Determine Size Of Sales Force

• Management needs to decide how many

sales persons should be employed to
meet the company’s sales volume and
profit objectives.
• If the size is too small then the
opportunities for sales and profits go
unexploited
• If it is too many. Excessive expenditures
reduce the net profit.
 Determine Size Of Sales Force
cont…
Three basic approaches used in
approximating the size of sales force.
• The workload method
• The sales potential method
• The incremental method.
 Workload Method
• The basic assumption is that all the sales people
should shoulder equal work load.
• Manta. first estimates the total workload involved
in covering company’s entire market, then
divides by the work load that an individual
salesperson should be able to handle.
• Companies applying this approach generally
assume that the interaction of the three major
factors- customer size, sales-volume potential,
and travel load
 Workload Method cont…
There are six steps involved in applying the
workload approach as follows
1. Classify customers both present and
prospective, into sales volume potential
categories (Classification criteria can also be
used ).
2. Decide on the length of time per sales call and
desired all frequencies on each class.
Eg. Class A : 60 min/call x 48 call/year = 48 hrs/yr.
 Workload Method cont…
3. Calculate the total workload involved in
covering the entire market.
Eg. Class A: 150 accounts x 48 hrs/yr=7200
Class B: 220 accounts x 12 hrs/yr=2640
Class C: 510 accounts x 3 hrs/yr= 1530
----------
total 11370 hrs
 Workload Method cont…
4. Determine the total work time available
per sales person. Suppose mangt. Decide
that salespeople should work 40 hrs/week,
48 weeks per year ( allowing 4 weeks for
vacation, holidays, sickness) then each
salesperson has available
40 hrs/week x 48 weeks= 1920 hrs/ year
 Workload Method cont…
5. Divide the total work time available per
person by task: Assume that mangt.
specifies that sales person should
apportion selling time as follows.
Selling Task 45% 864 hrs
Non selling task 30% 576 hrs
Traveling 25% 480 hrs
100 % 1920 hrs
 Workload Method cont…
6. Calculate the total number of sales people needed: This
is the matter of dividing the total market workload by the
total selling time available per sales person.
11370
------------ = 13 + sales people needed
864
Work method has inherent flaw ie, this approach
disregards profit as an explicit consideration: but it is
possible for mangt. to take profit criteria in to account in
determining lengths and freq.
Another assumption is that all sales persons will utilize their
time with same efficiency.
 Sales Potential Method.
• It is based on the assumption that performance
of the set of activities contained in the sales
person’s job description represent one sales
personnel unit, not necessarily that of any
particular sales person.
• If the individual’s performance is excellent, that
individual may do the job of more than one unit.
• If management expect all company sales
personnel to perform as specified in the job
description, then the number of sales persons
required equal the number of units of sales
personnel required.
 Sales Potential Method.
• Generally sales job descriptions are constructed
on the management's assumption that they
describe what the avg. sales person with avg.
performance will accomplish.
S S
N = ------ + T (S/P) ie; N = ----- (1 +T )
P P
N= Number of sales personnel unit, S= forecasted
sales volume , P= Estimated sales productivity
of one sales personnel unit
T= Allowance for rate of sales force turnover.
Sales Potential Method. Cont…
• Consider for example, a firm with forecasted
sales of Rs. 1 million, estimated sales
productivity per sales personnel unit of Rs.
1,00,00 and an estimated annual rate of sales
force turnover of 10%. Inserting these figures in
the equation, we have
Rs. 10,00,000
N= ------------------ x 1.10 = 11 sales personnel units
Rs. 1,00,000
 Sales Potential Method. cont..
• This is very simplified model for determining the
size of sales force.
• It does not include the lead time required for
seeking out, hiring, and training salespeople up
to the desired level of sales productivity.
• Another assumption in this model is that sales
potentials are identical in all territories, which is
similar to the assumption that the number of
sales personnel unit required is the same as the
number of sales persons needed.
 Incremental Method
• It represent the most conceptually correct
approach to the problem of determining the size
of the sales force.
• It is based on one main proposition that net
profits will increase when additional sales
personnel are added if the incremental sales
revenues exceed the incremental cost incurred.
• Thus in this method two factors are very
important ie, incremental revenue and
incremental cost.
 Incremental Method cont….
Example: Cost of Goods 65% of sales, sales
personnel salary Rs10,000 annually,
commission 5% of sales volume, travel
expense allowance Rs 6000 annually.
Company as presently 15 sales people.
Additional sales 16 th person Rs 2,00,000
17 th person Rs 1,50,00
18 th person Rs 1,00,000
19 th person Rs 50,000
 Incremental Method cont….
• This method is most difficult to apply in the
real world.
• It requires that the company develops a
sales response function which can be
used to approximate the market’s
behaviour in relation to alternative levels of
selling effort.