Deck 16: Sales Force Investment and Budgeting

Question 1

If a sales force downsizing is necessary, then it is best to make all the necessary changes at once rather than a little at a time.

Answer 1

True

Question 2

The Customer-Product matrix is based on new versus existing technologies and channels.

Answer 2

False

Question 3

You are probably undersized if your salespeople feel overworked, but your costs are within budget.

Answer 3

True

Question 4

A good sign that your sales force may be too large is when your finance department mentions that your sales force costs are out of line with industry norms.

Question 5

A sales forecast is usually made prior to estimating selling costs as a percent of sales.

Question 6

The percentage of sales method of establishing sales force size is based on what managers think sales force costs should be as a proportion of planned revenues.

Question 7

Your sales force is probably too large if the number of new customer sales is down.

Question 8

Sales carryover refers to the phenomenon of some portion of current sales being a function of previous sales efforts.

Question 9

A sales budget consists of a set of planned expenses and is usually prepared annually.

Question 10

When sales carryover effects are high, then there will likely be a large sales decrease if a sales force's size is reduced.

Question 11

Sales carryover occurs when a company continues to receive customer orders in a vacant territory with no salesperson.

Question 12

If the sales force needs to be downsized, then it is best to do it gradually.

Question 13

One reason the Customer-Product Matrix is an important planning tool is because a firm's sales management program is quite different depending on whether a company's sales are expected from new vs. existing customers and products.

Question 14

In most companies, the sales budgeting process usually begins with an estimate of how much to spend on personal selling.

Question 15

A drawback to the percentage of sales approach is that budget allocation for selling expenses tends to change in the same direction as sales.

Question 16

The Customer-Product matrix is a budgeting tool for analyzing the source of anticipated revenues.

Question 17

One of the benefits of a sales budget is that it forces sales managers to think about how marketing funds should be spent to effectively execute a sales strategy.

Question 18

The sales response approach to determining sales force size is based on the relationship between sales force effort and the sales response.

Question 19

According to your text, the sales force size decision is closely related to sales force automation and other sales force productivity enhancements decisions.

Question 20

A company is usually well advised to put significant sales force effort behind its new products, even if that means not having enough support for current products.

Question 21

Which of the following are indicators that a low level of sales carryover is likely:
A) the product is mature.

A) the product has strong brand equity.
B) the product is identical to a competitor's
C) only a and b above.
D) a, b, and c are all indicators of a low level of sales carryover.

Question 22

The company wants to spend 8% of sales on the sales force, the cost of supporting a salesperson is estimated at approximately $80,000 per person, and 20% of the sales force budget is for management and other costs. Calculate the number of salespeople the budget will support, if sales are forecasted to be $3.2 million.

A) 2 people
B) 2.5 people
C) 3 people
D) 3.5 people
E) none of the above

Question 23

Which of the following is true regarding the profit impact of sales force size:

A) the sales force is a cost generator.
B) keeping sales costs within budget will ensure maximum profits.
C) average profits per salesperson will generally decrease when new salespeople are added.
D) only a and c above are true.
E) a, b, and c above are all true.

Question 24

Which of the following issues often make getting the sales force size right a difficult task:

A) sales are not solely a function of current selling effort.
B) sales force frustration with a changing customer base.
C) customer frustration with seeing new salespeople.
D) poor or biased sales forecasts.
E) all of the above make the task difficult.

Question 25

The company wants to spend 5% of sales on the sales force, the cost of supporting a salesperson is estimated at approximately $127,500 per person, and 15% of the sales force budget is for management and other costs. Using the percent of sales method, calculate the sales force budget, if sales are forecasted to be $12 million.

A) $420,000
B) $480,800
C) $510,000
D) $600,800
E) none of the above

Question 26

According to the customer-product matrix for sales budget planning, which quadrant is most likely to highest training and promotion expenses?

A) "Convergence Selling" (new customers-current products).
B) "New Business Development" (new customers-new products).
C) "Account Management" (current customers-current products).
D) "Leverage Selling" (current customers-new products).
E) None of the above is likely to have the highest training and promotion expenses.

Question 27

Which of the statements are usually true regarding the financial impact of increasing the sales force size?

A) The average sales volume per salesperson will likely increase.
B) The average profit per salesperson is likely to decrease.
C) While average profits per salesperson may decrease, total company profits may increase.
D) only a and b above are true.
E) only b and c above are true.

Question 28

The sales force sizing approach that examines the total amount of sales time needed to service all customers is known as the

A) workload approach
B) sales effort approach
C) sales response approach
D) percent of sales approach
E) none of the above

Question 29

All of the following are expense categories normally found in a sales budget except:

A) recruiting and training.
B) office rent and utilities.
C) sales aids.
D) life insurance.
E) all of the above are expense classifications.

Question 30

According to the sales budgeting process discussed in your text, the first step of the process is to:

A) forecast sales.
B) design the marketing program.
C) estimate personal selling costs.
D) examine actual costs from the previous period.
E) none of the above.

Question 31

The company wants to spend 5% of sales on the sales force, the cost of supporting a salesperson is estimated at approximately $127,500 per person, and 15% of the sales force budget is for management and other costs. Using the percent of sales method, calculate the sales force budget, if sales are forecasted to be $12 million.

A) 3 salespeople
B) 4 salespeople
C) 5 salespeople
D) 6 salespeople
E) none of the above

Question 32

The phenomenon in which a portion of current sales is a function of customer relationships established through prior selling efforts is known as:

A) sales carryover.
B) customer relationship management.
C) sales workload analysis.
D) current customer development.
E) functional customer relationships.

Question 33

Budget administration has been significantly simplified with the development of:

A) electronic spreadsheets.
B) major account programs.
C) TQM.
D) benchmarking.
E) reengineering.

Question 34

The sales force sizing approach that is based on the sales costs and profit targets is known as the

A) workload approach
B) sales effort approach
C) sales response approach
D) percent of sales approach
E) none of the above

Question 35

The sales force sizing approach which is based on the sales that result from a certain level of sales force effort is known as the

A) workload approach
B) sales effort approach
C) sales response approach
D) percent of sales approach
E) none of the above

Question 36

There is likely to be a high sales carryover when:

A) the product is mature.
B) there is strong brand equity.
C) the product is identical to a competitor's.
D) only a and b above.
E) a, b, and c are all indicators of high sales carryover.

Question 37

Which of the following are indicators that a sales force might be undersized:

A) key customers wonder where your salesperson is.
B) current customers are considering switching suppliers.
C) new customer development is down.
D) only a and b above.
E) a, b, and c are all indicators of an undersized sales force.

Question 38

According to the customer-product matrix for sales budget planning, significant incentive compensation opportunities are most likely to be recommended for which quadrant?

A) "Convergence Selling" (new customers-current products).
B) "New Business Development" (new customers-new products).
C) "Account Management" (current customers-current products).
D) "Leverage Selling" (current customers-new products).
E) None of the above quadrants is likely to have the a more significant incentive compensation opportunity than the others.

Question 39

Which of the following are indicators that a sales force might be too large:

A) key customers wonder where your salesperson is.
B) current customers are considering switching suppliers.
C) new customer development is down.
D) your salespeople don't seem sufficiently stimulated.
E) all the above are all indicators of too large a sales force.

Question 40

The company wants to spend 8% of sales on the sales force, the cost of supporting a salesperson is estimated at approximately $80,000 per person, and 20% of the sales force budget is for management and other costs. Using the percent of sales method, calculate the sales force budget, if sales are forecasted to be $3.2 million.

A) $246,000
B) $204,800
C) $196,800
D) $192,800
E) none of the above