This method recognizes that their will be diminishing returns
associated with adding more sales people.
The computation of sales force size using this method is greatly
facilitated using spreadsheet programs with optimizer features.
33
33

34
Sales Revenue = $1,000,000
√
x
X
# of Sales People
$
Cost of Sales Force = $100,000x
$
Profit = $1,000,000
√
x
- $100,000x
Optimal Number of Sales People on the Sales Force
X

35
35
Example Problem:
Yearly revenue generated by the sales force is subject to the
Law of Diminishing Returns such that:
Revenue = $1,000,000 √x; where x = the number of sales people on
the sales force.
In addition, the cost of a salesperson averages $100,000 per year, so the
cost of the sales force can be computed as:
Cost = $100,000 x; where x is the number of people on the sales force.
How large should the sales force be in order to maximize profit and
what is the maximum profit at this sales force level?

36
36
Profit (
) = Revenue – Cost
Profit (
) = $1,000,000 √x - $100,000 x
Solution
X
X
5
.

The simplest way to calculate the optimal
sales force size is the breakdown method .
The breakdown method assumes that all
sales people have the potential to produce
the same amount of sales in one year.
The estimated productivity for one sales
person is divided into the company's
forecasted sales
to determine how many
sales reps are needed.
Determining Sales Force Size:
The Breakdown Method
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37

Example:
A firm forecasts total sales of $10 million for the
coming year.
If each sales person is capable of
producing $250,000 in sales per year, how many
sales people will be required?
Number required =
Forecasted
Sales
Productivity per sales
person
= $10,000,000 /
$250,000/sales rep
Determining Sales Force Size:
The Breakdown Method
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38

Advantages:
1.
Simple.
Disadvantages:
1.
No allowance for sales person turnover.
2.
Assumes each sales rep has equal
productivity.
3.
Uses reverse logic.
4.
Considers sales rather than profits as
the desired end result.
Determining Sales Force Size:
The Breakdown Method
39
39

The Workload Method is based on an
equal workload
for all sales people.
To find the number of sales people
needed, management determines the
amount of work
it takes to cover the
target market.
It then divides this
estimate by the workload the average
sales person can manage.
Determining Sales Force Size:
The Workload Method
40
40

(1)
Classify customers and prospects into groups
to the amount of work required to service that grou
based on sales volume).
(2)
Determine the number of sales calls an accou
receive per year and the desired length of these ca
(3)
Calculate the total amount of selling effort req
serve the entire market.
(4)
Estimate the time available per salesperson.
(5)
Allocate the time available per sales person by the
function that s/he performs.
(6) Determine the sales force size.
The Workload Method Consists of 6 Steps:
41

The workload method consists of the following
steps:
(1)
Classify customers and prospects into
groups according to the amount of work
required to service that group (usually based
on sales volume).

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- Spring '14
- JamesE.Stoddard
- Sales, sales force