CHAPTER 3

STRATEGIC PLANNING,
SALES STRATEGY, SALES
FORECASTING, AND
BUDGETING
 Strategic
Planning

• Strategic planning is deciding about the organization’s

mission, long-term objectives and strategies, and action plan.

• In a large, multi-business firm planning is done at three or four

organizational levels, as shown in the figure ( next slide).

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 Planning at Different Organizational Levels
Organizational Organization Planning Strategy
Levels Structure Type Level
Corporate Corporate
Corporate Strategic Plan Strategy
Corporate Office
(Long-term)

Strategic SBU SBU SBU Strategic Business

Business Unit ‘A’ ‘B’ ‘C’ Business Plan Strategy
(SBU)/Division/ (Long-term)
Business Unit

Product Product Product Strategic and Functional/

Product/ ‘x’ ‘y’ ‘z’ Tactical Marketing
Functional P1 P2 P3 Marketing Plan Strategy
(Long & Short-
term)

• Each SBU has a separate business, a set of competitors and customers, and a
manager responsible for strategic planning, performance, and control.

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 Role of Marketing and Sales in an
Organization

Organizational Role of Marketing and Sales Formal

Level Name
• Corporate • Provide customer and competition information. • Corporate
(Corporate Strategy) • Advocate customer orientation. Marketing
•SBU/Business Unit • Provide customer and competition analysis. • Strategic
(Business Strategy) •Forecast external environment. Marketing
•Analyze competitive advantage.
•Develop segmenting, targeting and positioning
strategies.
• Functional • Evolve and implement marketing plan • Marketing
(i) Marketing including marketing-mix strategy. Management
•Coordinate marketing related activities.
•Allocate resources.
(ii) Sales •Forecast short-term and long-term sales. Sales
•Develop and implement sales strategy. Management

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 Components of Sales Strategy

Customer

Salesperson

Sales Strategy

Customer
Customer Marketing
Classification Selling
Relationship Channel
Strategy Methods
Strategy Strategy

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 Components of Sales Strategy (Continued)

Customer Classification Strategy

• Each firm first decides on target market segments. Within each segment, it
classifies customers into high, medium, low sales & profit potential
customers.
• Marketing strategy is developed for each market segment.
• However, sales strategy is developed for each individual customer.

Customer Relationship Strategy

• Whether a selling firm should use transactional, value-added, or
collaborative relationship depends on both the seller and the customer.
• Each selling firm decides which individual customers should be chosen for
transactional, value-added or collaborative relationships. This mostly
depends on the volume of sales and profits generated by each customer.

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 Components of Sales Strategy (Continued)

Selling/Sales Presentation Methods

• These are: (1) Stimulus response, (2) formula, (3) need-satisfaction,
• Selection of appropriate selling method depends on the sales
situation.

Marketing Channel Strategy

• There are many sales / marketing channels. For example: company
sales force, distributors, franchisees, agents, the internet, brokers,
telemarketing, retailers/dealers.
• Selection of a suitable channel depends on both the buyer and
seller, the products / services, and the markets.

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 Growth In Sales
Different strategies are used : Strengthening distribution; developing new
products; improving service quality; vertical and horizontal integration, and
diversification.

Selling Challenges
Today, selling has become more challenging job because
(i) Buyers have more options.
(ii) Competition has become more intense and complex.
(iii) Customers are more knowledgeable due to Internet & media.
These challenges can be overcome by a salesperson with the right selling skills
and traits, company support, and by using the selling process.

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 Selling Skills
The necessary selling skills in most selling jobs are :
•Communication skills.
•Listening skills
•Negotiation skills
•Problem-solving skills

In chapter 2 we discussed communication, negotiation, and listening skills.

Problem-Solving Skills
• Salespeople, selling firms, sales teams or buyer-seller joint teams solve
customers’ problems like cost reduction, quality improvements, and so on.
•The process includes (i) problem identification, (ii) developing alternative solutions,
(iii) selecting, implementing and evaluating an appropriate solution.

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 Types of Sales Forecast
All (Total) Sales
Industry Sales
Company Sales
Product
Level Product Line Sales
Product Variant Sales
Product Item Sales
Types of Long Term
Sales Time
Forecast Medium Term
Period
Short Term
World
Nation(India / Japan)

Geographic Region (North / South)

Area Territory ( Branch / District )
Customer
• Above figure shows 90 ( 6X3X5) types of sales forecast.
• A sales manager should specify product level, time period, and geographic area
while communicating about a sales forecast.
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 Basic Terms Used in Sales Forecasting

• Market demand is the sum of the individual demand for a product

from buyers in the market. 

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 Basic Terms Used in Sales Forecasting
• Market potential is the expected market (or industry) demand,
resulting from a very high level of industry marketing expenditure, where
further increases in expenditure would have little effect on increase in
demand.

• 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.

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 Basic Terms (Continued)

• Company sales potential is the maximum estimated company

sales of a product or service, based on maximum share (or
percentage) of market potential expected by the company.

• Company sales forecast is the estimated company sales of a

product or service, based on a chosen (or proposed) marketing
expenditure plan, for a specific time period, in an assumed
marketing environment.

• Sales budget is the estimate of expected sales volume in units or

revenues from the company’s products and services, and also the
selling expenses. The sales volume budget is often set slightly lower
than the company sales forecast to avoid excessive risks.

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 Forecasting Approaches
• Two basic approaches:

(i)Top-down or Break-down approach, and

(ii)Bottom-up or Build-up approach.
• Some companies use both approaches to increase their
confidence in the forecast.
• Top-down approach needs lesser time and cost, as it uses
data from secondary sources.
• Bottom-up approach is more accurate for short-term forecast,
as it is based on primary data collection.

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 Steps Followed in Top-down /
Break-down Approach

1. Forecast relevant external environmental factors.

2. Estimate industry sales or market potential.

3. Calculate company sales potential = market potential x

company’s share in percentage.

4. Decide company sales forecast (which is usually lower than the

company sales potential due to various reasons).

5. Sales manager then breaks down the company sales forecasts

to different regions / branches.

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 Steps Followed in Bottom-up / Build-up
Approach
1.Salespersons estimate sales expected from their customers.

2.Area/branch sales managers add the sales forecasts

received from the salespersons and modify, if needed.

3.Regional / Zonal managers add, modify the sales forecasts

received from area / branch managers.

4.Sales/marketing head adds, modifies if needed, sales

forecasts received from regional/zonal managers into
company sales forecast, which is then presented to the
CEO for discussion and approval.

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 What is a Sales Budget?
• It includes estimates of sales volume and selling expenses.
• Sales budget is what to expect to sell long term and sales
forecast is a weekly or monthly checking to see how we are
meeting that vision
• Sales volume budget is derived from the company sales forecast
– generally slightly lower than the company sales forecast to
avoid excessive risks.
• Selling expenses budget consists of personal selling expenses
budget and sales administration expenses budget

Purposes of the Sales Budget

• Planning.
• Coordination.
• Control.
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 Money Allocation Methods

• Methods used for allocating money to each category / item of

selling expenses are :

1.Percentage of sales.
2.The sales manager’s judgment.
3.Objective and task.

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