Pro Forma Income Statement

Because marketing managers are accountable for the profit impact of their actions, they must translate their strategies and tactics into pro forma, or projected, income statements. A pro forma income statement displays projected revenues, budgeted expenses, and estimated net profit for an organization, product, or service during a specific planning period, usually a year. Pro forma income statements include a sales forecast and a listing of variable and fixed costs that can be programmed or committed.

Pro forma income statements can be prepared in different ways and reflect varying levels of specificity. They have a typical layout consisting of six major categories or line items:

1. Sales—forecasted unit volume times unit selling price
2. Cost of goods sold—costs incurred in buying or producing products and services. Generally speaking, these costs are constant per unit within certain volume ranges and vary with total unit volume.
3. Gross margin (sometimes called gross profit)—represents the remainder after cost of goods sold has been subtracted from sales.
4. Marketing expenses—generally programmed expenses budgeted to produce sales. Advertising expenses are typically fixed. Sales expenses can be fixed, such as a salesperson’s salary, or variable, such as sales commissions. Freight or delivery expenses are typically constant per unit and vary with total unit volume.
5. General and administrative expenses—generally, committed fixed costs for the planning period, which cannot be avoided if the organization is to operate. These costs are frequently called overhead.
6. Net income before (income) taxes (often called net profit before taxes—the remainder after all costs have been subtracted from sales.

A pro forma income statement reflects a marketing manager’s expectations (sales) given criterion inputs (costs). This means that a manager must think specifically about customer response to strategies and tactics and focus attention on the organization’s financial objectives of profitability and growth when preparing a pro forma income statement.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

Sales Territory Design

After the number of sales territories has been determined, the sales manager can address territory design questions. He can then strive for the ideal of making all territories equal with respect to the amount of sales potential they contain and the amount of work it takes a salesperson to cover them effectively. When territories are equal in potential, it is easier to evaluate each representative’s performance and to compare salespeople.  Equal workloads tend to improve sales force morale and diminish disputes between management and the sales force.  While considering these questions, the sales manager should take into account the impact on market response of practical territory structures and call frequencies. Obviously, it is difficult, if not impossible, to achieve an optimal balance with respect to all these factors. The sales manager5 should constantly strive for the proper balance, however.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

 

Customer-focused Selling Skills

Following customer-focused selling skills can be used in the sequence in which you use those skills and the emphasis you give them:

1. Connecting: To establish a personal bond with the customer;
2. Encouraging: To keep the customer participating in the sales call;
3. Questioning: To get in-depth information on the situation, problems and needs;
4. Listening: To hear and remember the facts and feelings shared by the customers.
5. Confirming: To make the progress of the sales call explicit;
6. Providing: To give information to create a clear, positive image of the salesperson, company, products, and services.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

Improving Quality

Improving quality is a lot like taking vitamins, eating healthy foods, and exercising regularly. Although the results may not be immediate, long-term benefits are significant. Quality is neither a quick fix nor the program of the month, but rather a way of life for companies who are serious about improvements.

Quality is a fundamental to creating value, yet it is a moving target and must meet the customers’ current definition of quality. Thus, we offer the following recommendations for improving service quality and ultimately delivering superior customer value:

• Design services in cooperation with customers. Learn what customers truly value by incorporating the voice of the customer earlier in the service development process. Also, it is important to determine not only the customers’ preferred service attributes but their relative importance, as well.
• Focus your improvement programs outward, on market break points. Only by defining those episodes, when the customer comes in contact with the organization, and by focusing on the ones most critical can you see things as the customer sees them. Also, visualize the complete sequence of the moments of truth a customer experiences in having some need met. Remember, the customer sees service in terms of a total experience, not an isolated set of activities. Mapping the service cycle helps companies see these activities as the customer sees them.
• Create a triangle representation of service quality. Hotels and restaurants often advertise and display on their properties ratings by one of the major motor clubs, such as AAA or Mobil Oil, Hertz #1 Gold Club service communicates a premium, value-added bundle of services to business travelers seeking a hassle-free car rental experience.
• Use teamwork to promote service excellence—service workers who support one another and achieve together can avoid service burnout.
• Create a service bias based on each of the following service quality determinants: professionalism, attitudes and behaviors, accessibility and flexibility, reliability and trustworthiness, service recovery, and reputation and credibility. These criteria can be used as guidelines for influencing positive service quality perceptions.
• Develop proper measurements. Use metrics that are specific on nature, such as 95% on-time-delivery, customer wait time, or order processing time. Benchmark the best practices for each service are being measured, such as wait time or order delivery.
• Employee selection, job design, and training are absolutely crucial to building customer satisfaction and service quality. Structure the job of service workers to maximize their ability to respond quickly and competently to customer needs. Also, train service personnel in areas of service delivery and attitude. Role play different service scenarios, showing various service recovery strategies. Provide service workers with some basic tools to help control service quality variation and uncover service problems.
• Reward total quality efforts in marketing. Look for opportunities to reinforce quality behaviors when they occur. Employees should be rewarded ob the basis of these behaviors (commitment, effort) rather than strictly on outcomes, such as sales quotas. Rewarding a salesperson for meeting or exceeding quota with a bonus while giving a nominal award such as a pin or plaque to the person who fixes the product or process sends a clear message about the importance of quality.
• Think of service as a process, not a series of functions. Service quality occurs when the entire service experience is managed and the organization is aligned to respond accordingly.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

The Creative Selling Process

Although it may look easy, creative selling is not a simple task. Of course, some sales are made in a matter of minutes. But others, particularly for large organizational purchase, can take years to complete. Salespeople should follow a carefully planned process from start to finish.

Step 1: Prospecting: Prospecting is the process of finding and qualifying potential customers. This involves three activities:

• Generating sales leads. Sales leads are names of individuals and organizations that might be likely prospects for the company’s products.
• Identifying prospects. A prospect is a potential customer who indicates a need or a desire for the seller’s product.
• Qualifying prospects. Not all prospects are worth investing sales time in. some may not have the authority to buy, and others won’t have enough money. The ones who do have both the authority and the available money are called qualified prospects.

Step 2: Preparing: With a list of hot prospects in hand, the salesperson’s next step is to prepare for the sales call. Without this preparation, the chances of success are greatly reduced. Preparation starts with creating a prospect profile, which includes the names of key people, their role in the decision-making process, and other relevant information such as the prospect’s buying needs, motive for buying, current suppliers, income/revenue level, and so on.

Next, the salesperson decides how to approach the prospect. Possible options for a first contact include sending a letter or cold calling in person or by telephone. For an existing customer, the salesperson can either drop by unannounced or call ahead for an appointment, which is generally preferred.

Before meeting with the prospect, the salesperson establishes specific objectives to achieve during the sales call. Depending on the situation, objectives can range anywhere from “getting the order today” to simply “convincing prospects top accept the company as a potential supplier.” Following that, the salesperson prepares the actual presentation, which can be as basic as a list of points to discuss or as elaborate as a product demonstration or multimedia presentation.

Step 3: Approaching the Prospect: Positive first impressions result from three elements. The first is an appropriate appearance—you wouldn’t wear blue jeans to call on a banker, and you probably wouldn’t wear a business suit to call on a farmer. Appearance also covers the things that represent you, including business cards, letters, and automobiles. Second, a salesperson’s attitude and behavior can make or break a sale. A salesperson should come across as professional, courteous, and considerate. Third, a salesperson’s opening lines should include a brief greeting and introduction, followed by a few carefully chosen words that get the prospect’s attention and generate interest. The best way to accomplish this is to focus on a benefit to the customer rather than on the product itself.

Step 4: Making the Presentation: the most critical step in the selling process is the presentation. It can take many forms, but its purpose never varies: to personally communicate a product message that will convince a prospect to buy. Most sellers use of two methods: The canned approach is a memorized presentation (easier for inexperienced sellers, but inefficient for complex products or for sellers who don’t know customer’s needs). The need satisfaction approach (now used by most professionals) identifies the customer’s needs and creates a presentation to specifically address them.

Step 5: Handling Objections: No matter how well a presentation is delivered, it doesn’t always conclude with an immediate offer that might move the prospect to buy. Often, the prospect will express various types of objections and concerns throughout the presentation. In fact, the absence of objections is often an indication that the prospect is not very interested in what the salesperson is selling. Many successful salespeople look at objections as a sign of the prospect’s interest and as an opportunity to develop new ideas that will strengthen future presentations.

Three basic approaches to overcoming objections include asking the prospect a question, giving a response to the objection, or telling the prospect that you will need to look into the matter and address it later.

Step 6: Closing: So far, you haven’t made a dime. You may have spent weeks or months—years in some cases—to bring the customer to this point, but you don’t make any money until the prospect decides to buy. This stage of the selling process, when you persuade the customer to place an order, is referred to as closing.

How should you ask for the order? Closing techniques are numerous; here are some of the more popular. The alternative proposal close asks the prospect to assumptive close, you simply proceed with processing the order, assuming that the prospect has already decided to buy. Another alternative is the silent close, in which you finish your presentation and sit quietly, waiting for the customer to respond with his or her buying decision. Finally, many salespeople prefer the direct close, where you just come right out and ask for the order.

These closing techniques might strike you as tricks, and in the hands of unethical salespeople, some closing approaches certainly can be. But the professional salesperson uses these techniques to make the selling process effective and efficient—not to trick people into buying when they aren’t ready.

Step 7: Following Up: Most salespeople depend on repeat sales, so it is important that they follow up on all sales and not ignore the customer once the first sale is made. During this follow-up stage of the selling process, you need to make sure that the product has been delivered properly and that the customer is satisfied. Inexperienced salespeople may avoid the follow-up stage because they fear facing an unhappy customer. However, an important part of a salesperson’s job is to ensure customer satisfaction and to build goodwill.

In order to improve the odds of keeping a satisfied customer after the sale, salespeople should remember to:

• Handle complaints promptly and pleasantly
• Maintain contact with customers
• Keep serving the customers
• Show appreciation.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

Negligence

Negligence is a failure to use ordinary care in the performance of an action. Businesses have an implicit duty to use reasonable care in designing and creating the product, as well as, in informing consumers about any potential hazards associated with the product. Labels, salespersons’ claims, and advertisements must tell consumers what they need to know about the product to avoid using it in ways that could lead to personal injury.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

Sole Proprietorships

Sole proprietorships, businesses owned and operated by one individual, are the most common form of business organization. Sole proprietorships are generally managed by their owners. Because of this simple management structure, the owner/manager can make decisions quickly. This is just one of many advantages of the sole proprietorship form of business.

Ease and Cost of Formation: Forming a sole proprietorship in relatively easy and inexpensive. In some countries, creating a sole proprietorship involves merely announcing the new business in the local newspaper. Other proprietorships, such as barber shops and restaurants, may require state and local licenses and permits because of the nature of the business. No lawyer is needed to create such enterprises, and the owner can usually take care of the required paperwork.

An entrepreneur starting a new sole proprietorship must find a suitable site from which to operate the business. Some sole proprietors look no farther than their garage or a spare bedroom that they can convert into a workshop or office. Computers, personal copiers, fax machines, and other high-tech gadgets have been a boon for home-based businesses, permitting them to interact quickly with customers, suppliers, and others. Many independent salespersons and contractors can perform their work using a notebook computer as they travel. E-mail and cell phones have made it possible for many proprietorships to develop in the service area.

Secrecy: Sole proprietorships make possible the greatest degree of secrecy. The proprietor, unlike the owners of a partnership or corporation, does not have to discuss publicly his or her operating plans, minimizing the possibility that competitors can obtain trade secrets. Financial reports need not be disclosed.

Distribution and Use of Profits: All profits from a sole proprietorship belong exclusively to the owner. He or she does not have to share them with any partners or stockholders. The owner decides how to use the profits.

Flexibility and Control of the Business: The sole proprietor has complete control over the business and can make decisions on the spot without anyone else’s approval. This control allows the owner to respond quickly or competitive business conditions or to changes in the economy.

Government Regulation: Sole proprietorships have the most freedom from government regulation. Most government regulations apply only to businesses that a certain number of employees, and securities laws apply only to corporations that issue stock. Nonetheless, sole proprietors must ensure that they follow all laws that do apply to their business.

Taxation: Profits from the business are considered personal income to the sole proprietor and are taxed at individual tax rates. The owner pays one income tax.

Closing the Business: A sole proprietorship can be dissolved easily. No approval of co-owners or partners is necessary. The only legal condition is that all loans must be paid off.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

Message Content in Marketing Communications

Message content deals with what is said in a message and how it is said. There are five common content topics that have great relevance for marketing practitioners: 1) fear appeals; 2) the use of humor; 3) the role of music; 4) sex appeals; and 5) subliminal messages. Advertisers, salespersons, public relations spokespersons, and other marketing communicators use all of these message styles to varying degrees in hopes of gaining attention, achieving impact, and ultimately producing sales.

Fear Appeals: Companies sometimes use fear appeals in attempting to motivate customers to action. The underlying logic when using fear appeals is that fear will stimulate audience involvement with a message and thereby promote acceptance of message arguments. The appeals may take the form of social disapproval or physical danger aside from the basic ethical issue of whether fear should be used at all, the fundamental issue for marketing communicators is determining how intense the fear presentation should be. Numerous fear-appeal studies have been performed by psychologists and marketing researchers, but the fact remains that there still is no consensus on the “optimum” level of fear. Some Neither extremely strong nor very weak fear appeals are maximally effective. It seems that appeals at a somewhat moderate level of fear are best.

Humor: Politicians, actors and actresses, after-dinner speakers, professors, and indeed all of us at one time or another use humor to create a desired reaction. Salespeople and advertisers also turn to humor in the hopes of achieving various communication objectives. Whether humor is effective and what kinds of humor are most successful are matters of some debate among marketing communications practitioners and scholars.

Despite the frequent use of humor in advertising, relatively little is known in a definitive scientific sense about its effects on customer behavior. However there are some generalizations:

• Humorous messages attract attention.
• Humor can inhibit consumers’ understanding of the intended meaning of a message.
• Because humor is a pleasant form of distraction, it can produce an increase in persuasion by effectively “disarming” receivers’ natural selective perception and reducing their tendencies toward counter arguing with persuasive selling claims.
• Humor tends to enhance source credibility, thereby improving the persuasive impact of an ad message.
• A humorous context may increase liking for the source and create a positive mood, thereby enhancing the persuasive effect of the message.
• To the extent that a humorous context functions as a positive reinforce, a persuasive communication placed in such a context may be more effective.
• The effects of humor can differ due to differences in audience characteristics. Advertisers must use humor carefully since consumers display a variety of tastes in what is humorous and what is not.

Music: celebrated musicians, as well as, non-vocal accompaniment and unknown vocalists are used extensively in promoting everything. Music performs useful communication functions such as attracting attention, putting consumers in a positive mood, and making them more respective to message arguments. Although music’s role in marketing is an increasingly understand subject, a few recent studies have begun to demonstrate the roles that music performs. Music is an unconditional stimulus in an effort to influence experimental subjects’ preference.

Sex Appeals: Sex appeals in advertising are often explicit. The use of explicit sex was unthinkable just a few years ago, it now represents part of a new trend toward more sexually explicit advertising. Sexual explicitness is prevalent and overt in some countries. Whether such advertising is effective and under what conditions it may be effective remain largely unexplored issues. Complicating the matter is the fact that sex in advertising actually takes two forms: nudity and suggestiveness. It is uncertain which form is more effective. There are several potential roles. First, sexual material in advertising acts as an initial attentional lure and also holds attention for a longer period, given that the models are attractive or the scene is pleasant. This is called the “stopping power” role of sex. A second potential role is to enhance recall. Sexual content or symbolism will enhance recall only if it is appropriate to the product category and the creative advertising execution. Sexual appeals produce significantly better recall only if the advertising execution has an appropriate relationship with the advertised product. A third role performed by sexual content in advertising is to evoke emotional response such as feelings of attraction or even lust.

Subliminal Messages: the word subliminal refers to the presentation of stimuli at a rate or level that is below the conscious threshold of awareness. Stimuli that cannot be perceived by the conscious senses may nonetheless be perceived subconsciously. This possibility has generated considerable concern from advertising critics and has fostered much speculation from researchers.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

Talk Less, Listen More

The more talking you do, the less information you will receive. Your role is that of a buyer. You are thinking about purchasing services from the person you’re interviewing. Asking questions and evaluating the responses are your key functions. Picture yourself at a car dealership, talking to a salesperson about the possible purchase of a car. Who should be doing most of the talking? Who should be answering the most questions? In both cases the answer is the person selling, not the person buying. The person asking the questions gets the most information.

Your questions should seek information on specific issues and also let you uncover personality traits. Listen for comments that include attitudes, energy levels, and the ability to communicate concisely and to answer the question asked, not the one the interviewee wants to answer. None of this can be accomplished when you are doing the majority of the talking.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

Closing the Sale

Closing refers to obtaining a final agreement to purchase. All the salesperson’s efforts are witnessed unless the client “signs on the dotted line;” yet this is where many salespeople fail. It is natural to delay making purchase decisions. But as the time it takes the salesperson to close the sale increases, the profit to be made from the sale goes down, and the risk of losing the sale increases. Consequently, the salesperson’s task is to speed up the final decision. Often, this can best be done by simply asking for an order.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.