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Planning Forecasting and Budgeting Updated (1)

The document outlines the importance of planning, sales forecasting, and budgeting within organizations, emphasizing the relationship between marketing and sales strategies. It discusses various forecasting methods, including qualitative and quantitative approaches, and highlights the significance of sales budgets in estimating expected sales volume and expenses. Additionally, it covers the roles of strategic planning at different organizational levels and the impact of sales personnel on forecasting accuracy.
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0% found this document useful (0 votes)
16 views44 pages

Planning Forecasting and Budgeting Updated (1)

The document outlines the importance of planning, sales forecasting, and budgeting within organizations, emphasizing the relationship between marketing and sales strategies. It discusses various forecasting methods, including qualitative and quantitative approaches, and highlights the significance of sales budgets in estimating expected sales volume and expenses. Additionally, it covers the roles of strategic planning at different organizational levels and the impact of sales personnel on forecasting accuracy.
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Planning, Sales

Forecasting and
Budgeting

1
Planning, Sales Forecasting and
Budgeting
At the end of this module, the learning outcomes are:
• Appreciate the role of strategic planning, marketing strategy and
marketing management
• To study the relationship between marketing strategy and sales
strategy.
• To understand the importance and concepts of sales forecasting.
• To understand the role and importance of sales budget.

2
Planning, Sales Forecasting and
Budgeting
Suggested Readings:
• Sales and Distribution Management by Havaldar and Cavale, 3rd
edition, Chapter 3.

3
Planning, Sales Forecasting and
Budgeting
Strategic Planning
• Relates to the organization’s long-term objectives and strategies.
• Long-term orientation.
• Happens at three levels.

4
Planning In A Large
Organisation
Organisational Organisation Structure Type of
Levels Planning

Corporate Corporate Office Corporate


Strategic
Planning

Division / SBU SBU SBU Business/ SBU


Business Unit / ‘A’ ‘B’ ‘C’ Strategic
SBU Planning

Functional /
Product Product Product Product Operational
‘x’ ‘y’ ‘z’ Planning

• For effective planning, operations, and control, a large multi-


product / multi-business firm divides its major products /
services into divisions / strategic business units ( SBUs)
• Each SBU has a separate business, a set of competitors and
customers, and a manager responsible for strategic planning,
performance, and control
Planning In A Large
Organisation
Reliance
• SBU Oil/Petroleum
• SBU Jio
• SBU Retail
• We want to be top 3 in any business we get into
• Jio we want to have 50 cr by the year 2020
• Want to be leader
• Products, Pricing, Place, Promotion

6
Planning In A Large
Organisation
• Promotion
• Sales Strategy
• Hires Sales personnel
• For every geographical region of India

7
Role of Marketing in
Organisational Planning
Type of Role of Marketing – Key Tasks Formal
Planning Name

• Corporate • Provide customer and competition • Corporate


strategic information marketing
planning • Support customer orientation

• Divisional / • Provide customer and competition • Strategic


SBU analysis marketing
Strategic • Develop competitive advantage, target
planning markets, value proposition, positioning

• Product / • Evolve and implement marketing plan • Marketing


functional or including marketing-mix strategy, and sales management/
Operational strategy Sales
planning Management
Planning, Sales Forecasting and
Budgeting
Relationship between corporate strategy and sales strategy.
• Corporate strategy is translated into business strategy.
• Business strategy is translated into marketing strategy.
• A marketing strategy is translated into sales strategy.

9
Planning, Sales Forecasting and
Budgeting
Marketing Strategy
• Marketing Objectives
• Segmentation
• Target Market
• Positioning
• Marketing Mix
• Promotion
• Sales

10
Marketing and Sales
Strategies
• Figure below shows how sales strategy is developed from marketing
strategy Sales promotion
strategy
Product /
service
strategy
Target
Advertising
market
strategy
strategy
(Long- Promotion /
term) IMC* strategy

Marketing
Personal selling / sales
Strategy
strategy
Price
Marketing strategy
mix strategy
(Short-term)
Public relations & Publicity
strategy

Distribution
strategy
Direct marketing
strategy

* IMC: Integrated Marketing Communication


Planning, Sales Forecasting and
Budgeting
Components of sales strategy
• Classifying market segments and individual customers within a target
segment
• Relationship strategy
• Selling Methods
• Channel Strategy

12
Planning, Sales Forecasting and
Budgeting
Relationship strategy
• Level of relationship would depend on the profit potential from the
customer.
• Will vary from transactional to collaborative.

13
Planning, Sales Forecasting and
Budgeting
Relationship strategy
• Classifying market segments and individual customers within a target
segment
• All customers are not equal
• 80/20 rule
• 20% of the customers provide 80% of the profit.
• Sales personnel provide differential treatment to customers based on
their profit potential.

14
Planning, Sales Forecasting and
Budgeting
Selling Methods
• Will depend on the type of customer and stages of the buying
process.
• Purpose is to create awareness or get repeat orders.

15
Planning, Sales Forecasting and
Budgeting
Channel Strategy
• Use of direct versus indirect channel.
• Whether customers will be handled by own sales force, outside sales
force or middlemen.

16
Planning, Sales Forecasting and
Budgeting
Sales Forecasting
• Critical input for the entire organization.
• Determines revenues, costing
• Fix plant capacities
• Human resources planning.
• Stakeholders constantly monitor this parameter.

17
Planning, Sales Forecasting and
Budgeting
Market (or industry) forecast (or market size)
• is the expected market (or industry) demand at one level of industry
marketing expenditure

18
Planning, Sales Forecasting and
Budgeting
Company demand
• is the company’s estimated share of market demand for a product or
service at alternative levels of the company marketing efforts (or
expenditures) in a specific time period

19
Planning, Sales Forecasting and
Budgeting
Sales budget
• is the estimate of expected sales volume in units or revenues from the
company’s products and services, and the selling expenses.
• It is set slightly lower than the company sales forecast, to avoid
excessive risks

20
Planning, Sales Forecasting and
Budgeting
Forecasting Approaches

• Two basic approaches:


• Top-down or Break-down approach
• Bottom-up or Build-up approach

• Some companies use both approaches to increase their


confidence in the forecast

21
Planning, Sales Forecasting and
Budgeting
Top-down or Break-down approach
• Based on macro environmental factors
• Estimate industry trends
• Fortunes of the overall industry
• Calculate company sales potential = market potential x company
share
• Decide company sales forecast (lower than company sales potential
because sales potential is maximum estimated sales, without any
constraints)

22
Planning, Sales Forecasting and
Budgeting
Bottom-up or Build-up approach
• Starts at the lowest hierarchical level.
• Ask sales personnel to provide forecast.
• Area / Branch managers combine sales forecasts received from
salespersons
• Regional / Zonal managers combine sales forecasts received from area
/ branch managers
• Sales / marketing head combines sales forecasts received from
regional / zonal managers into company sales forecast, which is
presented to CEO for discussion and approval
23
Planning, Sales Forecasting and
Budgeting
• Tea versus Electric Cars vs Green Energy
• Govt policies
• Charging stations network

24
Sales Forecasting
Methods
Qualitative Methods Quantitative Methods

• Executive opinion • Moving averages


• Delphi method • Exponential smoothing
• Salesforce composite • Decomposition
• Survey of buyers’ • Naïve / Ratio method
intentions
• Test marketing • Regression analysis
• Econometric analysis
Planning, Sales Forecasting and
Budgeting
Qualitative methods
Executive opinion
• Based on the opinion of sales personnel
• Quick forecasting and low cost are advantages
• Highly subjective.

26
Planning, Sales Forecasting and
Budgeting
Delphi Method
• Based on opinion of the experts
• Each expert has its own opinion.
• Listen to opinion of other experts
• Revised opinion.
• Advantages: objective, good accuracy
• Disadvantages: getting experts, no breakdown into subunits, time
required: medium (3/4 weeks) to long (2/3 months)

27
Planning, Sales Forecasting and
Budgeting
Salesforce composite
• Sales personnel estimate future sales in their respective areas.
• Collated and consolidated at each level.
• Advantages: Salespeople are involved, breakdown into subunits
possible
• Disadvantages: Optimistic or pessimistic forecasts, medium to long
time required

28
Planning, Sales Forecasting and
Budgeting
Survey of buyers’ intentions
• Procedure involves asking customers about their intentions to buy the
company’s products and services.
• Appropriate for high value and low volume products.
• Advantages: gives more market information, can forecast new and
existing products, good accuracy.
• Disadvantages: some buyers’ unwilling to respond, time required is
long (3-6 months), medium to high cost

29
Planning, Sales Forecasting and
Budgeting
• Boeing Aircraft sales for the FY 22 23 in India
• Airlines
• 20
• How much are they likely to buy
• Aircraft is 300 Crores

30
Planning, Sales Forecasting and
Budgeting
Test Marketing
• Methods used for consumer market testing: full blown, controlled,
and simulated test marketing
• Methods used for business market testing: alpha and beta testing

31
Planning, Sales Forecasting and
Budgeting
Quantitative Methods
• Moving averages
• Based on past data
• Procedure is to calculate the average company sales for previous years
• Moving averages name is due to dropping sales in the oldest period and
replacing it by sales in the newest period
• Advantages: simple and easy to calculate, low cost, less time, good
accuracy for short term and stable conditions
• Disadvantages: can not predict downturn / upturn, not used for unstable
market conditions and long-term forecasts
32
Planning, Sales Forecasting and
Budgeting
Exponential Smoothing method
• The forecaster allows sales in certain periods to influence the sales forecast
more than sales in other periods
• Equation used:
Sales forecast for next period=(L)(actual sales of this year)+(1-L)(this year’s
sales forecast), where (L) is a smoothing constant, ranging greater than zero
and less than 1
• Advantages: simple method, forecaster’s knowledge used, low cost, less
time, good accuracy for short term forecast
• Disadvantages: smoothing constant is arbitrary, not used for long-term and
new product forecast
33
Planning, Sales Forecasting and
Budgeting
Decomposition Method
• Process includes breaking down the company’s previous periods’
sales data into components like trend, cycle, seasonal, and erratic
events. These components are recombined to produce sales forecast
• Advantages: Conceptually sound, fair to good accuracy, low cost, less
time
• Disadvantages: complex statistical method, historical data needed,
used for short-term forecasting only

34
Planning, Sales Forecasting and
Budgeting
Naive / Ratio Method
• Assumes: what happened in the immediate past will happen in
immediate future
• Simple formula used.
• Advantages: simple to calculate, low cost, less time, accuracy good
for short-term forecasting
• Disadvantages: less accurate if past sales fluctuate.

35
Planning, Sales Forecasting and
Budgeting
Regression Analysis method
• It is a statistical forecasting method
• Process consists of identifying causal relationship between company
sales (dependent variable, y) and independent variable (x), which
influences sales
• If one independent variable is used, it is called linear (or simple)
regression, using formula; y=a+bx, where ‘a’ is the intercept and ‘b’ is
the slope of the trend line

36
Planning, Sales Forecasting and
Budgeting
Regression Analysis method
• In practice, company sales are influenced by several independent
variables, like price, population, promotional expenditure. The
method used is multiple regression analysis.
• Advantages: Objective, good accuracy, predicts upturn / downturn,
short to medium time, low to medium cost
• Disadvantages: technically complex, large historical data needed,
software packages essential

37
Planning, Sales Forecasting and
Budgeting
Econometric Analysis Method
• Procedure includes developing many regression equations
representing (i) relationships between sales and independent
variables which influence sales, and (ii) interrelationships between
variables. Forecast is prepared by solving these equations
• Computers and software packages are used
• Advantages: Good accuracy of forecasts of economic conditions and
industry sales
• Disadvantages: need expertise & large historical data, medium to
long time, medium to high cost
38
Planning, Sales Forecasting and
Budgeting
• Sale of Diesel Cars for the next 5 years in India

39
Planning, Sales Forecasting and
Budgeting
How sales personnel improve forecasting?
• Do not rely on one method.
• All methods will not be suitable.
• A range of sales forecast is developed.
• Use of technology aided tools is on the rise.
• Interpretation of sales personnel is critical.

40
Planning, Sales Forecasting and
Budgeting
Sales Budget
• It is an estimate of sales volume and selling expenses.
• Company sales forecast is the critical input for the same.
• generally slightly lower than the company sales forecast, to avoid
excessive risks.
• Estimate of various expenses.
• Detailed break up of revenue and expenditure.

41
Planning, Sales Forecasting and
Budgeting
Sales Budgeting methods
• Percentage of Sales method.
• Executive judgement method.
• Objective and task method

42
Planning, Sales Forecasting and
Budgeting
Tesla
• Electric Cars
• Concept
• Charging stations
• Test Drive
• Explain/training involved
Objective and Task method

43
Planning, Sales Forecasting and
Budgeting
Honda Cars
• Plan to sell 3 lac cars next year.
• Planning to launch 3 SUVs in 25 26
• SUV
• Existing cars

44

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