Purposes of the Sales Budget

1. Mechanism of Control Control is the primary orientation in sales budgeting. The completed bud­get, which is a composite of sales, expense, and profit goals for various sales units, serves as a yardstick against which progress is measured. Comparison of accomplishments with relevant breakdowns of the budget measures the quality of performance of individual

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Sales Budget – Form and Content

The completed sales budget is a statement of projected sales revenues and selling expenses. The so-called “summary” of the sales volume section of the sales budget is both in dollars and product units, so that budgeted figures are readily adjustable for price changes. The budget section on planned sales volume is presented in considerable

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Sales Budgetary Procedure

Company budgetary procedure normally begins in the sales department. After all, the sales department in nearly all companies is the main depart­ment generating inward flows of revenues. The nature and amount of the predicted flows of sales revenues impact directly upon the activities of other departments. Therefore, once top management receives and gives tentative

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Objectives in using Sales Targets

The general objective that sales management has in mind while using tar­gets is to control the sales effort. Sales control is facilitated through setting targets to use in appraising performances of sales organizational units, such as a sales region or an individual on the sales force. Sales control is tightened through setting of targets

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Sales Target, Sales Forecast, and the Sales Budget

Relationships among sales target, the sales forecast, and the sales budget vary from company to company. Relationships depend not only upon the procedures used in forecasting, budgeting, and target setting but upon how the planners integrate these three procedures. The greater the integration, the more effective targets are as mechanisms for controlling sales efforts.

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Types of Sales Targets and Sales Target-Setting Procedures

Differences in forecasting and budgeting procedures, management phi­losophy, selling problems, and executive judgment, as well as varia­tions in target-setting procedures, cause each firm to have somewhat unique targets. Ignoring small differences, however, targets fall into four categories: (1) sales volume, (2) budget, (3) activity, and (4) combination. Differences in procedures show up mainly in

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Administering the Sales Target System

Skill in administering the target system is important not only for realizing the full benefit for control purposes, but to securing staff cooperation in making the system work. Most critical is securing and maintaining accep­tance of the targets by those to whom they are assigned. Few people take kindly to having yardsticks applied to

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Reasons for Not using Sales Targets

Some companies do not use targets. In certain industrial-goods categories, for instance, it is difficult to obtain accurate sales estimates; thus, targets, if used, are based on subjective judgments. Numerous executives prefer not to use targets if it means basing them on “guesstimates.” In other situa­tions, it is possible to obtain accurate sales estimates,

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The Sales Territory Concept

The emphasis in the sales territory concept is upon customers and prospects rather than upon the area in which an individual salesper­son works. Operationally defined, a sales territory is a grouping of cus­tomers and prospects assigned to an individual salesperson. Many sales executives refer to sales territories as geographic areas, for example, the South

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Reasons for Establishing or Revising Sales Territories

Sales territories are set up, and subsequently revised as market conditions dictate, to facilitate the planning and control of sales operations. More specifically, there are five reasons for having sales territories: (1) to pro­vide proper market coverage, (2) to control selling expenses, (3) to assist in evaluating sales personnel, (4) to contribute to sales

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Procedures for Setting Up or Revising Sales Territories

In setting up or in revising sales territories, there are four steps: (1) select­ing a basic geographical control unit, (2) determining sales potentials in control units, (3) combining control units into tentative territories, and (4) adjusting for coverage difficulty and redistricting tentative territories. 1. Selecting a Basic Geographical Control Unit The starting point in

Routing and Scheduling Sales Personnel

Routing and scheduling plans aim to maintain the lines of communication, to optimize sales coverage and minimize wasted time. When management is informed at all times of salespersons’ whereabouts in the field—or at least knows where they should be—it is easy to contact them to provide needed information or last-minute instructions. Chances are good

The Sales Audit

A sales audit is a systematic and comprehensive appraisal of the total selling operation. It appraises integration of the individual inputs to the personal selling effort and identifies and evaluates assumptions under­lying the sales operation. More specifically, a sales audit is a systematic, critical, and unbiased review and appraisal of the basic objectives and

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Sales Analysis

Sales analysis is a detailed study of sales volume performance to detect strengths and weaknesses. If sales management depends solely on sum­mary sales data, it will not be possible to evaluate its own activities and those of the sales force. The fact that sales increased by 2 percent over last year but profit decreased

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Marketing Cost Analysis

Marketing cost analysis examines sales volume and selling expenses to determine the relative profitability of particular aspects of sales opera­tions. The first step in marketing cost analysis is sales analysis by territo­ries, sales personnel, products, class of account, size of order, marketing channels, and other categories. Having broken down sales volume, for instance, by

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Martin Packaging Company, Inc.: Manufacturer of Packaging Products and Systems – Use of Standard Costs

George Hannibal, manager of the Sales Department of the Martin Pack­aging Company, Inc., faced the task of evaluating the marketing and sales strategy imputations of the proposed new method of using standard costs in budgeting sales costs. Because the averaging method currently in use provided very poor estimates for budgeting purposes, Grady Winkler, the

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Driskill Manufacturing Company: Maintenance Equipment Manufacturer – Use of Sales Quotas

Jack Dixon, sales manager, and Henry Granger, director of marketing research, of the Driskill Manufacturing Company, were in complete dis­agreement about the current method of preparing sales quotas. The Driskill Manufacturing Company marketed a line of maintenance equipment used all over the country, in a variety of businesses, and had attained considerable prestige in

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Allied Board and Carton Company: Manufacturers of Containers – Difficulties with Sales Targets

The Allied Board and Carton Company manufactured and distributed cardboard boxes, cartons, and other packaging materials. The sales force of twenty-five persons, assigned to territories thoughout the United States, made calls directly on purchasing agents of manufacturers of industrial and consumer products. During the previous eighteen months, operating losses had been experienced, and a

Goodtime Equipment Company: Manufacturer of Playground Equipment – Complaints About a Quota System and Proposal for a New Bonus System Based upon Quotas

The Goodtime Equipment Company, Minneapolis, was a medium-sized manufacturer of playground equipment. The company produced an exten­sive product line and marketed its products nationwide. The field sales force numbered thirty-five persons, who were paid on a salary basis. In addition to the salary plan, Goodtime Equipment Co. had a bonus program for its sales

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McBride Electric Corporation: Manufacturer of Electric Equipment Accessories – Need for Revision of Sales Territories

McBride Electric Corporation, headquartered in Detroit, was a large pro­ducer of electrical equipment and accessories. Established in 1910, McBride grew steadily and became one of the major U.S. suppliers of electrical products. McBride sold some of its products direct to a few large accounts, but most of the product line was sold through a

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