Turning Customer Information into Sales Knowledge：中国经济管理大学 MBA课堂笔记《销售管理学》
Turning Customer Information into Sales Knowledge：
中国经济管理大学/中國經濟管理大學
Turning Customer Information into Sales Knowledge
Learning Objectives:
After completing this chapter, students will be able to:
· Identify the major elements of customer data integration.
· Explain how documented, accessible customer information benefits a firm’s various functional groups.
· Create sales forecasts using the various types of forecasting methods prominently implemented in sales settings
Introducing the Chapter:
By way of introduction, you may find this chapter to be one of those chapters that tie well to other marketing courses. This chapter explores the use of technology and customer information so you can relate it to marketing strategy and marketing research. Customer data integration (CDI), which is the technical process of gathering data and making it useful and available, is discussed. Students should be able to identify the major elements of CDI.
Salespeople collect a lot of data. The challenge is to organize that data and make it available and useful to other parts of the organization. Students should be able to explain how documented, accessible customer information benefits a firm’s various functional groups. While the tendency may be to treat this chapter as a forecasting chapter, consider expanding the conversation in class by discussing the complete range of information gathered by salespeople that would be useful to execs.
The two estimates that companies make are market potential or overall demand and sales potential or what the company could sell if all went well. There are several methods that are used to come up with these estimates. Students should be able to create sales forecasts using the various types of forecasting methods.
Chapter Outline:
I. Customer Data Integration
A. Steps in Data Integration
1. Collect the data
2. Make data available to decision makers
a. Data mart: a specialized database designed for a specific purpose
3. Use data in making strategy
a. Sales forecasting
b. Determining pricing strategies
c. Looking for new product opportunities
II. Use of Sales-Generated Data
A. Functions that use Sales-Generated Data
1. Manufacturing
a. Input into how much the firm’s should make
2. Product Development
a. Recommendations about new products
b. Different feature combinations
c. Reconfigured versions of existing products
3. Finance and Accounting
a. Information to come up with competitive credit policies
b. Market conditions that cause customers to buy instead of lease products or vice versa.
4. Marketing
a. How well a marketing campaign is working
b. What customers are saying about a product
5. Sales Management
a. What training related to the product is needed
b. Which products should be emphasized
c. Whether sales managers should push for a price cut or product enhancement,
d. How many salespeople to hire
6. Human Resources
III. Sales Forecasting
A. Estimates made by the firm
1. Market Potential: total industry-wide sales expected for a product category for a period of time.
2. Sales Potential: maximum market share the company can reasonably expects to achieve.
IV. Estimating Market Potential
A. Factors affecting Market Potential
1. Economic factors
2. Elasticity: the degree to which a product’s price affects its sales
3. Technology
4. Laws and regulations
a. Increasing the costs associated with products
b. Imposing tariffs and trade restrictions
5. Social factors: fashions and trends within society
6. Demographic trends
a. Having fewer children
b. Generational differences
V. Estimating Sales Potential
A. Factors affecting Sales Potential
1. Social trends
2. Trade laws
VI. Forecasting methods
A. Time series techniques
1. Trend analysis/naïve forecast
2. Moving averages: rate of change for the past few periods is averaged
3. Exponential smoothing: type of moving average that puts more emphasis on the most recent period
4. Correlation Analysis: form of trend analysis that forecasts sales based on the trends of other variables
a. Leading indicator: variable that leads, or happens before, the sales of the company’s product
b. Consumer Spending Correlates: variables that predict how much
consumers will spend overall
c. Business Spending Correlates: variables for companies that sell to other businesses
B. Response Models
1. Market test: an experiment where the company launches the offering in a limited market in order to gain real-world knowledge of how the market will react to the product.
C. Judgment techniques
1. Executive opinion
2. Expert opinion
3. Customer and channel surveys
4. Sales force composite
VII. Limitations of Forecasting
A. Factors that influence forecasting accuracy
1. Data quality
2. Rapid change
3. Length of horizon
4. Time and cost
VIII. Guidelines for Forecasting
A. Guidelines to improve quality of forecasts
1. Commit to accuracy
2. Use multiple methods
3. Pick the right method(s) for your business
4. Use as much information as you can
5. Plan for multiple scenarios
6. Track your progress and adjust the forecast
IX. Chapter Summary
Questions and Problems:
1. Suppose your company sells plastic injection machines – machines that are used to inject plastic into molds so companies can make plastic bottles. From what consumer products is the demand for your machines derived? How volatile would you expect your demand to be, and why?
Demand is derived from consumer products that are packaged in plastic products such as soft drinks. The demand may not be so volatile because of the wide range of industries that use plastic bottles. Yet, at times, there are reports raising health concerns about plastic bottles. If demand for plastic bottles varied as consumers switch to glass or aluminum cans, demand for the machines could swing greatly.
2. What are the best and worst methods for forecasting the sales of the following products and services? Why?
a. A new dorm for your campus (how big should it be?)
One good way would be use time series techniques such trend analysis. An estimate would be possible based on how enrollment has been increasing and by how much it is expected to increase. Another good way would be to consider leading indicators, such as population shifts in younger ages, and how those correlate with school enrollment through a regression model.
b. Street sweepers
The best method would be time series techniques such as a trend analysis, since changes in the market for street sweepers would be few.
c. Tax consulting services for small businesses
The best method would be a judgment technique such as sales force composite.
d. A new laboratory device used in physics experiments
The best method would be response model such as a market test. This would determine how the market will respond to the new product. The worst method would be to use time series techniques because this product is new in the market.
3. Your boss says “All we have to do is sell one of these new products to each of our current customers and it will be successful!” What assumptions have to hold true for her wish to come true? Is she guilty of Chinese Marketing? What problems could arise if she treats that statement as a forecast?
An assumption that’s being made is that each of the current customers will be willing and able to buy the new product, so she is guilty of Chinese Marketing. This assumption may result in an incorrect forecast because it might prove to be more optimistic than the sales they will actually make.
4. What is the difference between a forecast and a quota? Is the difference large, and is it important to recognize the difference?
A forecast is an estimate of what consumers demand will be for certain products, how much of the product the firm can produce and sell at certain prices, and how the firm’s competitors and customers will respond to those prices. A quota is a measure allocated to individual salespeople or a sales unit of how much they need to sell. A quota is a performance objective and is related to the forecast; however, a quota is also influenced by the compensation plan and other factors and may be significantly different.
5. A sales executive has a difficult time forecasting sales without knowing how many salespeople the firm will employ (an aspect we looked at in Chapter 7). Yet, the size of the sales force can be enlarged or shrunk depending on the forecast. Similarly, advertising drives sales: If the firm increases its advertising, its sales should increase; if it decreases advertising, it sales should fall. Yet advertising budgets are often based on a percentage of sales. How can these circular problems be tackled?
Typically, these circular problems are tackled by making assumptions based on budgets. For example, if the budget calls for a certain level of sales (based on a forecast or quota or both), then the advertising budget could be derived by quoting a percentage of sales. Alternatively, if money is available for a certain level of spending, then the percentage can be applied and that level of sales can be forecasted. The same reasoning can be applied to sales force size. Cash flow may determine the sales force size which then determines sales. Forecast cash flow and then estimate the sales force size, from which then a sales forecast can be determined. Alternatively, start with a sales forecast, then back track to the cash flow and sales force size and see if the assumptions can hold.
6. For the following products and services, what factor(s) would you use to estimate market potential?
Campbell’s Soup
Economic factors such as consumer confidence and disposable income might influence soup consumption, but so does the weather
Fossil watches
Social factors (fashion trends) and economic factors (disposable income)
Pontiac sports cars
Social factors such as demographics (aging Baby Boomers seem to be buying more sports cars, for example), as well as economic (rising gas prices)
Bose Wave radios
Technology factors influencing the quality of radio delivery as well as economic
Viagra
Legal and regulatory factors that might influence the drug’s availability but also demographic (serves an older male age group)
Calvin Klein men’s suits
Social factors, such as fashion (including the growth of business casual as opposed to suits). Economic factors such as disposable income. Regulatory factors that inhibit or enhance trade with fabric and clothing imports.
You just took over as the Chief Sales Officer of LoMBArdi Trophy Co., a company you’ve worked for almost twenty years. You know that firm’s sales forecasts are inaccurate because the company has annually added 20% to the quotas assigned the firm’s salespeople, which collectively they have always met or exceeded. But you need an accurate forecast for various purposes, including budgeting. How would you change the situation so you get accurate forecasts?
The company has linked quotas to forecasts in a way that has made forecasts unreliable. The change that is needed is to unlink forecasts and quotas. While that sounds easy, it requires making sure that salespeople understand what process will be used to determine quota, such as an increase over last year’s sales, and transparency into the quota-setting process. Then the forecasting process can co-exist.
Answers for Chapter Caselets:
Caselet 13-1
Englander Container
Case Questions:
1. Use two different trend analysis methods and determine how much the company will sell next year. How confident are you that this is an accurate forecast? What additional information or methods would you like to incorporate in your forecast?
Simple Trend Analysis
Shipping Company Sales
This may not be an accurate forecast because it only takes into account past sales. To make it more accurate, other variables can be taken into account. Since the company is selling to other companies, the trends in these companies-for instance the sales patterns and the factors affecting their sales should also be looked at.
2. Assume that the company is manufacturing at 90% of its capacity in order to meet its current sales levels. If it wins every
If it wins all the government’s bids, that means it will have to manufacture almost as many products for the government as it will for the shipping and industrial users. Since it’s already utilizing 90% of its capacity, it will not have the capacity to meet all these orders, so they will have to make a decision-for instance, whether to expand their manufacturing facility or to hire more workers.
Caselet 13-2
Freud Testing Services
Case Questions:
1. In a perfect world, how would you answer George?
I would advise him to use multiple methods to do his forecast. For the new products that he wants to implement, he could develop some of them and perform a market test by offering the products to a limited market to see how customers will respond to them. Based on the response, he could go ahead and estimate what the demand of the full market will be. He could also hire an expert or experts to do a forecast, especially for the international markets. He could also use purchase customer surveys from research companies or conduct channel survey, by asking the distributors how much they expect to sell.
Assuming George had no cash to spend, how would your answer change?
If George has no cash to spend, then he is limited in how to determine potential for these markets. I would probably advise him to ask the distributors what they estimate to sell and based on that he can make a rough forecast and decide whether to add more distributors. For the new product he is thinking of launching, he could try and find some general statistics or trends in the profile testing industry and make a rough estimate based on that.
Self-Assessment:
In your copy of Sales Management, you will find an Access Code Card. By using this code at www.pearsonhighered.com/tanner, you will gain access to the SAL program. Students will find an Access Code Card in their copy of the book as well. The first SAL instrument is addressed in the text, the second is provided as an additional exercise.
IA5 - How Well do I Handle Ambiguity?
The overall score will give you an indication of the ability to tolerate, even enjoy, ambiguous situations. This relates to forecasts because of the tendency to treat numbers as givens, rather than as estimates. In class, you can then lead the discussion toward one’s over-reliance on forecasts if the student has difficulty with ambiguity. Further, you can then discuss how this would relate to using multiple methods that result in vastly different forecasts!
Using Videos:
Go to the website with videos from Selling Power and consider the two videos selected for this chapter. Listed below are potential ways to introduce each video and questions you might consider to encourage further discussion after you have viewed the videos. To access the videos go to www.pearsonhighered.com/tanner.
Defining the Sales Process: Frank Asgatis
This video is one of the shortest, just over 3 minutes. You may even want to put the link into a powerpoint slide so you can show it in class. The first point that Asgatis makes is that the sales process should support the way the buyer wants to buy. The second point that Asgatis makes is that needs and process both go together. This video could have been shown earlier, so why now? The relevance to this chapter, though, is that forecasting is about predicting the outputs of a process, as influenced by external factors. For this chapter, good questions to ask are:
1. If you are to define the sales process, what information do you need? Where do you go to get that information?
2. Who uses that information and how?
3. How does what Asgatis have to offer help salespeople? Their managers?
The Sales Funnel: Ron Hubsher
In the Sales Funnel with Ron Hubsher, he discusses his book, which is based on the premise that the sales funnel represents decision stages by customers, not activity stages by salespeople. This is a fundamental premise that we’ve been arguing for years – from a lead to a suspect requires that the buyer agree to see the rep, from a suspect to a prospect requires that the customer agree that there is a need and it will be solved, etc. Some questions to ask students include:
1. Why is it important for the salesperson to know where the customer is in the sales funnel? The answer is that knowing where the customer is tells the salesperson what to do next.
2. Why is it important for salespeople to know how many they have in each stage?
3. Why would salespeople focus on activities rather than customer decisions? According to Hubsher, what are the limitations of focusing on salesperson activities versus customer decisions?
Full Case Recommendations:
The Plantation case is recommended. This case centers on a real estate development that is selling slowly. In fact, it is selling so slowly that the bank is considering foreclosure. As a result, the owner has hired a sales agency to take the sales reins over from his daughter, whose personality may have been turning prospects off. Data are provided that can be used to create forecasts for leads generated, as well as a forecast was developed by the sales agency. In addition, detail is provided on the sales plan that will be used to close prospects. What is not provided in the case is how the sales agency will begin to develop leads.
If you are using this case for this chapter, begin class discussions by asking if the forecast generated by the sales agency is reasonable. Where will the initial leads come from? Their plan centers on selling builders first; is that reasonable? Ignoring for now the financial crisis that had not yet happened when the case was written, will the plan generate the needed revenue?
Another fruitful area of discussion is to go back to the original investment decision to buy the property and build the course. Explore why the forecasts were not met and why the Plantation got into so much trouble. Forecasts are only as good as the strategy and the implementation.
Other In-Class Exercises:
As you have probably already discovered, there is no role play in the book for this chapter. One option for an in-class exercise is to role play Caselet 13-2.
Another in-class exercise that you can do is to access Yahoo Finance through the internet and have the class pick several stocks. Project the price lines for the stocks and ask students to calculate various price forecasts using different methods. Note how different the methods can be. Further, discuss the impact of a new product on stock price, or the financial crisis of 2008, then relate these events, both internal and external, to sales forecasting. Then conclude by asking which stock they would invest in and why?
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