Page 167 - DMGT205_SALES_MANAGEMENT

Unit 11: Controlling the Sales Effort

Objectives Notes

After studying this unit, you will be able to:
 Explain the importance of budgeting;

 Describe the methods and purposes of sales control;
 Discuss the concept of quotas;
 Describe the types of quotas;
 Explain the concept of sales territory.

Introduction

Sales managers must be aware of the types of expenses that are incurred both before and after
the sale as well as the sales revenues generated. Budgeting becomes a key task of sales
management. It is also known as a blue print to making profitable sales. It estimates how much
sales are to be made and what expenses will be incurred in the same. A proper budget provides
a projection into the sales volume, selling expenses and profits of the company. Personal selling
objectives, both quantitative and qualitative, determine the sales related marketing policies
which in turn forms personal selling strategies. The strategies are decided keeping in mind the
two key decisions, i.e., kind of sales personnel and size of sales personnel. All this together
determines the sales budgets and once the expenses have been estimated the sales force
management is undertaken.

11.1 Sales Budgeting and Control

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 are related in that if sales budget is inadequate the sales forecast
will not be achieved and if sales forecast is increased sales budget must be increased accordingly.
It also acts as a means of evaluating and planning sales effort. It aims at attaining maximum
profits by direct efforts on most profitable segments, customers and products.
11.2 Purpose of Sales Budget

It serves three basic purposes:
Planning Tool: In order to achieve goals and objectives sales managers plan by outlining
essential costs to be incurred. This helps in profit planning and act as a guide for achieving
objectives.
Instrument of Coordination: Budget acts as an instrument of coordination. Selling is one of the
functions of marketing and needs support from the elements of marketing mix. Budgets also
help in integrating other functions of like sales, finance, production and purchase.

A Tool for Control: Comparison between budgeted and actual costs result in the analysis of
factors causing variations and enables the sales manager to spot problem areas or plan better for
expected outcomes. Variance analysis helps in improving insight of sales manager and enables
to define and develop realistic sales budget in future with minimal variance.

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