Determination of Sales Force Size_2

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Determination of Sales Force Size
Determining the size of sales force depends on the company’s targeted sales volume and profit objectives. After defining the kind of sales person that best suits the company’s need, Management decides on the size of sales force. It is, however, impossible to determine the exact number of sales persons. The decision on the size of sales force is very complicated as the territories vary in their demand structure for prospecting. The level of competition, nature of customer segments etc. also affect the size of sales force. There are three basic approaches used in approximating these numbers although none produces a definitive answer. They are as follows: 1. The Work Load Method 2. The Sales Potential Method 3. The Incremental Method The Work Load Method: This is the most popularly used method. The basic assumption is that all sales personnel should shoulder equal workload. This calls for deciding the frequency and the number of calls a sales person has to make in a sale. Management first estimates the total workload involved in covering the company’s entire market and then divides it by the work load an individual sales person should be able to handle, thus determine the number of sales persons required. The steps are:1. Customers are grouped into categories according to the value of goods bought and potential for the future 2. The call frequency is assessed for each category of customer. The total workload per year is calculated by multiplying the call frequency and number of customers in each category. 3. The total workload involved in covering the company’s entire market is calculated. 4. The average no. of call per week per salesman is estimated and the no. of working weeks per year is calculated. 5. Divide the total work time available per salesperson by task. 6. The total annual calls or the total market workload is divided by the total selling time available per salesperson .i.e. step (3) is divided by step 5 (b). The Sales Potential Method: It is based on the assumption that performance of the set of activities contained in the job description represents one sale personnel unit. A particular sales person may represent either more or less than one sales personnel unit. If ones performance is excellent, he may do the job of more than one unit: if below par, he may do less. It must be noted that the performance expectation of sales personnel are constructed on management’s assumption of how much will an average salesperson with average performance accomplish. With that assumption one

can estimate the no. of amount of sales volume that each salesperson unit should produce. When divide this amount with the forecasted sales volume (the co. sales volume objective), the no. of sales person required is estimated. The relationships are summarized in the equation: N= S/P + T (S/P) or N= S/P (1+T) Where, N= no. of sales personnel unit S= forecasted sales volume P= estimated sales productivity of one sales personnel unit A= allowance for rate of sales force turnover The Incremental Method: Conceptually, the incremental method is the best approach to determining sales force size. It is based on one preposition: net profits will increase when additional sales personnel are added if the incremental sales revenues exceed the incremental cost incurred. The optimum size of sales force is at the level when the net profit contributed resulting from the addition of each sales force is at its maximum. From that point on any addition of sales force will lead to negative net profit contribution. Although conceptually correct, this method is also the most difficult to apply.

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