
period of around three-five years. The exact time period for which a forecast is
developed is dependent on the product/ market characteristics as well as the
purpose for which it is developed and hence may very from company to company.
Notwithstanding thus the longer the time span covered, the more qualitative will
be the forecast, and the shorter the time span covered, the more quantitative the
forecast.
Time series (trend fitting, moving average), correlation and regression, customer/
dealer surveys and executive judgement are the most commonly used methods
for preparing sales forecasts.
The selection of the appropriate forecasting method(s) depends upon
(i) its purpose
(ii) availability of reliable and relevant data and
(iii) market conditions.
For increased usefulness, the overall sales forecasts should be broken down by
product, month, territory, geographical area, and segmentwise as per the needs
of the company.
Classification of Sales Forecast:
There are broadly 3 types of sales forecasting:

11.6.1 Qualitative
1. Salesforce aggregate
2. Executive judgement
3. Purchased survey

11.6.2 Extrapolative
1. Naive
2. Moving average
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 3. Percent rate of change Sales Planning, Forecasting
and Budgeting
4. The unit rate of change
5. Leading indicator
6. Exponential smoothening
7. Line extension

11.6.3 Quantitative
1. Multiple regression
2. Econometric
3. Simple regression

11.7 QUALITATIVE SALE FORECASTING

Salesforce aggregate: This involves the sales force projecting sales for the
customers in their territories. These sales figures are aggregated and then
reviewed at the top management level. The territory estimates are often based on
the demand expected from the largest customer in the territory. This is preferred
by industrial organizations where the number of customers under each salesperson
is not very high. The salespersons have a reasonable idea of the demand potential
of their territory organization-wise. The further buy-in of the sales force is also
high for this type of forecasting because the sales force has themselves created
the same.

Executive Judgement: This involves senior executives using their expert

judgement using economic indicators like Retail inflation, Consumer price index
(CPI), historical sales, and other trends. These are then compared with the forecast
done by salespeople and the differences are reconciled. This forecasting tool
continues to have more popularity as managers trust their judgement compared
to the less popular statistical tools. However, the available evidence does not
indicate that this method is more accurate in forecasting. This method serves
from the apparent drawback that this forecasting comes with experience and age
and it’s difficult to teach.

Purchased Survey: Commercially purchased surveys like A.C.Nielson, IMRB,

ORG Marg, R.K.Swamy BBDO, etc. help to give insights depending on the
deep details the survey is subscribed to.

EXTRAPOLATION:
Naive: This involves using the last period’s sales for having the next period’s
forecast without predictions or adjusting the factors. This implies that the previous
period’s actual sales are the naïve forecast for the next period. This forecasting
assumes that nothing is going to change and the best estimate of the future is the
current level of sales. No special skills are used for this forecasting and are one
of the most simple ones.
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Sales Planning and Control
Quarter
Q1 Q2 Q3 Q4
Actual sales> 50 65 68 75
Naïve forecast> 50 65 68

Fig. 7: Naive forecast

The error in the forecast for Q2 is the difference between the Naïve forecast and
the Actual sale
 50 – 65 = -15
Percentage of forecasting error for Q2 = (Naïve forecast – Actual sales)/
Actual sales
= (49-77)/ 77
= -36% (which means that the forecast
is 36% less than the actual.)
To compute forecasting accuracy across several periods, MAPE(Mean absolute
percentage error) is used:
MAPE = X 100
n = number of periods for which forecast is made
MAPE calculates the forecasting errors for each period without regard to whether
they are positive or negative. The benefit of MAPE is that it allows comparison
across companies and product categories.
Moving Average: This involves averaging the actual sales of the previous period
with the forecasted sales for the next period. The period could be 1 or 2 or 3 or 4
etc.
For ex: The moving average forecast for 2 and 4 years is given below. in Fig . 7
Moving average forecast
Year Actual sales Two years Four years
2011 100
2012 110
2013 115 105
2014 120 112.5
2015 130 117.5 111.25
2016 131 125 118.75
2017 135 130.5 124
2018 133 133 129
2019 140 134 132.25
2020 128 136.5 134.75
2021 133 134 134
2022 ? 130.5 133.5

Fig. 8 : Moving average forecast

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Sales forecast for next year = Actual sales for the past two or four tears / Number Sales Planning, Forecasting
and Budgeting
of years (2 or 4)
Percent rate of change: This involves the following:
(Last year’s data- This year’s data) x 100 / (Last
year’s data)
For ex: Last year data = 0, This year data is 8, then putting in the above
formula is:
= (10-8)*100/ 8 = 25 %.
The unit rate of change: Same as above but the only difference is that the count
is used.
Leading Indicator: When sales are affected by the changes in the economy
leading indicators help in preparing the forecasts. The purpose is to find a factor
series that is closely similar to the organization’s sales. The statistics are usually
available several months in advance. Some of the important leading indicators
are stock prices, new orders for durable goods, housing sector growth, uptake in
consumer finance, IIP(Index of Industrial Production), etc. These predict turns
in sales trends. The decline in the lead indicators often indicates a levelling or
decline in sales. The lead indicators are more sensitive to the change in the business
environment and often signal turns in the economy many months in advance
before they occur.
Exponential Smoothing: This is a type of moving averages forecasting method
except where the most recent year’s sales data are weighted differently than the
past year’s sales data. An important aspect of this forecasting is to determine the
accurate data of () for this year’s company sales. This is typically done by
looking at the historical data to determine which weight gave the most accurate
sales forecast in the past.
In this case,  = 0.8 gives the most accurate results for this year’s company’s
sales. Fig 8 illustrates the example with data.
Sales forecast for next year
Year Actual sales  = 0.2  = 0.5  = 0.8
2011 1200
2012 1250 1200 1200 1200
2013 1280 1210 1225 1240
2014 1300 1224 1253 1272
2015 1350 1239 1276 1294
2016 1320 1261 1313 1339
2017 1400 1273 1317 1324
2018 1280 1298 1358 1385
2019 1250 1295 1319 1301
2020 1360 1286 1285 1260
2021 1380 1301 1285 1340
2022 ? 1317 1288 1372
Fig. 9: Exponential smoothening
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Sales Planning and Control Sales forecast for next year = () (actual sales this year) + (1- ) (this year’s
sales forecast)
= (0.2) (1380) + (1-0.2) (1301)
= 1317
Line extension: This includes introducing a new product based on the existing
product line. The forecasting uses the existing market share and introduces new
choices to consumers using existing numbers and data points.
QUANTITATIVE FORECASTING
Multiple Regression: It is a statistical technique that can be used to develop
sales forecasts at all organizational levels as well as companywide. There are
dependent and independent factors. The independent factors can be environmental,
organizational, or salesperson factors. The constant values of each of the
dependent factors are measured for the previous period. Typically a statistical
package such as SPSS can be used to estimate the parameters of the regression
equation. For eg. A sales manager wanting to forecast the sales for his/her territory
could develop the following regression equation:
Territory sales = a + (b) (environmental factor) + (c) organizational factor) + (d)
(salesperson factor)
a,b, c, and d are the model parameters generated by the regression process for
the independent factors while the territory sales are the dependent factor. The
regression model though useful suffers from two fundamental flaws:
1. It incorporated independent variables in the model, though these
independent variables are highly interrelated
2. These equations are linear but the dependent variables can be non–linear.
These flaws can be addressed by performing linear regression on the logarithm
of the actual data
Fig. 9 illustrates the above point
Territory sales = (800.82) ( potentialt ) ( concentrationu ) ( experiencev )
(span of controlw )
Territory 1 Territory 2 Territory 3
Potential 1,14,000 1,25,000 87,000
(number of persons
employed by firms in
customer industry
located in the territory
Concentration 94,000 52,000 12,000
(number of persons
employed by the large
plants in customer
industry located in the
territory)
228
 Sales Planning, Forecasting
Experience 30 10 20 and Budgeting

(months salesperson
has been with the
company)
Span of control 5 8 10
(number of salespeople
supervised by sales
manager)
Territory sales forecast 5,86,000 2,38,400 1,73,200
Fig. 10 (Page 124, Sales Management by Ingram, Forge, Avila Schewpker,
Williams, 7th Ed.)

This function is non-linear and incorporates interactions through the

multiplications of dependent variables.
In the above example, potential and concentration are the Environmental factors.
Experience is a salesperson factor. The span of control is an organizational factor.
The above data is for three territories and generate the sales forecast data for
each territory. Higher the first three factors (potential, concentration, experience)
in Fig. 10 higher is the territory sales forecast. The higher the fourth factor (span
of control) the lower the territory sales forecast).
Econometric Forecasting: In econometrics forecasting, the process used for
forecasting can be quite varied. If historical data is available, forecasting typically
involves the use of one or more quantitative techniques. If historical data isn’t
available, or if it contains significant gaps or is unreliable, then forecasting can
be qualitative. The great advantage of econometric forecasting models is
indirect. It can be used to predict the direction and extent of change in the overall
economic activity or any of its components. This information can then become
the input required to estimate the independent variables of a single equation
forecasting model.
Simple Regression: Linear regression is a statistical tool used to help predict
future values from past values. Commonly expressed as:
Y = mx + c; Y= dependent variable, m = slope of the independent variable, x =
independent c= constant
Which regression to use: simple or multiple often depends on the following three
factors:
1 One statistic is R^2. If the R^2 value is 0.70, the equations 70% of the
variable in the data. Forecasting equations with a high value of R^2 are
preferred over equations that have a low value of R^2 like 5 to 10%.
2 The standard error of the estimate is another statistic that indicates the
quality of the forecast. It gives the range within which you can expect to
find the true value of the variable you are predicting.
3 Another statistic is the error in each of the coefficients. The error in the
coefficients should be smaller than the coefficients. If the errors are larger 229
Sales Planning and Control than the coefficients then it might be a good idea to drop the variable
from the forecasting equation.
With regression forecasting, one needs 5 observations for every independent
variable. An equation with 3 variables should have 15 observations. If the data
does not meet this requirement then a different forecasting method should be
used.

11.8 MANAGING SALES FORECAST

Sales forecasting involves the use of one or more of the above tools used alone
or in combination based on the forecasting accuracy achieved by the tools(s).
The forecasting tool’s output is also adjusted for gross macroeconomic conditions
which are difficult to predict. At times advanced algorithms with multiple variables
are modelled to replicate all possible market conditions. More often than not the
forecasting tools are also validated by using rich executive experience. At times
the margin of error of the forecasting tools decides the forecasting tool to be
used.

11.9 WHAT TO DO WHEN SALES FORECASTS

DIFFER?
When sales forecasts differ widely from the actual sales mostly the sales leadership
of the sales organization goes into a root cause analysis mode. Retailer-wise,
territory-wise, branch-wise, and region-wise reasons are explored. Often the
reasons for the gap are discussed at different levels. Common reasons for the
variations are flagged :
a) Salespeople are very subjective about their sales values or sales closures.
b) There is a significant price rise of the products in the market which
leads to an abnormal increase in demand for the product and thereby
ensuring that the actual sales are higher than the forecasts.
c) There is a significant price rise of the product as a result of which the
offtake is significantly reduced leading to the actual sales being far less
than the forecasted sales
d) A very aggressive competition which is giving unreasonably favourable
discounts and credit period to the trade sales.
Mostly corrective measures are discussed and deliberated. Implementation is
assured by all stakeholders of the sales team.

11.10 SALES FORECASTING FOR NEW PRODUCTS

Unlike the established products, forecasting of the sales for new products is more
difficult. Depending upon the degree of similarity/dissimilarity with the existing
products, sales forecast for new products are based on :
o Past records and experience
230
 o Study of competing product’s demand Sales Planning, Forecasting
and Budgeting
o Market research findings Test market results
o Demand behaviour of substitute products arid rate of substitution.
In addition, sales curve of such a new product in foreign markets and its analysis
on a product life cycle basis provides meaningful insights.
In the case of a totally new product, a close watch on the actual sales alongwith
the experts opinion, lessen to some extent the otherwise impossible task of
developing reliable forecasts for such products.
New products sales forecast is typically done based on two logical points:
1. New product is a variation of the existing product: Using sales
volumes of existing products in the market. For ex. Differing in size,
colour, shape, etc. forecast of products/categories which are close or
similar to them.
2. Judgemental forecasting: Applicable in cases where there is no
historical data available for the product category. We can use the Delphi
technique (interactive forecasting technique which depends on a panel
of experts), scenario forecasting, forecasting by analogy

11.11 MEANING AND IMPORTANCE OF SALES

BUDGETING
The sales budget is an important tool used by sales managers for the annual
planning of their sales objectives. It also includes a set of planned expenses
prepared on an annual basis. The sales forecast helps to indicate how many
salespeople would be needed. This adds to the travel and other expenses of the
sales force. Then the actual expense is compared to the budgeted expenses. When
expenses exceed the budget then they have to be controlled or asked for more
budget. The main objective of preparing a sales budget is to decide how much is
to be spent on personal selling and how much is to be spent on various selling
activities.
Design marketing plan. Set advertising
and promotion expenditure level

Forecast sales

Estimate personal selling costs needed Revise expenditure categories.

to achieve the sales goals Request additional funds as needed

Compare actual expenditure with

Figure 11: Sales forecast forward and backward linkages

A sales budget is a financial plan depicting how resources should best be allocated
to achieve the forecasted sales. The purpose of sales budgeting is to plan for and
control the expenditure of resources (money, material, people, and facilities)
necessary to achieve the desired sales objectives. Sales forecast and sales budget 231
Sales Planning and Control are therefore intimately related as much as that if the sales budget is inadequate,
the sales forecast will not be achieved, or if the sales forecast is increased the
sales budget must be increased accordingly. Sales budget by relating sales obtained
and resources deployed also acts as a means for evaluating sales planning and
sales effort. It aims at attaining maximum profits by directing the emphasis on
the most profitable segments, customers, and products.

11.12 PURPOSE OF THE SALES BUDGET

A sales budget generally serves three basic purposes.
1) Planning
2) Coordinating
3) Controlling
1) A Planning Tool: To achieve the goals and objectives of the sales
department, the sales manager must outline essential tasks to be
performed and compute the estimated costs required for their
performance. Sales budgeting, therefore, helps in profit planning and
provides a guide for action towards achieving the organizational
objectives.
2) An Instrument of Coordination: As we all know selling is only one of
the important functions of marketing. To be effective it needs support
from other elements of the marketing mix. The process of developing a
realistic sales budget draws upon backward and forward linkages of
selling with marketing and in turn brings about necessary integration
within the various selling and marketing functions, and coordination
between sales, finance, production, and purchase functions.
3) A Tool of Control: The sales budget on adoption becomes the mark
against which actual results are compared. For example, look at the
following figure:

(in '000 Rs.)

Variance
Budget Actual Favourable Unfavourable
Sales Rs. 7000 Rs. 8900 Rs. 1900
Expenses
Direct Selling 2500 2375 125
Sales promotion 1500 1650 Rs. 150
Advertising 997 1075 78
Administrative 875 775 100
Total expenses Rs. 5872 Rs. 5875 03
Profit (before tax) Rs. 1128 Rs. 3025 1897
232 Figure 12: Budget Variance
The above figure is self-explanatory and points out both the favourable and Sales Planning, Forecasting
and Budgeting
unfavourable variance. The analysis of the factors causing variance enables the
sales manager to quickly spot potential problem areas or better plan for unexpected
outcomes such as higher than budget sales.
The budget variance analysis approach thus helps in improving insights of the
sales manager and enables him to refine and develop realistic sales budgets in
the future with minimal variance.

11.13 METHODS OF SALES BUDGETING

A variety of methods ranging from the sales manager’s gut feeling to the
application of management science models are used for determining the sales
budgets. The popular methods are as under:

What is Affordable
This method is generally used by firms dealing in capital industrial goods. Also,
companies giving low emphasis on sales and marketing functions or having a
small size of operation make use of this judgemental method.

Rules of Thumb
Such as a given percentage of sales. Mass selling goods and companies dominated
by finance function are major users of this method.

Competitive Parity
Large-sized companies whose products face tough competition and need effective
marketing to maintain profits make use of this method. The use of this method
presumes knowledge of the competitor’s activities and resource allocation.

Objective and Task Method

A systematic method help in the determination of the sales budget by identifying
the objective of the sales function, and then ascertaining the selling and related
tasks required to achieve each objective. Later, the cost of each task/activity is
calculated to arrive at the total budget. The finalization of the budget may require
adjustments both in the objectives as well as in the way the task may be performed.

Based Budgeting
It is relatively a new approach to budgeting. It involves a process in which the
sales budget for each. the year is initiated from Zero bases thus justifying all
expenditure and discarding the continuation of conventions and rules of thumb.
The method suffers from. practical limitations which relate to a very - elaborate
and time-consuming process required by it.
In practice, companies make use of a combination of the above methods and
Sales
Budgeting and Control depending upon the experience gained sales -budgeting
approach stands refined. The status of the sales and marketing function within
the organization determines the extent of sophistication used in the approach to
sales budgeting.
233
Sales Planning and Control
11.14 PREPARATION OF SALES BUDGET
The preparation of a sales budget is one of the most important elements of the
sales planning process. Generally, three basic budgets are developed, the sales
budget, the selling expense budget, and the sales department administrative
budget. Most sales organizations have specified procedures, formats, and
timetables for developing the sales budget. While all sales budgets relate to the
sales forecast, the steps taken in the systematic preparation of the budget can be
identified in the following sequence.
Territory 1 Sales Budget Product Product Product
(Value) category 1 category 2 category 3
Territory 1 Sales budget Product Product Product
(volume) category 1 category 2 category 3
Territory 2 Sales Budget Product Product Product
(Value) category 1 category 2 category 3
Territory 2 Sales budget Product Product Product
(volume) category 1 category 2 category 3
Product Product sub SKU1,
category 1 category 1 SKU2,
SKU3
Product sub SKU4,
category 2 SKU5,
SKU6
Product sub SKU7,
category 3 SKU8,
SKU9
Branch Territory 1 Territory 2 Territory 3
Branch1 Sales Budget
(Value)

Branch 1 Sales budget

(volume)

Branch 1 Sales Budget

(Value)

Branch 1 Sales budget

(volume)

Branch 3 Sales Budget

(Value)

Branch 3 Sales budget

(volume)

Branch 4 Sales Budget

(Value)

Branch 4 Sales budget

(volume)
234
 Sales Planning, Forecasting
Region 1 Sales Budget and Budgeting
(Value)

Region 1 Sales budget

(volume)

Region 2 Sales Budget

(Value) Regional
Budget (Sales
Region 2 Sales budget value);
(volume) Regional
Budget(Sales
Region 3 Sales Budget
Volume)
(Value)

Region 3 Sales budget

(volume)

Region 4 Sales Budget

(Value)

Region 4 Sales budget

(volume)

Fig. 13 : Preparation of sales budget

The first table shows the territory-wise sales value and volume budget. Then the
sales value budget and sales volume budget are broken down into various product
category budgets. In the 2nd table, the product category budget is broken down
into product sub-category budgets. The product sub-category budget is broken
down into various SKUs (Stock keeping units). An SKU cannot be divided further.
The 3rd table shows the Territory wise budget adding up to the branch budget.
The 4th table shows the branch table adding up to the Regional budget. The 5th
table shows the Regional budgets adding up to the National budget.

Review and Analysis of Marketing Environment

Generally companies prepare sales budgets on the principle of bottom-up plan-
ning with each echelon. To prepare a tentative budget of revenue and expenses,
depending on the organizational structure of the sales department, each depart-
mental head is asked to predict their sales volume and expenses for the coming
period and their contribution to overhead. For example, in a leading tyre company
each District sales manager prepares his/her district budget and submits it to the
Regional or Divisional office, where they are added together and included with the
divisional/regional budget. In turn, these divisional budgets are submitted to the
sales manager for the particular product or market group. At the end of this chain
of subordinates’ budgets, the top executives in the sales department scan and pre-
pare a final sales budget for the company. Now the marketing budget is combined
with the budgets of the sales department and the staff marketing departments, to
give a total of sales revenues and selling and other marketing expenses for the
company. Some of the common items in each sales budget include the following:
 Salaries, salespersons, administrative support, etc.
 Direct selling expenses - travel, lodging, food, entertainment.
 Commissions on sales, Bonus.
235
Sales Planning and Control  Benefits packages covering medical insurance, gratuity, and retirement
contribution
 Office expenses-mailing, telephone, office supplies, and other
miscellaneous costs.
 Advertising and promotional materials, selling aids, contest awards, and
product samples. catalogs, price lists, etc.
This review of past budget performance helps the sales manager to minimize
variances in the coming period.

Communicating Overall Objectives

Sales executives at the top level must communicate their sales goals and
objectives to the marketing department and argue effectively for an equitable
share of funds. The chief sales executive of the firm should encourage the
participation of all superiors and managers in the budget process so that, as a
part of its development, they will accept responsibility for it and later
enthusiastically implement it.

Setting a Preliminary Plan for Allocation of Resources and

Selling Efforts to Different Activities
Particularly products, customers, and territories, so that revisions can be made in
this initial sales budget. The sales manager must emphasize that the budget should
be as realistic as possible at each stage of its development so that it can maximize
its favourable impact on the firm. When budget goals are achieved through a
cooperative team effort, a strong feeling of organizational confidence is created.
In case of failure to stay within budgets, the sales manager should stress rewards
and public commendations to encourage positive attitudes towards budget goals
and pride in their achievement.

Selling the Sales Budget to Top Management

The top sales and marketing executive must visualize that every budget proposal
they are presenting to the top management must remain in competition with the
proposal submitted by the heads of other divisions. Every division- usually
demands an increased allocation of funds. Unless sales managers rationally justify
each item in their budgets based on profit contribution, the item may not get due
consideration by the top management.

11.15 BUDGET IMPLEMENTATION AND

ESTABLISHMENT OF FEEDBACK
MECHANISM
Actual budgetary control features go into operation, as soon as the approved
budgets have been distributed to all units of the firms. Each item in the budget
serves as a quota or standard against which management measures performance.
In the case of actual performances showing variance from budgeted performance,
two courses of action are available to the organization.
1) To ascertain whether the variance is a result of poor performance by the
236 sales group - necessary steps should be taken to ensure that salespersons
 organize their selling efforts more carefully so that budgeted expenses Sales Planning, Forecasting
and Budgeting
can be brought back into line.
2) To revise the sales budget by incorporating the changed allocation of
the item For example, if it is discovered that travel expenses have
increased because of the necessity of calling on new customers not
previously covered, action should be taken to revise the budget to reflect
changed conditions.
Salespersons are generally trained to be budget-conscious, it is the responsibility
of the sales manager to ensure that sales revenue and cost ratios remain within
the reasonable budget limit. Figure 2 shows the quarterly sales budget form that
the sales manager might consider using to monitor budget variances and take
timely corrective action to rectify them if need be.

Fig. 14: Quarterly sales budget format

Experiences bring out the following main items on which variance between
budgeted and actual costs often arise, are
 salaries and fringe benefits
 direct selling expenses
 maintenance of company vehicles sales and other product/business
promotional costs
 promotional allowances including discounts, rebates, etc.

The sales manager must give attention though to a varying degree, to each of the
above and other items. It is wise to tighten control over expenses, especially
under circumstances when sales forecasts are not being met or sales budgets are
being exceeded A general attitude of caution before incurring an expense is
considered prudent. A leading material handling equipment company has a norm
237
Sales Planning and Control that not more than forty percent of the sales expense budget will be spent unless
more than fifty percent of the forecasted sales have been realized.

All shortfalls in budgeted sales that affect gross profit contribution must at least
make a case for a thorough review of the sales and marketing programmes of the
firms. Researches reveal the causes of shortfalls as production stoppages,
distribution problems, a shift in market mood, competitive activity, wrong pricing,
undermanning of sales staff or inexperienced sales staff, delays in new product
launch, etc.

11.16 FLEXIBILITY IN BUDGETING

The flexible sales budget is an alternative to overcome the rigidity of the traditional
sales budget which makes the sales manager merely an analyzer of the financial
performance of the company. Flexible budgets make use of standard costs (based
on records or managerial judgement) for different revenue forecasts. It allows
the sales manager to continuously monitor financial performance in terms of
standard cost ratios. For example, the standard cost for promotion materials
(brochures, display samples, etc. might be. 5 for every Rs. 100 sales or a ratio of
0.05. After nine months Rs. 400 has been spent on promotional materials while
Rs. 2400 worth of revenue has been generated. The sales manager observed that
the ratio has risen to 0.166. In this case expenditure on promotional materials
need to be cut back reasonably. In the past use of flexible budgeting was limited
to large-sized companies, but now small companies also are adopting flexible
budgeting techniques. There is one more dimension of flexibility in sales budget
and this arises out of the very, nature of sales budget As we all know that a sales
budget is an estimation relating to the future period under assumed market
conditions. In the event of a change in market conditions necessitating a change
in the firm’s expenditure of efforts, the sales budget should carry flexibility of
inter-item reallocation of expenses and other resources e.g. sales allowance to
additional sales persons to display contest to fast cargo movement to cash discount,
etc.

238
 Sales Planning, Forecasting
and Budgeting

Check Your Answers

A) 1 (T), 2 (T), 3 (F), 4 (F), 5 (F)
B) 1 (d), 2 (b), 3 (c), 4 (b), 5 (a)

Sales expenditure: For the selling expenses an annual/monthly plan is prepared

for the same. The following are the common selling expenses:
 Salesforce/sales manager salaries, commissions, and bonuses
 Social security
 Retirement plans
 Medical and life insurance
 Cars
 Travel, lodging, boarding, entertainment
 Office supplies and postage
 Office rent and utilities
 Clerical and secretarial services 239
Sales Planning and Control  Recruitment and training

 Samples and other sales aids

The amount budgeted for each product category and customer varies. Many times
the initial expenses are apportioned based on the previous year’s expense budget
accounting for inflation and marketing expenses. It has been seen that increasingly
many sales organizations are using video conferencing to reduce expenses in
travelling, hotel stay, and other costs. Budgeting helps marketing managers to
decide the optimal marketing mix for the various marketing variables. The sales
budget also helps control the sales operations. Nowadays spreadsheets are being
extensively used to do various analyses and help the management to do the income,
analysis by product categories, geographies, sales territories, regions,
salespersons, etc. It also helps to calculate the cost of sales for each territory.
Nowadays the salespeople are increasingly being incentivized on sticking to
their budgets and being below that.
Sales budgeting also looks into phasing (dividing into months) the sales budget
and the expenses and aligning them. Fig. 16 shows the same.
Year > 2022 Jan Feb March April May June July Aug Sep Oct Nov Dec Total
This year sales budget(lakhs) 140 120 200 100 120 140 100 160 200 260 240 240 2000
This year sales budget phasing(%) 7% 6% 10% 5% 6% 7% 5% 8% 10% 13% 12% 12% 100%
Last year(2021) actual sales(lakhs) 120 110 175 90 111 128 95 145 180 240 230 231 1855
This year budgeted expenses(lakhs) 12 11 21 11 13 15 9 16 22 27 25 26 208
This year budgeted expenses(%) 8.6% 9.2% 10.5% 11.0% 10.8% 10.7% 9.0% 10.0% 11.0% 10.4% 10.4% 10.8% 10.4%
This year actual sales (lakhs)
This year actual sales expenses(lakhs)
This year actual sales expenses(%)
Fig.16: Sales and expense budgeting versus actual sales, expense

Scenario 1: If the actual sales and expenses are close to the budget then it is
thought to be a good sale.
Scenario 2: If actual sales are less than the budget and the expenses are as per
budget; then it means that the spend % is high as the actual sales are low.

11.17 SUMMARY
The function of Sales Management is a specialized function that involves
planning, direction, and control of personal selling, including recruiting, selecting,
equipping, assigning, routing, supervising, and motivating the sales force. All
this is primarily done to achieve the specific sales objectives, setting which
involves a comprehensive Sales Planning process. In various steps so involved
in the Sales Planning Process has been siscussed.

Product-wise Sales Planning consists of identifying the Market Potential, Sales

Potential, and then the Sales Forecasts. The Sales forecasts are compiled after
though study of customers, their size, and their buying behaviour. Territory
Planning is done by analyzing each salesman’s capacity to work, identifying the
frequency of calls per month, building in parity in sales potential, minimizing
travel time & expenses, and deciding on proper headquarters.
240
Territory Coverage Planning should be standardized and it should be made on a Sales Planning, Forecasting
and Budgeting
sheet of paper where the contact point and address of the salesman should also
be indicated. Frequent reviews of this plan should also be made to accommodate
necessary changes for towns and customers.
Sales Territory Expense Planning is done once all the planning listed above is
properly done. After deciding the number of salesmen required, a Sales Manager
can work out the expenses. A Sales Manager can add or discontinue salesmen
depending upon the requirements which may alter his Sales Territory Expense
Planning. This planning also helps a Sales Manager to operate proper control
systems.
Sales Programme Planning involves planning the efficient and optimum use of
various Sales Promotion measures like putting up point of sales material,
Improving shop window display, conducting, demonstrations, distribution of
samples, etc.
A Sales Manager should also plan his itinerary well - he should be clear as to
what is his tour objective, why is he going there, what will he achieve on tour,
etc. A Sales Manager should devote more of his time to average performers and
should circulate his TOUR PLAN to other departments.
A sales forecast constitutes a critical component of the sales planning task of the
company. To do this with the desired accuracy, detailed market knowledge and
the existence of a comprehensive marketing information system are required.
Development of sales forecasts on a product, segment, customer, and geographical
area basis enables a company to keep sales as planned. This led to the
establishment of quantitative goals relating to an identified sales unit for a specific
period. The sales quotas were also determined to facilitate the carving of profitable
sales territories and their management most productively.
The sum of money required over a specified period to run a sales department is
usually the sales budget and how much should we spend on the sales function is
the essence of a sales budget. The process of developing a sales budget deals
with identifying ways of optional resource allocation for various selling activities.
A sales budget aids in sales planning and acts as a standard. performance and a
tool of control. While the sales budget acts as a tool for salesforce evaluation and
control, there is certainly a distinct need for continuous monitoring and control
of the total sales function. The other methods used for controlling the sales function
are-sales analysis, marketing cost analysis, and sales management audit. For
obtaining the best return, from the scarce resources budgeted for the sales function,
a sales control system must be established in the company. The effective use of a
sales control system requires the existence of both a comprehensive sales
information- system as well as an elaborate cost accounting system, the systems
which generate information for control purposes.

11.18 KEYWORDS
Sales Plan : A determinant of personal selling strategy
reflecting a clear understanding of overall
company goals and market characteristics, and
241
Sales Planning and Control incorporating techniques and information which
will allow for more effective decisions in
eliciting competitive success.

Process of Sales Plan : It is in three stages. Firstly, prepare sales

forecasts and budgets based on identified firm’s
market. Its sales potential by product line,
geographic area, or customer type. Therefore,
divide the market into territories so that sales
effort can be allocated most effectively to current
and potential customers.

Finally, set quotas as a means of guiding and

motivating salesmen, as well as a means of
controlling and evaluating their effort.
Sales Forecast : An estimate of Rupee or unit .sales for a
specified, future period, under a proposed
marketing plan or period.

Market Potential : The expected sales of a commodity, a group of

commodities, or a service for an entire industry
in a market during a stated period.

Sales Potential : The share of market potential that a company

expects to achieve.

Sales Efficiency : A measure of performance to evaluate the

relationship between sales volume or value and
individual and total selling cost.

Sales Volume Planning : A means of allocating targets, expressed in

quantitative terms, to individual sales persons
to achieve overall sales volume objectives.

Sales Targets : A performance standard against which the degree

of achievement can be measured. Targets are
usually set on a geographical, product, or
customer basis in either selling quantities or sales
performance terms.

Budget phasing : Dividing the annual budget into proportional

monthly budgets. In numbers, value, or mostly
percentage.
Budgetary Control : The processes by which an organization ensures
that a close watch is kept on the organization’s
progress towards achieving its annual budget -
its revenue and profit goal.

Natural Expenses : The traditional expense categories (salaries, rent,

depreciation, etc.) are used in an accounting
statement.
242
Cost vs. Expenses : Two terms that are often used interchangeably Sales Planning, Forecasting
and Budgeting
in describing marketing cost analysis. But costs
tend to be specific and directly related to volume
output, while expenses are more general or
indirect expenditure.

Sales Analysis : The process of interpreting the pattern of sales

orders obtained in the marketplace. This term
may also refer, more widely, to the interpretation
of all data - including sale orders from the
marketplace.

Standard Costs : Predetermined costs based on experience and

research studies for achieving certain levels of
volume.

11.19 SELF-ASSESSMENT QUESTIONS

1) How do sales forecasting help in sales planning suggest at least five
requirements of a sales manager in which sales forecasting can be of help

2) What specific points you would consider while territory planning. Explain
each of them, briefly.

3) What measures can be taken to improve the territory’s productivity? Explain

by taking the samples of a) Jewellery watches and b) Agricultural pesticides.

4) Discuss how sales forecasts and sales quotas relate to each other.

5) What are the distinct advantages of sales forecasting? In your opinion does
forecasting help even when there is a recession in the industry. Discuss.

6) Give a comparative account of various types of sales quotas and identify the
attributes of a good sales quota plan.

7) What is a deviation from budget and its importance?

11.20 REFERENCES/FURTHER READINGS

Sales Management, Still, Cundiff, Govoni 5 Paperback – 1 January 2008;
Published by Pearson Sales Management, Cron, Decarlo, 10th Edition, 2016;
Published by Wiley

Sales Management Analysis and Decision Making by Thomas N. Ingram,

Raymond W. LaForge, Ramon A. Avila, Charles H. Schwepker Jr., Michael R.
Williams, Published by Routledge

Arthur Median, 1986 Industrial Sales Force Management, Croorn Helm Ltd.,
Provident House, Burrell Row, Beckenham, Kent BR3 AT.

Chris Noonam, 1986, Sales Management, George Allen & Unwin, London.
Richard R. Still Edward W. Cundiff, Nornia, n A. P. Govani, 1988, Sales.
243
Sales Planning and Control Douglas J. Dalrymple, 1982 Sales Management: Concepts and Cases. John Wiley
and Sons, New York, Chichestei, Brisbane, Tomoto, Singapore.
Gordan J. Bolt, 1987, Market and Sales Forecasting: A Tool Approach. Essex
Kogan Page Ltd., 130 Pentonville Road, London.

Sales Management by Jobber and Lancaster

244