Marketing 2A

COMGA2 – B22

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Higher Education Act, 101, of 1997. Registration Certificate number: 2001/HE07/008
Week 2: Lesson 4
Learning
Outcomes
• Explain the importance of recruitment and selection procedures.
• Explain how sales management organizes sales activity and controls sales output.
 What will be
covered for the
week?
Sales forecasting
Week 2
Lesson Budgeting
4
Salesperson Recruitment

Salesperson selection
Week 2: Lesson 4
Introduction

Welcome to today's lecture on sales forecasting.

This topic is crucial for anyone aspiring to excel in the fields of marketing, finance, and business management.
What is sales forecasting?
Sales forecasting is the process of estimating future sales, and it serves as the backbone for making informed business
decisions.

Why do we do sales forecasting?

Accurate forecasts help companies manage their resources efficiently, plan inventory, set achievable sales targets, and
develop strategic plans.
Week 2: Lesson 4
Introduction

Today, we will explore various sales forecasting methods, understand their applications, and discuss how to effectively
interpret and utilize forecast data.

Whether you are planning to run your own business or work in a corporate setting, mastering sales forecasting will equip you
with the tools to anticipate market demands and stay ahead of the competition.

Let's dive into the world of sales forecasting and discover how we can predict the future with data-driven insights.
 Week 2: Lesson 4
• Sales Forecasting
• Defining Forecasting – Sales forecasting estimates future
revenue by predicting the number of products or services a
sales unit will sell in the next week, month, quarter, or year.

• Importance of Sales Forecasting

• Sales forecasts help to identify potential problems with the
reaching of the organization’s objectives
• Serves to guide the HR department regarding the
appointment of staff in specific positions
• Serves as a guide to assist management in the allocation of
resources
• Forecasting can work as a motivational tool
• Forecasting can assist the sales team to gain perspective on
where the company is going
Terms and components of Sales Forecasting
What do we consider before we do sales forecasting?
Look at the images for clues.

• Market Potential - the estimated sales amounts of all the companies

combined within a particular industry
• Sales Potential - reflects the organization’s expectation of sales that
can be generated through their sales (market share) of the total market
potential.
• Sales Forecast - is the projection of estimated sales, expressed in units
sold or monetary value for a specific period in the future.
• Sales quotas – performance expectations of a department, a team or
an individual
Steps in Sales Forecasting
Step 2:
Step 1: Step 3: Selection of
Determination of Step 4: Collection of
Determination of forecasting
factors affecting data
goals techniques
sales

Step 7: Conversion Step 8: Drafting

Step 5: Analysis of Step 6: Forecasting of industry forecast operational
market potential of future sales to company sales programme and
forecast budget

Step 9: Derivation Step 10: Revision

of sales volume and adaption of
objective forecasts
Class activity

Launching a New Energy Drink (present your findings in class – 15 min exercise)
Your group works for a beverage company that is planning to launch a new energy drink targeting young adults
aged 18-30.
The company aims to capture a significant share of the energy drink market, which is highly competitive.
The
Stepsproduct
in Saleswill be positioned as a premium energy drink with natural ingredients and unique packaging.
Forecasting:
Step 1: Determination of Goals Discuss and determine the sales goals for the new energy drink in terms of revenue and
units sold.
Step 2: Determination of Factors Affecting Sales Identify factors that could affect the sales of the energy drink (e.g.,
consumer preferences, economic conditions, competition).
Step 3: Selection of Forecasting Techniques Choose a forecasting technique (e.g., time series analysis, market research)
that you believe is suitable for forecasting sales of the energy drink.
Step 4: Collection of Data Gather relevant data, such as historical sales data of similar products, market research on energy
drink consumption, and economic indicators.
Step 5: Analysis of Market Potential Analyze the market potential for the new energy drink, considering the size of the target
market and competitors' market share.
Step 6: Forecasting of Future Sales Use the selected forecasting technique to forecast the future sales of the energy drink
for the next year.
Step 7: Conversion of Industry Forecast to Company Sales Forecast Convert the industry-level forecast into a company-
level sales forecast, considering your company's market share and distribution channels.
Step 8: Drafting Operational Program and Budget Develop an operational program and budget based on the sales forecast,
including marketing strategies and production plans.
Step 9: Derivation of Sales Volume Objective Derive a specific sales volume objective (e.g., number of units to be sold
monthly) based on the sales forecast.
Step 10: Revision and Adaptation of Forecasts Revise and adapt the sales forecast based on any new information or
Class activity: Possible answer
[Link] 1: Determination of Goals The company aims to achieve R50 million in revenue and sell 2 million units
of the new energy drink in the first year.
[Link] 2: Determination of Factors Affecting Sales Consumer preferences for natural and premium products,
economic conditions affecting discretionary spending, competition from other energy drink brands.
[Link] 3: Selection of Forecasting Techniques Time series analysis based on historical data of energy drink
sales and market research on consumer trends.
[Link] 4: Collection of Data Historical sales data of similar energy drinks, market research on energy drink
consumption habits, economic indicators (e.g., GDP growth, consumer confidence).
[Link] 5: Analysis of Market Potential The energy drink market is growing, with a large segment of young
adults looking for healthier and premium beverage options. Competitors include Red Bull, Monster Energy, and
other established brands.
[Link] 6: Forecasting of Future Sales Based on the analysis and historical data, the forecasted sales for the
new energy drink are projected to be 2.5 million units in the first year.
[Link] 7: Conversion of Industry Forecast to Company Sales Forecast: Adjust the industry forecast to reflect
your company's market share and distribution channels. For instance, if the total market is expected to sell 20
million units, and your company aims for a 10% market share, your sales forecast would be 2 million units.
[Link] 8: Drafting Operational Program and Budget: Develop a marketing strategy to promote the new
energy drink, including digital advertising, social media campaigns, and sampling events at universities and
gyms. Plan production schedules to meet forecasted demand, and allocate budget resources accordingly.
[Link] 9: Derivation of Sales Volume Objective : Set a specific sales volume objective, such as selling an
average of 167,000 units per month to reach the annual target of 2 million units.
[Link] 10: Revision and Adaptation of Forecasts Regularly update forecasts based on actual sales data,
Sales Forecasting Methods

Qualitative techniques p. 53
• User surveys – method asks current users of a product or service how much they will need over a specific
period

• Jury of executive opinion – relies on the opinion or judgment of a select group of managers
Sales Forecasting Methods

Qualitative techniques p. 53
• Sales force survey – this method requires managers to ask the sales team how much they will sell.
Sales Forecasting Methods

Qualitative techniques p. 53
• Delphi techniques – this method utilizes a panel of experts in controlled brainstorming sessions to make
informed predictions.
Sales Forecasting Methods

Qualitative techniques p. 53
• Market test – when a product is launched to a limited group in order to see the reaction of that market, the
data is then collected to make a decision on how to move forward.
Sales Forecasting Methods
• Quantitative techniques

• Time series analysis – this method requires the sales manager to do some data analysis by using the business
cycle theory. They will analysis sales data over a specific period and use that to predict future sales. The four
elements of this method are trends, cyclical changes, seasonal variations and erratic factors.
• Sales = TxCxSxE
Sales Forecasting Methods
• Quantitative techniques

• Moving Averages – it takes the organization’s goals of the previous years and calculates the average sales by
calculating the last three, six or other number of years’ sales. The sales manager uses that average to
determine future sales.
Sales Forecasting Methods
• Quantitative techniques
• Exponential smoothing – similar to the moving average method with the exception that the older certain
data sets become, the less relevant it becomes.
Sales Forecasting Methods
• Quantitative techniques
• Other trends analyses – Regression analysis and ARIMA

• Casual technique – these methods look at identifying factors

that can affect sales and establish a cause – effect relationship;
these methods are Correlation analysis, Econometrics models,
and Input-output models.
Improving accuracy in Sales Forecasting

• Use a combination of forecasting techniques

• Select a sales forecasting technique that is relevant and applicable to the type of the business, size of
the business, and sales department
• Use only a small number of trends and erratic factors
• Collect several different forecasts and don’t rely on the maximum number of sales predicted
• Use the latest software to assist managers in doing forecasts.
Sales Budgeting Definition p. 63

A financial plan that shows how resources and sales efforts should be allocated to achieve the forecast level of sales.

The sales budget has three main purposes:

• Planning
• Co-ordination
• Control

There are three types of budgets for sales departments:

• Sales budget
• Selling expenses budget
• Administrative budget

• What are these types of budgets? How do they differ?

There are three types of budgets for sales departments:
• Sales budget
• Selling expenses budget
• Administrative budget

Type of Budget Description

Focuses on expected sales revenue for a specific
Sales Budget period (e.g., monthly, annually). Based on sales
forecasts and targets.
Covers expenses directly related to selling
Selling Expenses Budget activities, such as sales commissions, travel
expenses, advertising, and promotions.
Covers administrative expenses of the sales
Administrative Budget department, including salaries, office supplies,
utilities, and other administrative costs.
Steps in setting a budget p. 64

Step 3: Identify
Step 1: Review Step 2:
specific
analyse the current Communicate sales
opportunities and
situation objectives
problems

Step 4: Develop an Step 5: Prepare a Step 6: Implement

initial allocation of budget the budget and
resources presentation provide feedback
What are sales quotas?
Why are they important?
p. 67

Sales Quotas Definition - quantitative sales objectives assigned to either individual salespeople or a specific sales
territory over a specified period.

Objectives of sales quotas

• To set standards for performance evaluation of the sales force
• To control selling expenses
• To motivate the sales force
• To develop effective remuneration plans
• To establish which market areas, need extra promotional effort
• To identify sales training needs
• To assign selling activities
• To assist in the correct distribution of products
• To achieve higher sales and profits
Types of Sales Quotas

• Sales volume quotas

• Sales targets are set in terms of quantities to be achieved by a specific sales territory over a specific period
Types of Sales Quotas

• Profit-based quotas
• The sales volume that is targeted is meant to achieve a said amount of profit.
Types of Sales Quotas

• Activity quotas
• Salespeople would establish their own sales activities to do for the day and the sales manager will only
ensures that the most important activities are done.
John can use several forecasting methods to determine how much his team will sell. Given the context and
available data, he should consider the following methods:

[Link] Series Analysis: This method involves analyzing historical sales data to identify patterns or trends
over time. Given the industry growth rate of 15% every three months, John can extrapolate past sales data to
forecast future sales, adjusting for seasonal variations if necessary. (Quantitative)

[Link] Force Composite: John could ask his sales team to estimate their future sales. Since they are on the
front lines, they may have valuable insights into customer behavior and market trends. (Sales force survey)
(Qualitative techniques)

[Link] Method: This involves consulting a panel of experts, either within the company or from the industry,
to gain insights and reach a consensus on future sales forecasts. This method is useful when there is
uncertainty or when the market is rapidly changing. (Qualitative)
In rethinking the budget, John should focus on the following areas:

[Link] Materials and Equipment: Given that the sales staff have indicated the competition has better
promotional materials and equipment, John should allocate a portion of the budget to improve these
resources. This could include high-quality brochures, digital marketing tools, demo kits, and updated
presentations.

[Link] and Development: Even though his sales staff are highly trained and experienced, continuous
professional development is crucial. Investing in ongoing training programs can help the sales team stay
updated with the latest sales techniques and product knowledge.

[Link] Incentives and Bonuses: John should review and potentially increase the budget for sales incentives
and bonuses. Effective incentive programs can significantly boost sales performance.

[Link] Research and Customer Insights: Allocating budget towards understanding customer needs and
market trends can help tailor sales strategies more effectively.

[Link] and CRM Systems: Investing in advanced Customer Relationship Management (CRM)
systems can help streamline the sales process, track customer interactions, and identify new sales
opportunities.
To motivate his sales staff, John can implement the following strategies:

[Link] Realistic and Achievable Sales Quotas: Quotas should be challenging but attainable. They should
reflect both individual and team goals, considering market conditions and historical sales data.

[Link] Sales Team in Quota Setting: Involving the sales team in the process of setting quotas can
increase their buy-in and commitment to achieving these targets.

[Link] Regular Feedback and Recognition: Regular performance reviews and feedback sessions can
help sales staff understand their progress and areas for improvement. Recognizing and rewarding high
performers can also boost motivation.

[Link] a Tiered Incentive Program: Implement a tiered incentive program where higher performance leads
to greater rewards. This can include bonuses, commissions, and other non-monetary incentives such as
awards, trips, or additional time off.

[Link] Professional Development Opportunities: Providing opportunities for career advancement and
professional growth can motivate sales staff to perform better. This can include leadership training, mentorship
programs, and opportunities to attend industry conferences.