This method recognizes that their will be diminishing returns associated with

This method recognizes that their will be diminishing

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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
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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
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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?
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36 36 Profit ( ) = Revenue – Cost Profit ( ) = $1,000,000 √x - $100,000 x Solution X X 5 .
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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 37 37
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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 38 38
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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
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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
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(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
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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

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