Types of Sales Jobs

Driver sales person

Sales support

Sales development

Inside order-taker

Outside order-taker

Missionary sales person

Sales engineer/consultant

Consultative sales person: tangible products

Consultative sales person: services and other intangible products

Sales maintenance

TM 1-2 (Fig. 1-2)

Generate Sales: Provide service tocustomers:

Territorymanagement:

Professionaldevelopment:

Companyservice:

Precall planning Prospecting Make sales

presentations Overcome

objections Close by asking

for the orders Arrange for

delivery Entertain Arrange for

credit/financing Collect

payments Participate in

trade shows

Providemanagement/technicalconsulting

Overseeinstallations andrepairs

Check inventorylevels

Stock shelves Provide

merchandisingassistance: Co-op

advertising,point-of-purchase

Displays,brochures

Oversee productand equipmenttesting

Train wholesalers'and retailer'ssalespeople

Gather andanalyzeinformationon customers,competitors'generalmarketdevelopments

Disseminateinformation toappropriatepersonnelwithinsalespersons'company

Develop salesstrategies andplans,forecasts, andbudgets

Participate in: Sales

meetings Profes-

sionalsassociations

Trainingprograms

Train newsales-people

Performcivicduties

Selected Activities of Salespeople

TM 1-3 (Fig. 1-3)

Sales Jobs are Different than Other Jobs

• Salespeople are largely responsible for implementing a firm’s marketing

strategies in the field.

• Salespeople represent their company to customers.

• Salespeople represent their customers to their company.

• Salespeople operate with little or no direct supervision.

• Salespeople are alone a large part of the time.

• A sales person needs more tact and social intelligence than other

employees on the same level in the organization.

• Sales people are among the few employees authorized to spend company

funds.

• Sales jobs frequently require considerable travel and time away from

home and family.

• Salespeople are responsible for revenue generation.

TM 1-4

2

Sales Management Responsibilities(Figure 1-5)

TM 1-5

CommunicationCoordinationIntegration

Strategicplanning

Organizing thesales force

RecruitingSelection

AssimilationTraining anddevelopment

Motivation andsupervision

Performanceevaluation

Sales Management Responsibilities TM 1-5(Fig. 1-5)

Managing is a distinct activity which requires a unique set of skills, knowledge, and attitudes

TM 1-6a

Some skills are the same; many are different

• motivating

• planning

• training

• delegating

• recruiting

• administration

TM 1-6b

President

Vice president of sales

National sales manager

Regional/divisional sales manager

District sales manager

Sales supervisor

Sales person

Staff assistants available for advice and support at any step along the ladder

TM 1-7

(FIG. 1-6)

The Executive Ladder in Personal Selling

TM 1-8

FIG. 1-7

Vice president of marketing

President

Product engineer

Client-team leader

Distribution logistics specialist

Customer sales/service representative

The Executive Ladder in Team Selling

TM 1-9

Product Manufacturers Wholesalers Retailers

Life-Cycle Industrial Consumer All Products Durable Nondurable

Introduction

Maturity

Decline

Growth

Promotional Mix: Product Life Cycle, Type of Business and Product

Personal selling Advertising Personal selling Personal selling Advertising

Personal selling Advertising Sales promotion

Personal selling Sales promotion Personal selling Personal selling Advertising

Advertising Sales promotion Sales promotion Sales promotion

Personal selling Sales promotion Personal selling Personal selling Sales promotion

Sales promotion Sales promotion

Personal selling Advertising Personal selling Personal selling Advertising

Personal selling Sales promotion Sales promotionSales promotion Advertising

A Company’s Complete Marketing System:A Framework of Internal SourcesOperating within a Set of External Forces

Macroenvironmental forces:

Demography Economic conditions Sociocultural factors Political-legal factors Technology Competition

Company’s marketing mix:

Product planning Price structure Distribution system Promotional activities

Marketing inter-mediaries Suppliers The market

Nonmarketing resources in the firm:

Production Financial Personnel

Public image Research and Development Location

TM 2-1 (Fig. 2-1)

Marketing inter-mediaries

Company Organization Chart Embracing the Concept of Marketing Management

TM 2-2 (Fig. 2-3)

President

Production Manager

Marketing Manager

Financial Manager

Personnel Manager

Manager of Marketing Planning and Facilitating Staff Services

Chief Sales Force Manager

AdvertisingSales promotionMarketing researchSales trainingSales analysis and control (sales statistics)

Management of field

Management of sales office

activities including customer service and product service

Sales budgetingSales forecastingPlanning for channels, territories, and quotasProduct planningInventory controlProduction schedulingPhysical distribution

sales organization

Organization’s mission

Strategy and tactics to achieve goals

TM 2-3

Strategic Planning for the Total Company

Broad goals

top

down

Relationship Between Objectives, Strategies and Tactics

Set Goals

Formulate

Strategies

Develop Tactics

TM 2-4 (Fig. 2-4)

TM 2-5

Relationship Marketing

• Long-term commitment

• Understanding customer expectations

• Building service partnerships

• Empowering employees

• Total quality management

Company

Marketing Goals

Strategy

Increase marketing share 10%

TM 2-6

Company Strategy-Marketing Goals and Strategy

Earn 20% ROI

StrategyIncrease share of customer business

GoalsIncrease market

share 10%

Marketing

Sales Force Goals

Strategy Increase share of customer business

TM 2-7

Marketing Strategy-Sales Force Goals, Strategy and Tactics

share 10%

GoalsIncrease share of customer business

StrategyBuild long-term

customer relations

TacticsDevelop sales teams

Provide bonuses for greater customer share

Increase market

Transaction oriented

Relationship oriented

Partnership

Low HighLow

High

TM 2-8 (FIG. 2-5)Multiple relationship strategies

Cost of serving the customer

Commitment to the customer

TM 3-1 FIG. 3-1 Salesperson’s Average Time Allocation*

Waiting/Travel

AdministrativeTasks Selling Over thePhone Selling Face-to-Face Service Calls

(8.5 hrs) 18%

(5.3 hrs) 18%

(7.2 hrs) 15%

(14.3 hrs) 31%

(11.6 hrs) 25%

*SOURCE: Christem P. Herde, Dartnell’s 29th Sales Force Compensation Survey 1996-1997, (The Dartnell Press: Chicago, IL), p. 177.

THE EIGHT STEPS OF THE SALES PROCESS

Follow-up

Gaining Commitment

Meeting objections

Presentation

Need Assessment

Approach

Preapproach

Prospecting

TM 3-2

TM 3-3 FIG. 3-2Lead Conversion Ratio: Inquiry to

Decision 12 Months After Inquiring

Purchased

No longer inmarketPlan to buy

Plan to buy 25% Purchased

45%No longer in market

30%

*SOURCE: Bob Donath, James K. Obermayer, Carolyn K. Dixon, and Richard A. Crocker, “When Your Prospect Calls,” Marketing Management, Vol. 3, No. 2, 1994.

TM 3-4 (FIG. 3-3)

The Value of Inquiry Follow-Up

Source: Bob Donath, James K. Obermayer, Carolyn K. Dixon, and Richard A. Crocker, “When Your Prospect Calls,” Marketing Management, Vol. 3, No. 2, 1994

Share of buyer’s

business if not followed

up 40%Share of buyer’s

business if followed up 83%

TM 3-5Buying Center Members

Type of influence Job position Influence description

User Production line workers and Use the product in the their supervisors production process

Influencer Engineers, research & Write specifications; supply development specialists information

Gatekeepers Purchasing agents, reception- Limit access to others and ists, secretaries, research control the flow of assistants information to others

Deciders Purchasing agents (small or Make actual choice between reorder items), management suppliers

Buyers Purchasing agents Formally give the order to a supplier; arrange terms of sale

TM 3-6NEED ASSESSMENT

• Situational questions

How often do you change the cutting oil in your drill presses?

In addition to the hospital administrator, who else has an influence on the decision?

• Problem discovery questions

Have you experienced any delays in getting repair parts?

In which part of the production process is quality control the most important.

• Problem Impact questions

How do these delays in getting parts affect your production costs?

What impact do the quality consistency problems have on your production costs?

• Solution value question

If your inventories could be reduced by 20%, how much would that save you?

If your rejection rate on final inspection was reduced to under one percent, how much would

• Confirmatory questions

So, you wold be interested in an inventory control system that reduced your inventories by 20%?

If I can provide evidence to you that our products would lower your rejection rate to under one

percent, would you be interested?

that save you?

Presentation of Product, Features, Benefits, Advantages

Product Features Benefits Advantages

Camera Telephoto lens Take pictures Able to capturefrom longer images of animals

distances. or people from a distance.

Bicycle Attached water Can hold a water Don’t get dehydrated. bottle holder bottle. Don’t have to stop

for water. Feel more refreshed.

Drill Press Multiple drill Can change bits Saves time. bits attached without shutting Saves money.

down the machine.

Motor Oil Rust inhibitor Oil and engine Saves money.have longer life.

TM 3-7

TM 4-1

Organizational Design

Characteristics of a Good Organizational Design

Effective informal

organization

Market orientation

Activities organized

Balanced and coordinated

activities

Stable, but flexible

Responsible span of control

Authority and responsibility

aligned

Advertising Manager

Sales Promotion Manager

General Sales Manager

Marketing Research Manager

Sales Analyst

Western Regional Sales Manager

Eastern Regional Sales Manager

4 District Sales Managers

Salespeople each with own territory

4 District Sales Managers

Salespeople each with own territory

Geographical OrganizationTM 4-2 (Fig. 4-5)

Chief Marketing Executive

Chief Marketing Executive

Advertising Manager

Sales Promotion Manager

General Sales Manager

Marketing Research Manager

Customer Relations Manager

Sales Manager Product A

Sales Manager Product B

Sales Manager Product C

Salespeople Product A

Salespeople Product B

Salespeople Product C

Sales Organization with Product Specialized Sales Force TM 4-3

(Fig. 4-6)

Chief Marketing Executive

Advertising Manager

Sales Promotion Manager

General Sales Manager

Director of Marketing Research

Sales Organization Specialized by Type of Customers

Salespeople

Sales Manager Transportation Industry

Sales Manager Steel Industry

Sales Manager Petroleum Industry

Salespeople Salespeople

TM 4-4 (Fig. 4-8)

TM 4-5

Selling firm Buying firm

Salesperson Exchange processes

Purchasing agent

Sales Team

Information

Problem Solving

Negotiation

Friendship,trust

Product/services

Payment

Reciprocity

Organizational buying center

Marketing

Sales

Manufacturing

R&D

Engineering

Physical distribution

Purchasing

Manufacturing

R&D

Engineering

Marketing

The Relationship Between a Sales Team and a Buying Center

Uses of Telemarketing

• Identify prospective customers

• Screening, qualifying leads

• Sales solicitation: small customers, re-orders

• Order processing

• Product service support

• Account management

• Customer relations

TM 4-6

RECRUITING AND SELECTION PROBLEMS

TM 5-1

• Lack of resources

• Lack of job specification and qualifications

• Qualifications not objectively established

• Lack of managerial training

• Personal prejudices

• Search for managerial talent

TM 5-2

KEY LAWS AND REGULATIONS AFFECTING A SALES FORCE

• Civil Rights Act of 1964

• Federal Contract Compliance, Executive Orders

• Age Discrimination in Employment Act (1967)

• Fair Employment Opportunity Act (1972)

• Rehabilitation Act of 1973

• Vietnam Era Veterans Readjustment Act (1974)

• Uniform Guidelines on Employment Selection Procedures (1978)

• Americans with Disabilities Act (1990)

TM 5-3 (Fig. 5.2)Sales Force Staffing Process

Plan for Recruiting & Selection

Establish Responsibility for Recruiting, Selection

and Assimilation

Determine Number of

People Wanted

Conduct Job Analysis

Prepare Job Description

Recruit Applicants

Select ApplicantsDesign a System

For Measuring Applicants

Hire The People

Assimilate New People Into Sales Force

Determine Hiring Qualifications

Measure Applicants Against Hiring Qualifications

Make Selection Decisions

TM 5-4

Workload Analysis

Number of reps needed Total workload in market

Workload one rep can handle Market workload:

Customer Number of Calls Total class accounts per year calls

x =

A 400 20 8,000

B 600 10 6,000

14,000

One rep’s workload:

Calls/day x Selling days/week x Working weeks/year = Annual workload 5 x 5 x 50 = 1250

Number of reps needed = = 112 reps

=

14,000

1250

TM 5-5 (Fig. 4-3)

Determining the Number of Salespeople Needed

Strategic Plans

New - Eliminated/ + Promotions + Retirements + Terminations/ = Total new territories combined resignations reps needed territories

Expansion MN and RI 2 promotions 2 retirements 1 termination into Texas. Territories expected expected expected reps needed

4 - 1 + 2 + 2 + 1 = 8

Total new

TM 5-6

CONTENT OF THE JOB DESCRIPTION

• Title

• The nature of the product or service to be sold

• Type of customers to be called on,

frequency of calls, and types of personnel to be contacted

• Specific tasks and responsibilities to be

carried out

• Organizational relationships

• Mental and physical demands of the job

• Environmental pressures and constraints

that might affect the job

TM 5-7

RECRUITING FOR THE TEAM

• Willingness to share

• Cooperative

• Trusting

• Empathetic

• Accepting of others

• Receptive to others ideas

• Selflessness

• Leadership skills

TM 5-8RECRUITING SOURCES OF SALES REPRESENTATIVES

Source Comment

Referrals: Candidates and position are known to person making referral.

Within company:

Office and factory employees Company employees know the company and its products.

Sales force leads Current salespeople know their job requirements and can possibly identify candidates who could be a good job match.

Other Companies:

Competitors Competitors know the customers and are familiar with your products.

Customers Customers know your products and your company.

Suppliers Suppliers know your company and your products.

Educational institutions Primarily used when recruiting inexperienced people. Students are usually actively involved in a job search, and this provides an efficient place to screen large numbers of available candidates.

Advertisements Produces the greatest number of candidates, but the average quality is sometimes lower.

Employment agencies The agency is often more costly than other methods, but it will do a large part of the initial screening.

Voluntary applicants These applicants are interested in your firm and probably possess a high degree of self-confidence, self-reliance, and initiative.

Part-time workers These workers are easy to contact, readily available, and can work flexible hours. This is a good source for in-home selling.

TM 5-9 (Fig. 5-8)Recruiting Evaluation Matrix

Evaluation Criteria

Consistent with strategic planning?

Number recruits

Number hired

Percent retained after 3 years

Cost Frequency of use

Rep’s per-formance after 2 yrs.

Recruiting sources

Within company: Sales force Other departments

Competitors Customers Noncompetitors

Educational institutions

Advertisements

Employment agencies

Voluntary applicants

Women

Minorities

Other companies:

TM 6-1

References and credit reports

Psychological tests

Application blanks

Personal interviews

Assessment Centers

Organizational Design

Salesperson Selection Tools

TM 6-2

Application Blank Information

Personal Experience Physical Environmental

Name Work Ability to perform Membership in job-related social and

service Address & Phone Education physical activities organizations

Health Outside interests

Reason for seeking particular job

Personal goals

References

TM 6-4

Suggestions for Improving Interviewing Effectiveness

• Have specific job specifications and qualifications clearly in mind

• Establish specific interviewing objectives

• Provide some degree of structure (guidelines, probing questions)

• Allow adequate time

• Be very familiar with application or resume information

• Use standardized rating sheets after each interview

• Use multiple interviews

• Provide training and practice for the interviewers

• Remember, the interview is an opportunity to learn more about the candidate as well as to sell your company

Selection and Hiring are Not SynonymousTM 7-1

COMPANY A DISLIKES ANN ANN DISLIKES COMPANY A

NO OFFER EXTENDED

COMPANY B LIKES ANN ANN DISLIKES COMPANY B

OFFER EXTENDED, BUT NOT ACCEPTED

ANN LIKES COMPANY C

OFFER EXTENDED & ACCEPTED

COMPANY A LIKES ANN

TM 7-2 (Fig. 7-2)

Details of the Job

Company eating facilities

Office practices

Paycheck

Expense account

For the new sales representative:

Details of the job

Phases of Developing and Conducting Sales Force Training

TM 8-1

Training assessment

Program design

Reinforcement

Evaluation

Establish program objectives

Identify who should be trained

Identify training needs and specific goals

How much training is needed?

Who should do the training?

When should the training take place?

Where should training be done?

Content of training

Teaching methods used in training program

Determine how training will be reinforced

What outcomes will be evaluated?

What measures will be used?

Objectives of Sales Training Programs

TM 8-2 (Fig. 8-3)

Increased Sales

Productivity

Improved Self-

Management

Lower turnover

Improve customer relations

Improve morale

Improved communica-

tion

Sales training program

objectives

Examples of Specific Training Objectives

Company orientation and Understand company goals and objectivesadministrative skills: Understand company selling philosophy

Understand organizational structure Understand company policies and procedures

Improve call reports Improve call patterns Improve time management

Knowledge: Existing products - features, benefits, and applications New products - features, benefits, and applications

Industry trendsCompetitive products - features, benefits, and

applications Specific customer applications and problems Promotional programs

Selling skills: Improve pre-call planningImprove prospecting methodsImprove strategy selectionImprove presentation skills Improve closing techniquesImprove understanding of and handling objectivesImprove customer sensitivity

TM 8-3

Who Should Train Sales People?TM 8-4

Source Advantages Disadvantages

Line executive Greater credibility Lack of time

Clearer expectations Lack of teachingability

More thoroughevaluation of candidates

Staff trainer Greater time Additional expense

More resources Lack of authority

Better training skills Less credibility

Outside specialist Greater specialization Additional expenseand expertise

Program content isnot specific to company’s needs

Training Content and Methods Matrix

TM 8-5

Lectures Discussion Demonstra- Programmed Interactive Audio On-the-Job Videos Bus. T.V. Role

tion learning simulation cassettes Playing

Company knowledge

Product knowledge

Market/Indus-try knowledge

Selling skills

Time Manage-ment

* * * *

* * * * * *

* * * * * * * * * *

* * * * * * * *

* * * * * * * * *

TM 9-1

MOTIVATION IS THE CHOICE OF AN INDIVIDUAL TO

1. Initiate action on a certain task … choice;

2. Expend a certain amount of effort on that

task … intensity;

3. Persist in expending effort over a period of

time … persistence.

The amount of effort the sales person desires to expend on each activity associated with the job.

TM 9-2 (Fig. 9-2)

Motivational Conditions

Are the rewards

worth the effort?

Does more effort lead to better performance?

GREATER EFFORT

The same or less effort

NO NONO

YES YESYESDoes better performance lead to greater rewards?

Maslow’s Hierarchy of Needs and Possible Sales Managers’ Actions

TM 9-3 (Fig. 9-3)

Fulfilled through:Self-development,

Managerial actions:Provide/offer advanced

training, assignments to special projects, more responsibility and

authority.

Fulfilled through: Status, recognition.Managerial actions: Recognize sales rep achievements

personally and publicly through title changes, commendation letters, promotions.

Fulfilled through: Affiliation, friendship, acceptance.Managerial actions: Use team selling, hold social functions, distribute

employee newsletters, hold sales meetings, mentoring.

Fulfilled through: Job security, safety, income security.Managerial actions: Provide safe work environment, set mutually agreed-upon

performance standards, communicate job performance expectations and consequences

of failure to perform.

Fulfilled through: Food, shelter, clothing, health care.Managerial actions: Provide/offer adequate income and good benefits package.

Safe

ty

need

s

Social

needs

Physiol

ogica

l

needs

Esteem

nee

ds

Self-a

ctual

izatio

n

needs

challenge.

Herzberg’s Motivation-Hygiene Theory

TM 9-4

HYGIENE FACTORS MOTIVATION FACTORS

• pay

• company policies

• supervision conditions

• work

• recognition

• responsibility

• challenge

• growth opportunities

Salespeople’s Perceived Reasons for Failure and Their Motivational Impact

Motivational impact

Perceived reasons Positive Negative

Ability Seek help; get Become frustrated additional training; and discouraged; ask for supervisor’s give up assistance; increase effort

Effort Work harder; make No change in behavior more calls; work

longer hours

Strategy Change selling No change in behavior strategy; adapt the

presentation

Task difficulty Work harder; Become frustrated change strategies; and discouraged; or seek help give up

Luck No change in behavior Avoid the situation

TM 9-5 (Fig. 9-5)

TM 9-6CAREER STAGES

• Primary concern is finding a suitable occupation

• Underdeveloped skills and knowledge

• Many drop out or are terminated

• Low expectancy instrumentality, high valence for personal growth

EXPLORATION

ESTABLISHMENT

• Primary concern is improving skills and performance

• Lack of promotion may cause disengagement or quitting

• New commitments make pay important

• High expectancy instrumentality, high valence for promotion and payMAINTENANCE

• Primary concern is maintaining position, status, and performance

• Have highest sales volumes and percentage of quota and pay

• High valence for recognitions, respect, and pay

• Low valence for promotionDISENGAGEMENT

• Primary concern is preparing for retirement and/or developing outside interest

• Low valence for higher order and lower order rewards

• Low instrumentality

TM 9-7

Sales Contest Design Elements

Equally Attainable

Goals

Attractive Variety of

Prizes

Sales Contest Design

Promote & Publicize

TM 9-8

CAUSES OF PLATEAUING

• No clear career path

• Not managed adequately

• Bored

• Burned out

• Economic needs met

• Discouraged with company

• Overlooked for promotion

• Lack of ability

• Avoiding risk of management job

• Reluctance to be transferred

What a Good Sales Compensation Plan should Do

TM 10-1 (Fig. 10-1)

Efforts +

Results =

Rewards

Control Sales representatives’activities

Treat customers properly

Attract and keep good people

Motivate the sales person Good sales compensation plan

Economical yet competitive

Security and incentive Fair Simple

Flexible and Stable

TM 10-2Potential Conflicts in Compensation Plan Design

Characteristics of Plan 1 2 3 4 5 6 7 8 9 10 11 12

Characteristics of Plan

1. Reward results __

2. Reward efforts C __

3. Provide steady income C __ __

4. Provide incentive __ C C __

5. Fair C C C C __

6. Flexible __ C C __ __ __

7. Simple C __ __ C C C __

8. Economical __ C C __ C __ C __

9. Competitive __ C C __ __ __ C C __

10. Controls and directs C __ __ C C C __ __ __ __

11. Consistent with company objectives C C C C __ __ C __ __ __ __

12. Stable C C __ C C C __ C __ C C __

C = Potential for conflict

Review job description

Identify plan’s objectives

Include job elements controllable by sales force and measurable

Establish level of compensation

Develop the method of compensation

Decide on indirect monetary compensation

Pretest and install plan

Steps in designing a sales compensation plan

TM 10-3

Others

Company Car

Pension

Moving Expenses

Insurance

Profit Sharing

Bonus

Drawing Account

Commission Paid Vacation

Other Business Expenses

TravelSalary

SECURITY INCENTIVES BENEFITS EXPENSES

Building Blocks for a Sales Compensation Plan

TM 10-4 Fig. 10-4

TM 10-5Methods of Compensation

Method Advantage Disadvantage Best Used

Straight salary

Provides security and stability for reps

Better for directing and controlling sales activities

Ensures proper treatment of customers

Direct incentive is easily lost if not administered properly

Represents a fixed cost

Requires supervision to direct, control, and evaluate

Difficult to direct and supervise sales people

Customers’ best interests may be ignored

Sales people’s earnings may fluctuate widely

Added cost

May be seen as inequitable if not administered properly

For products that require a lot of presale and/or post-sale service

For building long-term customer relationships

When supervision is available for new recruits

For new territories

For missionary sales

Straight commission

Bonus

When a strong incentive is needed to attain sales

For products that require little presale and/or post-sale service

The sale is a one-time sale

Adequate field supervision is not available

Company is in a weak financial position

Company uses part-time or independent sales people

Provides a strong incentive

Sales people have more freedom

Acts as a screening method

Added incentive

Can be used for specific activities - flexible

To encourage above-normal performance of specific activities

COMMISSION

BONUSSALARY

Possible Combination Compensation Plans

TM 10-6

TM 10-7Drawing Account Examples

Non-Guaranteed Plan

Month Draw Sales Volume Commission Earned End-of-Month Payment to Rep

January $1,800 $40,000 $4,000 $2,200 ($4,000 - $1,800 = $2,200)

February $1,800 $15,000 $1,500 $0 (rep owes $300)

March $1,800 $30,000 $3,000 $900 (computed as follows)

Commission = $3,000

Less draw - 1,800

Less February debt - 300

Net $ 900

Guaranteed Plan

Month Draw Sales Volume Commission Earned End-of-Month Payment to Rep

January $1,800 $40,000 $4,000 $2,200 ($4,000 - $1,800 = $2,200)

February $1,800 $15,000 $1,500 $0 (rep owes $0)

March $1,800 $30,000 $3,000 $1,200 ($3,000 - $1,800 = $1,200)

TM 10-8

COMPENSATING

• Shared reward

• Role-reward congruence

• Team-member input

• Peer evaluations

CROSS-FUNCTIONAL TEAMS

Factors Influencing Sales Force ExpensesTM 11-1

Communication

Expenses Gifts

Lodging

Meals

Office supplies

Transportation Entertainment

TM 11-2

Characteristics of a Sound Expense Plan

• No net gain or loss

• Equitable treatment

• No curtailment of beneficial activities

• Simple and economical

• Avoidance of disputes

• Company control of expenses and elimination of padding

Salesperson Expense Options

Method Reimbursement Advantages Disadvantages

Salespeople pay None Simple, no costs Reps may not spend

Unlimited All legitimate Flexible and fair, Encourages excessive

TM 11-3

their own expenses enough on customers

payment plan business expenses allows for territory spendingdifferences

Limited Specific amounts Limited and predictable Inflexible payment plan allowed expenses

Possibility for$80/day - lodging switching expenses

$45/day - food between categories $0.26/mile - transportation

Sales may resent

Flat allowance $700 per week Limited and predictable Inflexible expenses

Sales may resent

e.g.

TM 11-4

Factors Influencing Automobile Ownership Decision: Company Owned, Company Leased, or Salesperson Owned

Maintenance Special design

Size of sales force

Operating

Control

Mileage

Investment

Administrative problems

Personal preference

TM 11-5

Automobile Allowance Plans

Method Example

Flat amount $400 /month

Fixed mileage rate $.28/mile

Graduate mileage rate $.25/mile, first 15,000 miles$.15/mile, second 15,000 miles

Combination flat and $200/month + $.16/mile mileage rate

TM 11-6

Other Methods of Expense Control

• Training and enforcement

• Credit cards

• Expense bank account

• Change in nature of entertainment

• Telemarketing

• Careful travel planning

TM 12-1 (Fig. 12-1)

Leadership Effectiveness

Personal characteristics

Managerial skills

Leadership

effectiveness

Managerial behaviors

S I T U A T I O N

SupportingCoachingMentoringTeam buildingRepresenting

Persuading Recognizing Rewarding Conflict management

PlanningProblem solvingInformingDelegatingClarifyingMonitoring

TM 12-2 (Fig. 12-2)

Leadership Behaviors and Styles

RELATIONSHIP-ORIENTED TASK-ORIENTED

TM 12-3 (Fig. 12-3)Basic Leadership Styles

low task and

high relationship

high task and

high relationship

low task and

low relationship

high task and

low relationship

High

Hig

h

Low

Lo

wR

elat

ion

ship

beh

avio

r

Task behavior

Charismatic Leadership

Words and actions which transform the basic values, beliefs, and attitudes of employees in such a way that they are willing to perform beyond the standards levels expected by the organization.

• Articulate a vision

• Challenge the status quo

• Provide a role model

TM 12-4

TM 12-5Reasons for Supervision

Reasons for Supervision

Training

Improved morale

Better performance

Sales assistance

Enforcement

Amount of Supervision Needed

Optimal

Amount of Supervision HighLow

High

Low

Per

form

ance

Under Over

TM 12-6

Personal characteristics

CorporateCulture

Organizationaland workclimate

Individualperceptionsand beliefs

Satisfaction withThe job/individual

morale

Effectsof

morale

Sales force morale

SOCIAL INTERACTION

Factors Shaping Sales Force Morale

(Fig. 13-1)

Dimensions of Job Satisfaction (Fig. 13-2)

Co-workers

Companyand

management

PerformanceNature of

the job Pay

Promotions

Recognitionand status

Securityand benefits

SupervisionWorking

conditions

Dimensionsofjob

satisfaction

Effects of Sales Force MoraleTM 13-3

Low Morale High Morale

Excessive turnover Organizational commitment

Unsatisfactory performance Citizenship behavior

Increased expenses Improved performance

Increased complaint behavior

Development of outside interest

Disloyalty

Unionization

Morale Building Process TM 13-4

Integrate interests: match the

person with the job

Foster open and frequent communica-tion

Develop a strong corporate culture and

a supportive organizational

climate

Sales Forecasting Methods TM 14-1

Forecasting Advantages Disadvantages Best UsedExecutive opinion Quick, easy, and simple Subjective For new products

Lacks analytical rigor

Sales force composite Relatively simple Sales people are sometimes When reps are of a overly optimistic high caliber

Usually fairly accurate Sales people may sandbag When each rep has a

Involves those people who (estimate low) in order to small number of are responsible for the results look better customers

Time consuming

Survey of buyers Forecast is done by those who Time consuming For new products intentions will buy the product, so

accuracy is good Cost When there are a small number of customers

Customer may not be cooperative

Trend projections: moving Objective and inexpensive No consideration for major For established products average exponential product or market changes regression analysis Use smoothing historical data When market factors are

Require some statistical predictableanalysis For aggregate company

forecasts

Analysis of market factors Objective Unforeseen changes When market factors are stable and predictable

Fairly accurate Fairly simple

Test markets Very accurate Time consuming For new products which do not require large

Cost investments

TM 14-2 (Fig. 14-8)Sales Forecast Trend Projection Using Least Squares Method

Time Period Sales ($millions)

Year (x) (y)1996 1 7.2

1997 2 9.6

1998 3 12.8

1999 4 16.3

2000 5 21.9

2001 6 26.0

2002 7 27.9

2003 8 30.0

2004 9 32.1

2005 10 33.3 N = 10 x = 55 y = 217.1

x = 5.5 y = 21.7 (x) 2 = 3025 xy = 1452.7

b = N x y - x y

N(x2 ) - (x)2 = 10(1452.7) - (55)(217.1)

=10(385) - 3025

a = y - bx 21.7 - 3.13(5.5) 4.48

y = a + bx 4.48 + 3.13(x) =

= =

=

Forecast for 2006 (10-yr base) would be 4.48 + 3.13(11) = $38.9 million

Forecast for 2006 (4-year base) would be $35.4 million (calculation not shown)

_ _

3.13

Forecasted Sales

TM 14-3 (Fig. 14-7)

Projection of Sales Trend by Least Squares Method

40

35

30

25

20

15

10

5

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

• •

•

•

•

•

Y

2006 forecast 10-year base

2006 forecast 4-year base

•

•

•

•

• •

Market Factor Forecast: Dryever Diapers TM 14-4

Next Year Second Year

Projected population, ages 0-18 months 4,850,000 4,800,000 Percentage using diapers 100 100Number using diapers 4,850,000 4,800,000Average daily diapers per child 2.55 2.55Diapers daily, ages 0-18 months 12,367,500 12,240,000

Projected population, ages 19-30 months 3,300,000 3,200,000Percentage using diapers 80 80Number using diapers 2,640,000 2,560,000Average daily diapers per child 2.19 2.19Diapers daily, ages 19-30 months 5,781,600 5,606,400

Projected population, ages 31-42 months 3,500,000 3,300,000Percentage using diapers 40 40Number using diapers 1,400,000 1,320,000Average daily diapers per child 1.10 1.10Diapers daily, ages 31-42 months 1,540,000 1,452,000

Total daily diapers, all ages 19,689,100 19,298,400Percentage disposable diapers 95 95Number disposables daily 18,704,645 18,298,400Dryever market share percentage 20 20Expected daily sales (units) 3,740,929 3,666,696Wholesale price per diaper 0.07 0.07Annual sales forecast in dollars 95,580,736 93,684,083

Procedure for Designing Sales Territories TM 15-1 (Fig. 15-1)

Select a Control Unit

Determine Location and Potential of

Customers

Determine Basic

Territories

Assign Salespeople to

Territories

Set Up Territorial Coverage

Plans

Evaluate Effectiveness

of Design

Territory Size and Workload Factors TM 15-2

Workload Factor Territory Size Increase/Decrease

Nature of Job:Lots of presale and post-sale activity Decreases

Nature of product:A frequently purchased product DecreasesA limited repeat-sale Increases

Market development stage:New market--fewer accounts IncreasesEstablished market--more accounts Decreases

Market coverageSelective coverage IncreasesExtensive coverage Decreases

Competition:Intensive Decreases

(unless market is oversaturated:

Limited Increases

Buildup Method of Territorial Design TM 15-3 (Fig. 15-3)

Management must determine:

Desirable call patterns:Call frequency per account per year

Total calls needed in each control group

Workload capacity:Total calls possible per rep per year = number of daily calls x days selling

Tentatively set territorial boundary lines by combining control units until total calls needed = total calls possible

Modify territories as needed

Territory Design: Build-Up Method Worksheet TM 15-4

Control Units

Illinois Iowa Kentucky

Customer Call Calls Calls Calls

class frequency Accounts per year Accounts per year Accounts per year

A 2 per month 10 240 7 168 5 120

B 1 per month 30 360 17 204 10 120

C 1 every 2 months 68 408 55 330 27 162

108 1,008 79 702 34 402

Distribution of one rep’s calls 1,008 + 491 or 402

year (1,500)*

Possible control combinations 100% 70% or 100% Illinois Iowa Kentucky

Alternative territories 100% Illinois + 100% Kentucky 100% Illinois + 70% Iowa

*6 calls/day x 5 = 30 calls/week x 50 = 1,500 calls/year

Breakdown Method of Territorial DesignTM 15-5

(Fig. 15-5)

Management must determine

Company sales potential

Sales potential in each control unit

Sales volume expected from each sales person

Tentatively set territorial boundary lines by combining control units total sales potential = total sales volume expected

Modify territories as needed

Territory Design: Break-Down Method Worksheet

TM 15-6

Company sales potential = $200,000,000

Targeted volume rep = $ 10,000,000

Number of reps needed Company sales potential $200,000,000 Targeted volume/rep $ 10,000,000

Territory volume as Targeted volume/rep $ 10,000,000 Company sales potential $200,000,000

Each territory should comprise 5% of sales potential or $10,000,000

Combine adjacent control units until each sales potential of $10,000,000

= = = 20

5% == =

Functions of Budgeting

TM 16-1

Sales budget

Planning of performance

Coordination of performance

Evaluation of performance

Sales Rep Joe Joe Joe Gus Gus PRODUCTS Customer A. Customer B1 TOTAL Customer A Customer B

Skis: Ski $45 1 400 1 140 2 540 1 360 1 120 Ski $60 390 260 650 240 210 Ski $80 210 420 630 190 290 Total skis 2 000 1 820 3 820 1 790 1 620 Ski Accessories Ski Poles $100 400 600 1 000 300 400 Ski Poles $200 300 400 700 200 300 Boots $30 80 180 260 10 40 Boots $50 50 140 190 20 50 Boots $70 30 100 130 20 70 Laces 1 200 3 200 4 400 1 750 2 000 Bindings 250 300 550 200 270 Safety Straps 300 900 1 200 100 500 Wax 4 800 7 500 12 300 4 600 5 600 Mittens $3 1 200 2 400 3 600 800 1 400 Mittens $5 1 400 1 800 3 200 900 1 000 Goggles $1 1 500 2 800 4 300 750 1 500 Ski Pants: Pants $10Men's 1 100 800 1 900 800 600 Pants $10Women's 1 400 1 500 2 900 950 800 Pants $20 Men's 900 1 100 2 000 610 750 Pants $20 Women's 1 500 1 100 2 600 800 970 Total Pants 4 900 4 500 9 400 3 160 3 120 Parkas: Parkas $8 2 500 1 700 4 200 1 800 1 200 Parkas $15 3 200 2 200 5 400 900 1 000 Total Parkas 5 700 3 900 9 600 2 700 2 200

Sales Budget, 1998 Colorado Ski CompanyTM 16-2a

Sales Budget, 1998 Colorado Ski Company TM 16-2b

Joe Paula Paula Paula Totals Totals DollarsTotal Customer

A.Customer

B TOTALCustomer A Customer B Total

Volume

480 1 290 1 080 2 370 4 050 3 340 7 390 339 940450 260 140 400 890 610 1 500 90 000480 220 180 400 620 890 1 510 121 200

3 410 1 770 1 400 3 170 5 560 4 840 10 400 551 400

700 150 250 400 850 1 250 2 100 816 800

500 100 200 300 600 900 1 500 15 000 50 20 30 50 110 250 360 10 800 70 20 50 70 90 240 330 16 500 90 20 50 70 70 220 290 20 300

3 750 800 1 200 2 000 3 750 6 400 10 150 6 280470 75 110 185 525 680 1 205 19 280600 50 300 350 450 1 700 2 150 1 400

10 200 3 000 3 700 6 700 12 400 16 800 29 200 29 880 2 200 700 1 300 2 000 2 700 5 100 7 800 23 400 1 200 600 800 1 400 2 900 3 600 6 500 32 500 2 250 650 1 500 2 150 2 900 5 800 8 700 34 800

226 940

1 400 500 400 900 21 400 1 800 4 200 84 000 1 750 700 600 1 300 3 050 2 900 5 950 119 000 1 360 450 500 950 1 960 2 350 4 310 172 400 1 770 540 600 1 140 2 840 2 670 5 510 220 400 6 280 2 190 2 100 4 290 10 250 9 720 19 970 595 800

3 000 1 200 800 2 000 5 500 3 700 9 200 147 200 3 750 1 600 1 000 2 600 7 100 4 650 11 750 352 500 6 750 2 800 1 800 4 600 12 800 8 350 20 950 499 700

1 873 580TOTAL DOLLAR VOLUME

Flow of Information from Sales Budget to Other BudgetsTM 16-3 (Fig.

16-1)

Sales budget

Sales department expense budgets (advertising, selling costs, administration)

Administrative expense budgets

Production department budgets

Revenues Revenues

Expenses Expenses

Profit and loss budget

Cash budget

Purposes of Sales Quotas TM 16-4 (Fig. 16-2)

Indicate strong/weak

spots in selling structure

Evaluate sales

contest results

Control selling

expenses

Improve compensation

plan effectiveness

Control sales force activities

Evaluate sales force productivity

Sales quotas

are used ...

Furnish sales force goals/ incentives

Examples of Various Quota Bases TM 16-5

Quota Base Quota Actual Percent of Quota Attained

Sales volume, product line A $200,000 $200,000 110

Gross margin, product line B 30,000 25,000 83

Productdemonstrations 120 135 117

Orders from new accounts 15 17 113

Expense quota 50,000 45,000 -10 or 110

Combination of all the above using equal weights 106.6

For the expense based quota, the objective is to come in below quota rather than above, or 10% below quota can be interpreted as attaining 110% of the goal.

Territory volume

District sales volume

Total gross margin Total sales volume

District gross margin

Territory gross margin

By customer group By product By customer group By product

Bases for Analyzing Sales Volume and ProfitTM 17-1

Income and Expense Statement, by Sales Region, Colorado Ski Company, 1998 ($000).

TM 18-1 (Fig. 18-5)

Mid-Total Eastern western Western

Net sales $27,000 $9,000 $4,500 $13,500 Less cost of goods sold 18,900 6,300 3,150 9,450 Gross margin 8,100 2,700 1,350 4,050 Less operating expenses:

Personal selling 3,847 1,070 802 1,975 Advertising 1,220 420 220 580 Warehouse/shipping 480 190 125 165Order processing 240 79 56 105Administration 513 171 171 171

Total operating expenses 6,300 1,930 1,374 2,996

Net profit (loss) $1,800 $ 770 ($ 24) $ 1,054

Net profit (loss) as percentage of sales 6.7% 8.6% (0.53%) 7.8%

Income and Expense Statement, by Sales Region, Colorado Ski Company, 1998 ($000), using contribution-margin approach

TM 18-2

Mid- Total Eastern western Western

Net sales $27,000 $9,000 $4,500 $13,500 Less cost of goods sold 18,900 6,300 3,150 9,450 Gross margin 8,100 2,700 1,350 4,050 Less direct operating expenses:

Personal selling 3,082 845 595 1,642 Advertising 732 254 127 351Warehouse/shipping 160 64 42 54Order processing 130 43 30 57

Total direct operating expenses 4,104 1,206 794 2,104 Contribution margin $ 3,996 $1,494 $ 556 $1,946 Less indirect operating expenses:

Personal selling 765Advertising 488Warehouse/shipping 320Order processing 110Administration 513

Total indirect expenses $ 2,196 Net profit (loss) $ 1,800

Educate customers who buy from several different suppliers. Stress theadvantages of purchasing from one supplier.

For customers who purchase large total quantities in frequent small orders, stressthe advantages of ordering once a month instead of once a week. Point out that thebuyer eliminates all handling, billing, and accounting expenses connected withthree of the four orders. Note further that the buyer writes only one check and onepurchase order. In addition, stress that there will be only one bill to process andone shipment to put into inventory instead of three or four.

Educate the sales force as well as customers. In fact, it may be necessary tochange the compensation plan to discourage acceptance of smaller orders.

Substitute direct mail or telephone selling for sales calls or unprofitable or small-order accounts; or continue to call on these accounts, but less frequently.

Shift an account to a wholesaler or some other type of middleman rather thandealing directly, even by mail or telephone.

Drop a mass-distribution policy and adopt a selective one. This new policy mayactually increase sales because sales reps can spend more time with profitableaccounts.

Establish a minimum-order size.

Establish a minimum charge or a service charge to combat small orders.

Ways to Increase Order Size and Reduce Small Order Marketing Costs TM 18-3 (Fig. 18-8)

Return on Assets Managed (ROAM) TM 18-4

Sales $ 10,000,000 Cost of goods sold 7,000,000 Gross margin 3,000,000 Salaries 150,000Commission 850,000 Travel 150,000 District office expense 400,000

Total direct expenses 150,000 Contribution margin $ 1,450,000

Accounts receivable 2,200,000 Inventories 2,000,000

Total assets $ 4,200,000

Contribution margin Sales volume

1,450,000 10,000,000

Asset turnover = = Sales volume Accounts

receivable + Inventories

Profit on sales % = = x 100

$10,000,000 $ 4,200,000

= 14.5%

= 2.38 ROAM = Profit on sales % x Asset turnover

1,450,000 10,000,000

= x 10,000,000 4,200,000

= 14.5% x 2.38 = 34.5%

Procedures for Evaluating Sales PeopleTM 19-1 (Fig. 19-1)

1. Establish basic policies

2. Select evaluation bases

3. Set performance standards

4. Compare performances to standards

5. Discuss results with sales people

Output Factors Used as Evaluation BasesTM 19-2 (Fig. 19-2)

• Sales volume

• Sales volume as a percentage of:

• Orders

In dollars and in unitsBy products and customers (or customer groups)By mail, telephone, and personal sales calls

QuotaMarket potential (that is market share)

Number of orders Average size (dollar volume) of order Batting average of canceled orders

• Accounts

• Gross margin by product line, customer group, and order size

Percentage of accounts sold Number of new accountsNumber of lost accounts

Number of accounts with overdue payment

Input Factors Used as Evaluation Bases TM 19-3 (Fig. 19-3)

• Calls per day (call rate)

• Days worked

• Direct selling expense

• As percentage of sales volume As percentage of quota

• Nonselling activities

Advertising displays set up Letters written to prospects Telephone calls made to prospectsNumber of meetings held with dealers and/or distributors Number of service calls madeCollections made Number of customer complaints received

Evaluation Bases TM 19-4

Base OUTPUT INPUT Historical Goal Share Others Source

To Target/ Market To

Possible Bases of Comparisons

Sales volume * * * * * Company records

Gross margin * * * * Company records

Orders * * * * Company records

Calls/day * * * * Sales force call reports

Days worked * * * * Sales force call reports

Selling time * * * * Sales force call reports

Selling expense * * Company records

Activities * * Sales force call reports

Knowledge * * Sales manager

Sales presentation * * Sales manager

skills

Resourcefulness * * Sales manager

Customer relations * * Sales manager/customer

Attitude * * Sales manager/customer

Basic Performance Equations

TM 19-5

Sales = Days worked x x x

Sales = Days worked x Call rate x Batting average x Average order

Example:

Sales = 250 x 4 x .5 x 1000

Sales = 1000 x .5 x 1000

Sales = $50,000

Calls

Days worked

Orders

Call

Sales

Orders

Illegal Sales Practices

TM 20-1

• Granting price concessions that are not justified or that

• Making false claims about your product and the services

• Representing a product to be new when it is rebuilt or

• Misleading customers into thinking they are getting a

• Bribing customers’ employees in order to acquire or hold

• Using bribery or espionage to learn a competitor’s trade

are not necessary to meet competition

that accompany your product

second-hand

bargain when this is not the case

an account

secrets