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Sales Management 8

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Sales Management 8 Estimating Demand – PowerPoint PPT presentation

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Title: Sales Management 8


1
Sales Management 8
  • Estimating Demand

2
Market Potential
Sales
Industry Forecast
(Industry Forecast Market Potential)
(Company Forecast Company Potential)
Company Potential
Company Forecast
0
Time
3
Key Terms
  • Market Potential All possible sales
  • Industry Forecast Likely sales, all companies
  • Company Potential All possible sales for one
    company
  • Company Sales Forecast Likely company sales
  • NB All figures are expressed for a period of
    TIME.

4
So how do you estimate demand?
  • Determine WHO will use the product.
  • Which segment(s)? Size?
  • Determine their RATE of use.
  • New/Replacement Frequency.
  • WHO buys product?
  • Purchasing agent, parent, lover, uncle
  • WHAT is their motivation to purchase?
  • Life event, new business, new market, fun

5
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6
Why Forecast Sales?
  • Allocate resources
  • Control operations
  • Project Cash Flow (Important!)
  • Capital/operating budgets
  • Production schedules Inventory control
  • Hiring collective bargaining
  • Planning marketing and sales plans

7
Methods of Forecasting
  • Subjective
  • Users Expectations
  • Sales Force Composite
  • Jury of Executive Opinion
  • Delphi Technique

8
Users Expectations
  • Also called Buyers Intentions method
  • Focus Groups
  • Surveys
  • Intention ? Behavior, but does correlate

9
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10
Sales Force Composite
  • Salespeople are boundary-spanners
  • Close to customers, competitors
  • Fingers on the pulse of the market
  • Survey sales force, and add up estimates
  • Good starting point need adjustment

11
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12
Jury of Executive Opinion
  • Top/key executives, perhaps outside consultants,
    give best estimate
  • Not boundary spanners, but see Big Picture
  • May need discussion to reach an estimate that
    everyone can agree on

13
Group Think
14
Delphi Technique
  • Similar to Executive Opinion
  • Iterative/Secret Process
  • Convergence

15
Methods of Forecasting
  • Objective
  • Market Test
  • Time Series Analysis
  • Moving Averages
  • Exponential Smoothing
  • Decomposition
  • Statistical Demand Analysis

16
Test Market
  • Pick representative city
  • Full marketing effort
  • Extrapolate results to rest of nation
  • Expensive
  • Takes time
  • Tip your hand
  • Competitors can skew results

17
Time Series Analysis
  • Use historical (not hysterical) data to predict
    future
  • Like driving by looking in the rear-view mirror
  • Estimate starts in ballpark (not the franks)

18
Moving Averages
  • Average last n (2,4, whatever) years sales to
    predict the coming year
  • 2005 5,000 units
  • 2006 8,000 units
  • 2007 8,000 units
  • 2008 7,000 units estimated

19
Decomposition
  • Apply to monthly or quarterly data
  • Account for
  • Trends
  • Cycles
  • Seasons
  • Random occurrences

20
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21
Statistical Demand Analysis
  • Use regression or other techniques to determine
    relationship between sales and predictor factors.
  • Need good data and analytical skills.
  • Example
  • Home heating oil demand Function of
    temperature, sun, last fill, tank size, history.

22
What do companies use?
  • They tend to rely more heavily on qualitative
    than quantitative.
  • Especially sales force composite and jury of
    executive opinion.
  • Easier, quicker, perhaps accurate enough

23
Sales Territories
  • Design territories
  • Need a market index to compare
  • Industrial Goods
  • Standard Industrial Classification
  • North American Industrial Classification System
  • Consumer goods
  • Buying Power Index (5I 2P 3R)/10
  • disposable personal Income
  • US Population
  • total Retail sales

24
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