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Sales Control in B2B Business - Predicting Future Sales

Sales Control in B2B Business - Predicting Future Sales. Presentation at GSSI Conference 2009 Prof. Dr.-Ing. Jobst Görne HTW Aalen, Germany. Target of the Presentation.

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Sales Control in B2B Business - Predicting Future Sales

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  1. Sales Control in B2B Business - Predicting Future Sales Presentation at GSSI Conference 2009 Prof. Dr.-Ing. Jobst Görne HTW Aalen, Germany Prof. Dr.-Ing. Jobst Görne HTW AALEN

  2. Target ofthePresentation • Today’s complex business world needs long time of preparation for all kinds of financial, technical and human resources aspects • For this reason a detailed planning of the business future is inevitable • It is the aim of this presentation to improve predictability of business and the reliability of sales planning in the field of B2B, on the example of the automotive industry (serial delivery) Prof. Dr.-Ing. Jobst Görne HTW AALEN

  3. Predictionof Business Future Sales Customer Relations Total Sales : + = Market Behavior Prof. Dr.-Ing. Jobst Görne HTW AALEN

  4. Sales Planning vs. Sales Control Sales Planning Sales Execution Sales Results Sales Control Sales control loop parameters: - Frequency of the analysis of sales results - Market response time Control loop parameters vary from industry to industry Prof. Dr.-Ing. Jobst Görne HTW AALEN

  5. Structureof Automotive Supply Chain • Tier 3 • Often material suppliers needed to produce parts • Tier 2 • Manufacturer of parts like stampings or castings which are used for the components • Tier 1 • Manufacturer of complex components, such as diesel injection pumps, axles… • OEM • Car Manufacturer Prof. Dr.-Ing. Jobst Görne HTW AALEN

  6. Sales Control Loop Parameters for Tier1s • Tier1s develop components for new car generations • Development time can be 3-5 years • Normally no business is awarded to suppliers other than through the development phase • This means that the market response time is very long (3-5 years not counting the introduction time) Prof. Dr.-Ing. Jobst Görne HTW AALEN

  7. Extended Sales Control Loop Sales Planning Sales Execution Sales Results Predictionof Sales Sales Control • If market response times are long, early indicators need to be used • for sales management • - Otherwise the reactions of the market come too late Prof. Dr.-Ing. Jobst Görne HTW AALEN

  8. Predictingof Sales – Tier1 • Can Tier1s obtain sales information from OEMs? • Car manufacturers run an in depth market analysis in order to understand and predict the market success of their cars • Based upon the results, the production lines are set to a certain production speed • Under normal circumstances the production speed is not varied a lot • Sales plans are made for the next 3-4 years Prof. Dr.-Ing. Jobst Görne HTW AALEN

  9. Exampleof Sales ForecastTier1 Prof. Dr.-Ing. Jobst Görne HTW AALEN

  10. Conclusion Sales ControlTier1 • Very long market response time (3-5 years +) • Long forward thinking, stable customer relations and long term plans necessary • Good information level about mid future sales volume • Checking frequency may be set to 3 months Prof. Dr.-Ing. Jobst Görne HTW AALEN

  11. Sales Controlfor Tier2 Companies • Tier2 companies typically have many customers (100) and supply many different parts (1000) • It is not possible to obtain for every part the lifetime information from the customer • On the other hand, the market response time seems to be much shorter (1-2 years without introduction time) than for Tier1s • Still advanced information about the future sales development is needed Prof. Dr.-Ing. Jobst Görne HTW AALEN

  12. Average Part Life Time for Tier2s • According to the industry type of the customers, average part life times can be formulated • Passenger cars: about 5 years • Trucks: about 7 years • Motorcycles: 3-4 years • (needs confirmation) Prof. Dr.-Ing. Jobst Görne HTW AALEN

  13. Predictionof Sales Volume for Tier1s: Loss of Sales • Without any sales efforts, Tier 1s lose every year the percentage of their sales which corresponds to the Average Life Time ALT • Sales Loss SL can be calculated as a portion of the Total Sales TS: • SL = TS/ALT • The company has to compensate the SL by new acquisition! Prof. Dr.-Ing. Jobst Görne HTW AALEN

  14. The Acquisition Volume has to compensate the Sales Loss Sales Loss due to Average Part Life (ALT) + New Acquisition Volume Predicted Sales Volume = Prof. Dr.-Ing. Jobst Görne HTW AALEN

  15. Conclusionsforthe Sales Management of Tier2s • Market response times are not suitable for deriving marketing actions, thus early indicators need to be used • The comparison of Average Life Time ALT of the parts with the Acquisition Volume AV allows to predict early enough the future sales volume • The sales management needs to keep the AV higher than the SL in order not to lose turnover Prof. Dr.-Ing. Jobst Görne HTW AALEN

  16. Final Conclusions • High market response times generate the need of anticipated turnover informations • Tier1s can obtain this information from the customers for years ahead • Tier2s have to work with average values for the part life time. They have to assure that the yearly acquisition volume is higher than the yearly sales volume degradation • More research work needs to be done to support and quantify these findings Prof. Dr.-Ing. Jobst Görne HTW AALEN

  17. References • Backhaus, Klaus; Voeth, Markus (2007): “Industriegütermarketing”. 8., vollst. neu bearb. Aufl. Vahlen (Vahlens Handbücher der Wirtschafts- und Sozialwissenschaften). München • Cravens, Ingram, LaForge, Young (1993): “Behavior-based and Outcome-based Salesforce Control Systems, Journal of Marketing, Vol. 57, Oct. 93, 47-59  • DiederichHinrichsen and Anthony J. Pritchard (2005): “ Mathematical Systems Theory I - Modelling, State Space Analysis, Stability and Robustness” Springer-Verlag, Heidelberg, Germany • Franklin et al. (2002): “Feedback Control of Dynamic Systems” (4 ed.). New Jersey: Prentice Hall • Keuper und Hogenschurz, 2007: “Sales & Service: Management, Marketing, Promotion und Performance”, Gabler-Verlag, Wiesbaden, Germany • Kilian (2005): “Modern Control Technology”. Thompson Delmar Learning • Kraft (1999): “An empirical investigation of the antecedents of sales force control systems” Journal of Marketing, Vol 63, pp 120-134 • VDA (2007): Beschäftigte in der deutschen Automobilindustrie, www.vda.de • Wallace and Stahl (2002): “Sales Forecasting: A New Approach“ Apics Bookstore • Wilkinson, (2009): “Toward a comprehensive framework of sales management within business-to- business marketing organizations”, the marketing review, vol9, no.1, pp79-95 Prof. Dr.-Ing. Jobst Görne HTW AALEN

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