Derivation of A Sales Volume Objective

A sales volume objective for the coming operating period is the hoped-for outcome of a company’s short-range sales forecasting procedure. A sales forecast (1) contains an estimate of sales tied to a proposed marketing plan or program and (2) assumes a particular set of economic and other forces outside the unit for which the forecast is made. The sales forecast estimate does not necessarily become the company’s sales volume objective, but it provides an orientation point for management’s thinking. Further adjust­ments in the sales forecast estimate are necessary whenever management decides to alter its marketing plan or program or changes occur in compet­itor’s marketing strategies.

The sales volume objective should be consistent with management’s profit aspirations and the company’s marketing capabilities. It must be attainable at costs low enough to permit the company to reach its net profit objective, and the company’s marketing forces (that is, its sales force, the advertising program, the dealer organization, and so on) must be capable of reaching the objective set. All three items—the sales volume objective, management’s profit objective, and the company’s marketing capabilities— are interrelated. Using the sales estimate in the sales forecast as a point of departure, management juggles these three items until it satisfies itself that the relationship between them is the best obtainable. Only then does the sales forecast result in the setting of a sales volume objective. At that time, the chief sales executive accepts responsibility for making the forecast “come true.” Sales policies and selling strategies, formulated by the chief sales executive and his or her subordinates, must be put into effect in the grand effort to reach the sales volume, profit, and other objectives.

Source: Richard R. Still, Edward W. Cundliff, Normal A. P Govoni, Sandeep Puri (2017), Sales and Distribution Management: Decisions, Strategies, and Cases, Pearson; Sixth edition.