Sales Management KNEC notes

SALES MANAGEMENT

INTRODUCTION

This module unit is intended to equip the trainee with knowledge, skills and attitudes that will enable him/her to apply sales management skills in sales and marketing activities.

General Objectives

By the end of this module the trainee should be able to:

  1. Appreciate the importance of sales management in an organization
  2. Understand the duties and responsibilities of a sales manager
  3. Appreciate the purpose of sales forecasting, planning and sales targeting
  4. Understand the process of recruitment and selection of sales force
  5. Appreciate the importance of training and motivating the sales force
  6. Understand the organization structure of a sales department
  7. Appreciate the importance of setting standards of performance for sales force
  8. Appreciate the purpose of budgeting

 

COURSE UNIT SUMMARY AND TIME ALLOCATION

TOPIC SUB-TOPIC THEORY PRACTICAL TOTAL HOURS
1.INTRODUCTION TO SALES MANAGEMENT Meaning of sales management

Nature and role of sales management

Importance of sales management to an organization

Relationship between sales management and marketing management

15   15
2.SALES MANAGEMENT FUNCTION Sales  management functions

Duties and responsibilities of sale managers

Sale manager’s to marketing department

15 10 25
3.SALES FORECASTING AND PLANNING

 

Definition sales forecasting and planning

Purpose of sales forecasting and planning

Techniques of sales forecasting and planning

Process of sales target setting

15 10 25
4.RECRUITMENT AND SELECTION OF SALES FORCE

 

Job description and job specification

Recruitment of the sales force Sources of sale candidates

Process of interviewing and selecting the sales force

15 10 25
5.MOTIVATION AND TRAINING OF SALES FORCE

 

Building a sales force team

Motivation of sale force

Management of sales force

Methods of training sales force

15 10 25
6.SALES ORGANIZATION Organization structure of sales department

Determination of a sales force size

Establishment of sales territories

 

5 5 10
7.BUDGETING AND EVALUATION Purpose of budgeting

Budget determination

Purpose of evaluating sales force.

Setting performance standards.

 

 

10 5 15
8.EMERGING TRENDS IN SALES MANAGEMENT Emerging trends and issues in sales management

Challenges posed emerging and issues in sales management

Coping with challenges posed issues in sales management

 

5 5 10
TOTAL                                              150

 

TOPIC ONE

INTRODUCTION TO SALES MANAGEMENT

NATURE OF SALES MANAGEMENT

Originally, the term ‘sales management’ referred to the direction of sales force personnel. But, it has gained a significant position in the today’s world. Now, the sales management meant management of all marketing activities, including advertising, sales promotion, marketing research, physical distribution, pricing, and product merchandising.

The American marketers association (AMA’s) definition, takes into consideration a number of these viewpoints. Its definitions runs like: the planning, direction, and control of the personnel, selling activities of a business unit including recruiting, selecting, training, assigning, rating, supervising, paying, motivating, as all these tasks apply to the personnel sales-force. Further, it may be quoted: it is a socio-scientific process, involving’ group-effort’ in the pursuit of common goals or objectives, which are predetermined. Co-ordination is its key, though, no doubt, it is a system of authority, but the emphasis is on harmony and not conflict.

Sales-management differs from other fields of management, mainly in different aspects: the selling operation of a business firm does not exist in isolation. Thus, simultaneous with the changes taking place in the business, as well as marketing-orientation, a new concept of sales management has evolved. The business, is now society-oriented, on human-welfare aspects. So, sales-management has to work in a broader and newer environment, in co-existence with the traditional lines. The present emphasis is now on total development of human resources.

RELATIONSHIP BETWEEN SALES MANAGEMENT AND MARKETING MANAGEMENT

Sales and marketing always have had a close relationship, so close that many people have confused the two being the same.

  1. Marketing is a method of bringing customers to a business as well as making others aware of the business product and brand. Sales is selling the product the company offers.it can be achieved through phone, interaction as well as web page.
  2. Marketing sells the idea of product and services to everyone whereas sales sells the actual product one on one through personal interaction.
  3. Marketing generates interest but sales brings in money.
  4. Marketing does everything it can to reach and persuade prospective buyers while sales does everything it can to close the sale and get assigned an agreement/contract.
  5. Marketing responsibility is selling the idea while selling has a responsibility of selling the product and can be achieved through sales making.
  6. Selling is only a part of firm marketing activities and refers to personal communication of information to persuade a prospective buyer to buy something.
  7. Marketing refers to the process of planning, exchanging, the process, concept/idea, pricing, promotion and distribution of goods and services and ideas to satisfy companies or individuals. Sales excludes all this.
  8. Marketing has led to the emergence of marketing concepts (philosophies that aim at satisfying customer needs) while selling has led to the emergence of selling concepts (a philosophy that encourage organizations to undertake a large scale selling promotion effect.
  9. Sales people usually sells to customers the products while the marketing meets the organization with customers. The major objectives of sales department is responsible for activities like promotion. Marketing ignores all this.

IMPORTANCE OF SALES MANAGEMENT TO AN ORGANIZATION

  • To enable the top-management, to devote to more time in policy making for the growth and expansion of business.

(ii) To divide and fix authority among the sub-ordinates so that they may shirk work.

(iii) To avoid repetition of duties and functions so that there may not be any confusion among them.

(iv) To locate responsibility of each and every employee so that they can complete the whole work in stipulated time; if not then the particular person must be responsible.

(v) To establish the sales-routine in the business unit.

(vi) To stimulate sales-effort.

(vii) To enforce proper supervision of sales-force.

(viii) To integrate the individual in the organization.

TOPIC TWO

SALES MANAGEMENT FUNCTION

A sales organization performs the following functions:

  • Analysis of markets thoroughly, including products and market research.
  • Adoption of sound and defensible sales-policy.
  • Accurate market or sales forecasting and planning the sales[1]campaign, based on relevant data or information supplied the marketing research staff.

(iv) Deciding about prices of the goods and services; terms of sales and pricing policies to be implemented in the potential and existing markets.

  • Labelling, Packaging and packing, for the consumer, who wants a container, which will satisfy his desire for attractive appearance; keeping qualities, utility, quantity, and correct price and many other factors in view.
  • Branding or naming the product(s) and/or services to differentiate them from the competitors and to recognise easily the customer.
  • Deciding the channels of distribution for easy accessibility and timely delivery of the products and services.
  • Selection, training and control of salesmen, and fixing their remuneration to run the business operations efficiently and effectively.
  • Allocation of territory, and quota setting for effective Selling and to fix the responsibility to the concern person.
  • Sales-programmes and sales-promotion-activities prepared so that every sales activity may be completed in a planned manner
  • Arranging for advertising and publicity to inform the customer about the new products and services and their multiple uses.
  • Order-preparation and office-recording to know the profitability of the business and to evaluate the performance of the employees.
  • Preparation of customer s record-card to the customer loyalty about the products.
  • Scrutiny and recording of reports to compare the other competitors and to compare with the past period.
  • Study of statistical-records and reports for comparative analyses in terms of sales, etc.
  • Maintenance of salesman’s records to know their efficiency and to develop them.

DUTIES AND RESPONSIBILITIES OF SALE MANAGERS

  1. Environmental analysis and marketing research-this usually involves monitoring and adapting to external factors that affect success or failure such as the economy and competition and  collecting data to resolve specific marketing issues.
  2. Broadening an organizations/individuals scope-this involves deciding on the emphasis to place as well as the approach to take on societal issues and international marketing.
  3. Consumer analysis-this involves examining and evaluating consumer characteristic needs and purchase processes; and selecting the group(s) of consumers at which to aim marketing efforts.
  4. Product planning-this includes goods,services,organisations,people,places,and ideas-developing and maintaining products, product assortments(a set o all products and items that a particular seller offers for sale to buyers),product images,brands,packaging and optional features and deleting faltering products.
  5. Distribution planning-this involves forming relations with distribution intermediaries, physical distribution, inventory management, warehousing, transportation, the allocation of goods and services, wholesaling and retailing.
  6. Promotion planning-this involves communicating with customers, the general public and others through some form of advertising, public relations, personal selling and or sales promotion.
  7. Price planning-this involves determining price level and ranges, pricing techniques, terms of purchase, price adjustments and the use of price as an active or passive factor.
  8. Marketing management-this involve planning,implementing,and controlling the marketing program(strategy) and individual marketing functions; appraising the risks and benefits in decision making; and focusing on total quality.

 

DUTIES AND RESPONSIBILITIES OF SALES MANAGER

  1. Knowledge of: firm’s long and short-run goals and objectives, production process, consumer behavior, competitors
  2. Functional skills: market forecast, design of sales organization, recruiting and selecting salesperson, training, budgeting, compensation, territory and quota design, sales analysis, developing sales approach, customer service, order processing, credit and collection, promotion
  3. Administrative ability: planning, organizing, coordination, motivating, evaluation and control, communication
  4. Leadership ability

 

TOPIC THREE.

SALES FORECASTING AND PLANNING

SALES FORECASTING AND PLANNING

Sales Forecasting

Sales forecasting is the prediction of future performance based on available information about past performance.

This forecast is done for a particular period of a time in the near future, usually the next fiscal year. Sales forecasting is easier for established companies that have been operating for a few years than for newer companies. Businesses that use sales forecasting tend to perform better than those that don’t.

Sales planning and forecasting are extremely important processes for any company, because they form the basis for allocating resources.

Importance of Sales Forecasting

Sales Planning

When your sales reps make their forecasts, they are also planning their future activities, providing each of them with a business plan for managing their territory. Assuming that each of them has a proportion to fill, forecasting is the tool that helps them identify the customers to meet their objectives.

 

Demand Forecasting

The sales forecast is the best tool to get a good estimate of the demand for the products you sell. The sales team is the front line for your business and best positioned to gather information about expected demand.

 

Higher OTIF Delivery

With accurate sales forecasting, you can achieve a higher rate of on time in full, or OTIF, delivery. The information from sales forecasts guarantees that sufficient product will be manufactured or ordered to service customers on a timely basis, resulting in happier customers and fewer complaints.

Inventory Controls

The more accurate the sales forecast, the better prepared your company will be to manage its inventory. This is avoiding both overstock and stock-out situations. Stable inventory also means better management of your production.

Supply Chain Management

When you can predict demand and manage production more efficiently, you also have better control over your supply chain. This affords you the opportunities to manage resources and take full advantage of just-it-time ordering.

Financial Planning

Anticipating sales gives you the information you need to predict revenue and profit. Having good forecasting information at your disposal also gives you the ability to explore possibilities to increase both revenue and net income.

Internal Controls

Having an idea on the projected production rates for your business makes it possible for you to have better control of your internal operations. By anticipating future sales you can make decisions about hiring – permanent or temporary – marketing and expansion.

Continuous Improvement

Continuous improvement is a goal of many if not most businesses. By forecasting sales and continually revising the process to improve the accuracy, you can improve all aspects of your business performance.

Price Stability

With solid forecasting, the good levels of inventories that you maintain will prevent the need for panic sales to rid your business of excess merchandise. Sales may be managed on a thoughtful planned basis.

Marketing

Sales forecasting gives marketing an advanced look at future sales and offers the opportunity to schedule promotions if it appears sales will be weak. In extreme cases, sales forecasts may lead to discontinuing slow-moving products.

Cash Flow

Knowing whether your revenues are likely to grow or shrink in coming months keeps you from spending at a time when you should be conserving cash to survive a recession. It also allows you to take advantage of special deals or expansion opportunities that come along, knowing you will have enough cash to support your business.

 

Planning

Having a good idea of future revenues and where they will be generated in your business allows you to plan the best way to take advantage of future changes in the economy. Uncertainty is a roadblock to besting your competition expanding at just the right moment. Detailed and deep research into the economy, customer buying trends, new products and your company’s past revenue production experience creates a reliable sales forecast that provides a strong basis for your future planning.

 

Cost of Sales

Cost of sales refers to how much you are spending on products or components for each sale you make. This is really the core of sales forecasting. By predicting sales patterns, you can more accurately plan for what products or components you need. You definitely don’t want to miss an opportunity running out of materials during a busy season and having to scramble or pay extra to order what you need. On the other hand, you don’t want to overstock and have products go bad or have to recoup your expenses over a long, drawn-out period. Sales forecasting allows you to make informed decisions about what you need, how much you need and when you need it.

 

Staffing

Sales forecasting helps you manage your staffing needs, keep scheduling in order and maintain an open and respectful dialogue with your employees. This allows you to be more organized and minimize time spent on scheduling. it also improves your relationship with your staff: You can allow for the scheduling needs of your employees and be able to give ample notice when you expect to cut or expand employee hours.

 

Strategic Advertising

Detailed sales forecasting should help you develop the strategy and character of your advertising. A sales forecast will show you how much revenue you can expect and what kind of money is available for your advertising budget. It helps you track and predict the behavior of consumers, which is the basis for successful advertising. This information can help you break into new customer bases, address unmet consumer needs and abandon or scale down trends that are on the wane.

 

Classification of forecasting

Short-term forecasts are usually made for tactical reasons that include production planning and control, short-term cash requirements and adjustments that need to be made for seasonal sales fluctuations. Such forecasts are for periods of less than one year, with a normal range between one and three months.

 

Medium-term forecasts are made for minor strategic decisions in connection with the operation of the business. They are important in the area of business budgeting for the operating budget, and it is from this forecast that company budgets are built up. Incorrect forecasting can have serious implications for the rest of the organization, for if it turns out to be over-optimistic, the organization will be left with unsold stock and will have overspent on production. This forecast is used for such matters as the staffing levels that are required to achieve expected sales, the amount of money to be spent on sales effort, and short-term capital requirements for such items as machines to be purchased to meet increased production. The time period for a medium-term forecast is normally one year.

 

Long-term forecasts are for major strategic decisions to be taken within an organization, and they very much relate to resource implications. They deal with general rather than specific items, and rely more heavily in their computation upon such factors as government policy, social change and technological change. They are, therefore, concerned more with general trends, and in the light of these trends, attempt to predict sales over periods greater than two years. In some strategic, heavily capitalized industries, predictions might be needed for a decade or more. The problem is that for these lengths of time the forecast cannot be more than vague, and planners in retrospect blame the forecast when things go wrong and forecasting thus receives criticism.

Factors to consider in Sales Forecasting

Historical Perspective – As a starting point, management analyzes previous sales experience product lines, territories, classes of customers, and other relevant details. Management needs to consider a time line long enough to detect trends and patterns in the growth and the decline of dollar sales volume. This period is generally five to ten years. If the company’s experience with a particular product class is shorter, management will include visible experience of like companies.

 

Business Competence – The ability of a company to respond to the results of a sales forecast depends on its production capacity, marketing methods, financing, and leadership, and its ability to change each of these to maximize its profit potential.

Market Position –  Forecasting also considers the competitive position of the company with respect to its market share; research and development; quality of service, pricing and financing policies; and public image. In addition, forecasters also evaluate the quality and quantity of the customer base to determine brand loyalty, response to promotional efforts, economic viability, and credit worthiness.

General Economic Conditions – Although consumer markets are often characterized as being increasingly susceptible to segmentation in recent years, the condition of the overall economy is still a primary determinant of general sales volume, even in many niche markets. Forecasters incorporate relevant data that correlate well or demonstrate a causal relationship with sales volume.

Price Index – If the prices for products have changed over the years, changes in dollar volume of sales may not correlate well with volume of units. At one point in time when demand is strong, a company raises its prices. At another time, a company may engage in discounting to draw down inventories. Therefore, accountants devise a price index for each year which compensates for price increases. By dividing the dollar volume the price indexes, a company can track its “true” volume growth. This process is similar to an inflation index, which provides prices in constant dollars. As a result, management is able to compare the price-adjusted dollar sales volumes.

Intra-Company Trends – By analyzing month-to-month trends and seasonal variations over both the long and short terms, small business owners and managers can adjust the sales forecast to anticipate variations that historically repeat themselves during budget periods. Management may then construct a budget reflecting these variations, perhaps increasing volume discounts during traditionally slow periods, exploring new territories, or having sales representatives solicit product and service ideas from current customers.

Product Trends – Forecasters also trend individual products, using indexes to adjust for seasonal fluctuations and price changes. Product trends are important for understanding the life cycle of a product.

 

 

TECHNIQUES OF FORECASTING

There are two basic techniques:

Objective / Quantitative methods: – these are of a mathematical or statistical nature;

Subjective / Qualitative methods: – Are based on experience, judgment and intuition rather than on quantitative analysis.

 

Techniques of Forecasting

Qualitative forecasting techniques are sometimes referred to as judgmental or subjective techniques because they rely more on opinion and less on mathematics in their formulation. They are often used in conjunction with the quantitative techniques.

Consumer/user survey method

This method involves asking customers about their likely purchases for the forecast period, sometimes referred to as the market research method. For industrial products, where there are fewer customers, such research is often carried out the sales force on a face-to-face basis. The only problem is that then you have to ascertain what proportion of their likely purchases will accrue to your company. Another problem is that customers (and salespeople) tend to be optimistic when making predictions for the future.

For consumer products it is not possible to canvass customers through the sales force.

The best method is to interview customers through a market research survey.

This method is of most value when there are a small number of users who are prepared to state their intentions with a reasonable degree of accuracy. It is also a useful vehicle for collecting information of a technological nature which can be fed to one’s own research and development function.

 

Panels of executive opinion

This is sometimes called the judges (jury) methods, where specialists or experts are consulted who have knowledge of the industry being examined. Such people can come from inside/ outside the company and include marketing or financial personnel or, people who have a detailed knowledge of the industry. Sometimes external people can include customers who are in a position to advice from a buying company’s viewpoint. The panel thus normally comprises a mixture of internal and external personnel.

These experts come with a prepared forecast and must defend their stance in committee among the other experts. Their individual stances may be altered following such discussions. In the end, if disagreement results, mathematical aggregation may be necessary to arrive at a compromise.

 

Sales force composite

This method involves each salesperson making a product-by-product forecast for their particular sales territory. Thus individual forecasts are built up to produce a company forecast; this is sometimes termed a ‘grass-roots’ approach. Each salesperson’s forecast must be agreed with the manager and divisional manager where appropriate, and eventually the sales manager agrees the final composite forecast.

Where remuneration is linked to projected sales (through quotas or targets) there can be less cause for complaint because the forecast upon which remuneration is based has been produced the sales force itself.

The immediate problem with the sales force composite method of forecasting is that when the forecast is used for future remuneration (through the establishment of sales quotas or targets) there might be a tendency for salespeople to produce a pessimistic forecast. This can be alleviated linking selling expenses to the forecast as well as future remuneration.

When remuneration is not linked to the sales forecast there is a temptation to produce an optimistic forecast in view of what was said earlier about customers and salespeople tending to overestimate. The consequence of the above is that a forecast might be produced that is biased either pessimistically or optimistically.

 

Delphi method

This method bears a resemblance to the ‘panel of executive opinion’ method and the forecasting team is chosen using a similar set of criteria. The main difference is that members do not meet in committee.

A project leader administers a questionnaire to each member of the team which asks questions, usually of a behavioral nature.

The ultimate objective is to translate opinion into some form of forecast. After each round of questionnaires the aggregate response from each is circulated to members of the panel before they complete the questionnaire for the next round, so members are not completing their questionnaires in a void and can moderate their responses in the light of aggregate results.

The fact that members do not meet in committee means that they are not influenced majority opinion and a more objective forecast might result. However, as a vehicle for producing a territory-by-territory or product-by-product forecast it has limited value. It is of greater value in providing general data about industry trends and as a technological forecasting tool. It is also useful in providing information about new products or processes that the company intends to develop for ultimate manufacture and sale.

 

 

Product testing and test marketing

This technique is of value for new or modified products for which no previous sales figures exist and where it is difficult to estimate likely demand. It is therefore prudent to estimate likely demand for the product testing it on a sample of the market beforehand.

Product testing involves placing the pre-production model(s) with a sample of potential users beforehand and noting their reactions to the product over a period of time asking them to fill in a diary noting product deficiencies, how it worked, general reactions, etc. The type of products that can be tested in this manner can range from household durables, for example, vacuum cleaners, to canned foods such as soups.

Test marketing is perhaps of more value for forecasting purposes. It involves the limited launch of a product in a closely defined geographical test area, e.g. a test town such as Thika.

Thus a national launch is simulated in a small area representative of the country as a whole, obviously at less expense. It is of particular value for branded foodstuffs. Test market results can be grossed up to predict the national launch outcome.

Over time, the novelty factor of a new product might wear off. In addition, it gives competitors an advantage because they can observe the product being test marketed and any potential surprise advantage will be lost.

 

Quantitative Techniques                                    

Quantitative forecasting techniques are sometimes termed objective or mathematical techniques as they rely more upon mathematics and less upon judgments in their computation. These techniques are now very popular as a result of sophisticated computer packages, some being tailor-made for the company needing the forecast.

If the forecasting problem calls for specialist mathematical techniques then the answer is to consult a specialist.

Quantitative techniques can be divided into two types:

  1. Time series analysis

The only variable that the forecaster considers is time. These techniques are relatively simple to apply, but the danger is that too much emphasis might be placed upon past events to predict the future. The techniques are useful in predicting sales in markets that are relatively stable and not susceptible to sudden irrational changes in demand.

 

Moving averages

This method averages out and smooths data in a time series. The longer the time series, the greater will be the smoothing. The principle is that one subtracts the earliest sales figure and adds the latest sales figure.

Exponential smoothing

This is a technique that apportions varying weightings to different parts of the data from which the forecast is to be calculated. The problem with moving averages and straightforward trend projection is that it is unable to predict a downturn or upturn in the market.

 

  1. Causal techniques

It is assumed that there is a relationship between the measurable independent variable and the forecasted dependent variable. The forecast is produced putting the value of the independent variable into the calculation. One must choose a suitable independent variable and the period of the forecast to be produced must be considered carefully. The techniques are thus concerned with cause and effect.

 

  1. Leading indicators

This method seeks to define and establish a linear regression relationship between some measurable phenomenon and whatever is to be forecasted. It is not appropriate to enter into a discussion of the technique of linear regression within the confines of this text; should you wish to pursue the technique further, most reasonably advanced statistical texts will adequately describe the method and its applicability.

Example: The sale of children’s bicycles depends upon the child population, so a sensible leading indicator for a bicycle manufacturer would be birth statistics. The bicycle manufacturer

will therefore seek to establish a relationship between the two and, if the manufacturer is considering children’s first two-wheeler bicycles (say, at age three years old, on average) then births will precede first bicycles three years. In other words first bicycles will lag births three years.

  1. Simulation

This forecasting methodology has become possible with the widespread use of computers. Leading indicator forecasting establishes relationships between some measurable phenomenon and whatever is to be forecasted, while simulation uses a process of iteration, or trial and error, to arrive at the forecasting relationship. In a reasonably complicated forecasting problem the number of alternative possibilities and outcomes is vast. When probabilities of various outcomes are known, the technique is known as Monte Carlo simulation and depends upon a predetermined chance of a particular event occurring.

 

Bayesian decision theory

This technique is a mixture of subjective and objective techniques.  The technique is similar to critical path analysis in that it uses a network diagram and probabilities must be estimated for each event over the network.

 

TOPIC FOUR

RECRUITMENT AND SELECTION OF SALES FORCE

RECRUITMENT AND SELECTION

Objective

By the end of the topic, the learner should be able to:-

  • Learn the process of recruitment and various sources of it
  • Understand the steps involved in selection process.

 

INTRODUCTION

Recruitment is a positive process in which a company attracts a pool of talented people, whereas selection is a negative process through which they screen people and finally select desired number of personnel who are offered appointment. Attracting and selecting new sales personnel is an important aspect of the sales manager’s job.

Recruitment is the procedure to obtain a good number of people with the potential capability of becoming good sales personnel. After attracting a large number of people, it becomes feasible to select the individuals, which fit the needs of the organization. Appropriate recruiting and selection policies and procedures, and their skilful execution result in greater overall efficiency of sales department. Good selection fits the right person to the right job, thereincreasing job satisfaction and reducing the cost of personnel turnover. In addition training costs are reduced, either because those hired are more capable of absorbing training or because they require less formal training.

Recruitment is the process of generating a pool (group) of capable people to apply for employment to an organization.

Selection is the process of choosing the most suitable people out of the acceptable candidates who have applied for the job in the organization. (From both within as well as outside the organization)

Recruitment Process

To ensure the new recruits have the aptitude (ability) necessary to be successful in a particular type of sales job, certain procedures should be followed in the recruitment process. The steps in recruitment process are:

  1. Conducting a job analysis
  2. Preparing a job description
  3. Developing a set of job qualifications
  4. Attracting a pool of applicants

 

Conducting a job analysis – Prior to a company can seek for a particular type of salesperson, it must know something about the job to be filled. To aid in the process, a job analysis should be conducted to identify the duties, requirements, responsibilities, and conditions involved in the job. A good job analysis involves following steps:

Analyze the environment in which the salesperson is to work – E.g.

What is the nature of the competition faced the salesperson in this job?

What is the nature of the customers to be contacted, and what kinds of problems do they have?

What degree of knowledge, skill, and potential is needed for this particular position?

Determine the duties and responsibilities that are expected from the sales-person – In so doing, information should be obtained from (a) salespeople; (b) customers; (c) the sales manager; and (d) other marketing executives, including the advertising manager, marketing services manager, distribution manager, marketing research director, and credit manager.

Spend time making calls with several salespeople, observing and recording the various tasks of the job as they are actually performed – This should be done for a variety of different types of customers and over a representative period of time.

 

Preparing a job description – The result of a formal job analysis is a job description. Since a job description is used in recruiting, selecting, training, compensating and evaluating the sales force, the description should be in writing so that it can be referred to frequently. The written job description lets prospective job applicants, as well as current sales personnel, know exactly what the duties and responsibilities of the sales position are and on what basis the new employee will be evaluated.

The job description is probably the most important single tool used in managing the sales force. It is used not only in hiring but also in managing and sometimes as a basis for firing salespeople. It provides the sales trainer with a description of the salespeople’s duties and enables him or her to develop training programs that will help salespeople perform their duties better. Job descriptions are also used in developing compensation plans. Often, the type of job determines the type of compensation plan that will be used. Job descriptions aid managers in supervision and motivation, and they are used as an official document that is part of the contract between management and a salesperson’s union. Finally, a job description puts management in a position to determine whether each salesperson has a reasonable workload.

 

Developing a set of job qualifications – The duties and responsibilities set forth in the job description should be converted into a set of qualifications that a recruit should have in order to perform the sales job satisfactorily. Determining these qualifications is probably the most difficult aspect of the entire recruitment process. One reason is that the manager is dealing with human beings; therefore, a multitude of subjective and very complex characteristics are involved. Specific qualifications such as education and experience should be included in the job qualification, thus making good candidates easier to identify. But most firms also try to identify personality traits that presumably make better salespersons, such as self-confidence, aggressiveness, etc.

Job descriptions generally include:

  • General statement describing the concept and specific duties of the position
  • Classification title, position number, geographic location, division and work unit of the position, name and title of supervisor, and effective date of duties.
  • If supervisor position, list classifications supervised.
  • General statement describing the nature of the unit in context with the department/program
  • Description of the positions supervisory reporting relationship (this information can be found in the class specification, usually under the definition of the class)
  • Description of each range of supervision for “deep class” classifications
  • List of typical essential and marginal functions/duties, grouped in related categories
  • Duties broken down percentage of time spent on each task or group of similar tasks
  • Signature and date of employee and supervisor. You may want to include a disclaimer that the employee and supervisor acknowledge signing the duty statement that they have discussed the expectations of the position.

Attracting a pool of applicants – This is the last step in the recruitment process which involves attracting a pool of applicants for the sales position to be filled. Recruitment medium needs to ensure that there are a sufficient number of suitably qualified candidates from which to make a selection without being overwhelmed with large numbers of unsuitable applications. Using a recruitment agency to find a small number of suitable candidates, particularly for senior or specialized posts, may prove a significantly more cost-effective and efficient method than a major advertising campaign which generates a large response from unsuitable candidates. The choice of method will also be influenced the availability of candidates – i.e. is there likely to be a shortage or surplus of candidates?

 

Sources of Recruitment

There are many places a sales manager can go to find recruits. Sales managers should analyze each potential source to determine which ones will produce the best recruits for the sales position to be filled. Once good sources are identified, sales managers should maintain a continuing relationship with them, even during periods when no hiring is being done.

Types of Recruitment (Recruitment Sources)

  1. Internal Recruitment – is a recruitment which takes place within the concern or organization. Internal sources of recruitment are readily available to an organization.

These sources are;

  • Present Employees (Transfers, promotions)
  • Previous Applicants
  • Employee referrals – Referrals means, there are some people who are referred to you, that we have sending the bio-data of so and so, please see whether, you can fit him in into your organizations, so these are referrals.
  • Re-employment of ex-employees – Then former employees all right, those who may have left you for a better job, then found out that they made a mistake. Because, in fact your job was better than the job, he thought was better wants to come back, it is not very infrequent, in good organizations when people leave, younger people they leave, because they get a better salary offer from a smaller organization.

 

Advantages of recruitment from internal sources

  • Organization has more knowledge of the candidates strengths and weaknesses
  • Candidate already knows the organization
  • Employee morale and motivation is enhanced
  • Organizations return on investment in training and development is increased
  • Can generate a succession of promotions. Organization needs to hire only entry level candidates

Disadvantages of recruitment from internal sources

  • Employees may be promoted beyond their level of competence.
  • Employee infighting for promotions can affect morale.
  • Inbreeding can stifle creativity and innovation.
  • System can become bureaucratic.
  • Excellent training and development programs are necessary.

 

  1. External Recruitment – External sources of recruitment have to be solicited from outside the organization. It involves lot of time and money. These sources are
  • Employment at factory gate
  • Advertisements
  • Employment exchanges
  • Employment agencies,
  • Professional Associations
  • Educational institutes
  • Labor contractors
  • Recommendations
  • Raiding ( From Competitors)

 

  1. Employment at Factory Level – This a source of external recruitment in which the applications for vacancies are presented on bulletin boards outside the Factory or at the Gate. This kind of recruitment is applicable generally where factory workers are to be appointed. There are people who keep on soliciting jobs from one place to another. These applicants are called as unsolicited applicants. These types of workers apply on their own for their job. For this kind of recruitment workers have a tendency to shift from one factory to another.
  2. Advertisement – It is an external source which has got an important place in recruitment procedure. The biggest advantage of advertisement is that it covers a wide area of market and scattered applicants can get information from advertisements. Medium used is Newspapers and Television.
  3. Employment Exchanges – There are certain Employment exchanges which are run government. Most of the government undertakings and concerns employ people through such exchanges. Now-a-days recruitment in government agencies has become compulsory through employment exchange.
  4. Employment Agencies – There are certain professional organizations which look towards recruitment and employment of people, i.e. these private agencies run private individuals supply required manpower to needy concerns, e.g. DNA, Career point, Corporate staffing Services etc.
  5. Educational Institutions – There are certain professional Institutions which serve as an external source for recruiting fresh graduates from these institutes. This kind of recruitment done through such educational institutions is called as Campus Recruitment. They have special recruitment cells which help in providing jobs to fresh candidates, e.g. KPMG.
  6. Recommendations – There are certain people who have experience in a particular area. They enjoy goodwill and a stand in the company. There are certain vacancies which are filled recommendations of such people. The biggest drawback of this source is that the company has to rely totally on such people which can later on prove to be inefficient.
  7. Labor Contractors – These are the specialist people who supply manpower to the Factory or Manufacturing plants. Through these contractors, workers are appointed on contract basis, i.e. for a particular time period. Under conditions when these contractors leave the organization, such people who are appointed have to also leave the concern.
  8. Raiding (from Competitors) – This where an organization takes away people from the competitor, Citizen vs K24, K24 vs KTN, there both competing. So, the HR manager of each will try to lower people from competitor, because they are doing the same thing, they are the same knowledge base the employee, they do not require retraining, so in that sense it is cheaper, so raiding also is popular. Say Infosys and Wipro say look, let us have a gentlemen agreement that you will not take our people and we in turn will not take your people, so that also exist in industry. Now, how far each of these companies behaves in a gentlemanly fashion, who do not know, but sometimes they have that agreement.

 

Advantages of recruitment from External sources

  • Open process
  • The pool of talent is bigger
  • New insights skills and know-how can be introduced into the organization
  • It is often cheaper and easier to hire employees from outside the organization
  • Outside employees are not members of existing cliques.
  • Provides healthy competition

Disadvantages of recruitment from External sources

  • Attracting and selecting a new employee is more difficult
  • New employee adjustment and orientation takes longer
  • Morale may suffer among existing employees who have been passed over
  • An employee may be selected whose performance is below the standard required or whose personality does not match with the organization’s culture

Selection Process

The selection process involves choosing the candidates who best meet the qualifications and have the greatest aptitude for the job. There are numerous tools, techniques, and procedures that can be used in the selection process.

The Employee selection Process takes place in following order-

  1. Preliminary Interviews (screening interviews) – It is used to eliminate the undesirable recruits / candidates as soon as possible who do not meet the minimum eligibility criteria laid down the organization. The skills, academic and family background, competencies and interests of the candidate are examined during preliminary interview. Preliminary interviews are less formalized and planned than the final interviews. But no matter which tool is initially used, it should be brief. The shorter it is the ore it will cut down on costs. But it must not be so brief that it screens out good candidates. The candidates are given a brief up about the company and the job profile; and it is also examined how much the candidate knows about the company.
  2. Application blanks (Application forms) – The candidates who clear the preliminary interview are required to fill application blank. An application form is an easy means of collecting information necessary for determining an applicant’s qualifications. Information requested on forms usually includes name, address, position applied for, physical condition, educational background, work experience, participation in social organizations, outside interests and activities, and personal references. Other important questions on an application form relate directly to the sales position for which the application is made. For example:
  • Why do you want this job?
  • Why do you want to change jobs?
  • What minimum income do you require?
  • Are you willing to travel?
  • Are you willing to be transferred?
  • Are you willing to use your car for business?
  • What do you want to be doing five years from now? Ten years from now?

Application forms will differ from company to company. On all forms, however, it is illegal to include questions that are not related to the job.

  1. Written Tests- Various written tests are conducted during selection procedure to provide profile data that can be useful to management in the process of selecting and classifying candidates who are likely to be high performers. Several tests such as aptitude test, intelligence test, reasoning test, personality test may be conducted. These tests are used to objectively assess the potential candidate.

They should not be biased.

Intelligence tests: These tests measure raw intelligence and trainability. Recent research has indicated that a salesperson’s cognitive ability or intelligence is the best indicator of future job performance. Thus, although once looked down upon, the intelligence test is slowly regaining status as the most effective tool for selecting salespeople.

Knowledge tests: These tests are designed to measure what the applicant knows about a certain product, service, market, and the like.

Sales aptitude test: These tests measure a person’s innate or acquired social skills and selling know-how as well as tact and diplomacy.

Vocational interest tests: These tests measure the applicant’s vocational interest, the assumption being that a person is going to be more effective and stable if he or she has a strong interest in selling.

             Personality tests – these tests attempt to measure the behavioural traits believed necessary for success in selling, such as assertiveness, initiative, and extroversion.

  1. Employment Interviews (in-depth Interviews- It is a one to one interaction between the interviewer and the potential candidate. It is used to find whether the candidate is best suited for the required job or not. It can bring out personal characteristics that no other lection tool is capable of revealing. The interview also serves as a two way channel of communication, which means both the company and the applicant can ask questions and learn about each other. But such interviews consume time and money both. Moreover the competencies of the candidate cannot be judged. Such interviews may be biased at times. Such interviews should be conducted properly. No distractions should be there in room. There should be an honest communication between candidate and interviewer.
  2. Medical examination- Medical tests are conducted to ensure physical fitness and stamina of the potential employee. It will decrease chances of employee absenteeism and poor performance.

The results from the examination should be interpreted a doctor who is familiar with the demands of the sales job, and the sales manager should be notified of the results. Because of their expense, physical examinations usually are not given until a recruit has passed most of the steps in the selection process.

  1. Appointment Letter- A reference check is made about the candidate selected and then finally he is appointed giving a formal appointment letter.

Difference between Recruitment and Selection

Basis

 

Recruitment Selection
Meaning It is an activity of establishing contact between employers and applicants

 

It is a process of picking up more competent and suitable employees

 

Objective It encourages large number of

Candidates for a job

 

It attempts at rejecting unsuitable candidates

 

Process It is a simple process It is a complicated process

 

Hurdles The candidates have not to cross over many hurdles

 

Many hurdles have to be crossed

 

Approach It is a positive approach It is a negative approach

 

Sequence It precedes selection It follows recruitment

 

Economy It is an economical method It is an expensive method

 

Time

Consuming

 

Less time is required More time is required

 

Orientation and Placement

Once the candidates are selected for the required job, they have to be fitted as per the qualifications. Placement is said to be the process of fitting the selected person at the right job or place. Once he is fitted into the job, he is given the activities he has to perform and also told about his duties. The freshly appointed candidates are then given orientation in order to familiarize and introduce the company to him. Generally the information given during the orientation program includes –

  • Employee’s layout
  • Type of organizational structure
  • Departmental goals
  • Organizational layout
  • General rules and regulations
  • Standing Orders
  • Grievance system or procedure

In short, during Orientation employees are made aware about the mission and vision of the organization, the nature of operation of the organization, policies and programs of the organization.

The main aim of conducting Orientation is to build up confidence, morale and trust of the employee in the new organization, so that he becomes a productive and an efficient employee of the organization and contributes to the organizational success.

The nature of Orientation program varies with the organizational size, i.e., smaller the organization the more informal is the Orientation and larger the organization more formalized is the Orientation program.

Proper Placement of employees will lower the chances of employee’s absenteeism. The employees will be more satisfied and contended with their work.

 

TOPIC FIVE

MOTIVATION AND TRAINING

Introduction

Creating and maintaining a well-motivated sales force is a challenging task. The confidence and motivation of salespeople is usually out washed the inevitable rejections they suffer from buyers as part of everyday activities. Sales managers do not motivate salespeople but should provide the circumstances that will encourage salespeople to motivate themselves.

An understanding of motivation lies in the relationship between needs, drives and goals: The basic process involves needs (deprivations) which set drives in motion (deprivations with direction) to accomplish goals (anything that alleviates a need and reduces a drive).

Improving motivation is important to sales success since high levels of motivation lead to:

  • Increased creativity;
  • Working smarter and a more adaptive selling approach;
  • Working harder;
  • Increased use of win–win negotiation tactics;
  • Higher self-esteem;
  • A more relaxed attitude and a less negative emotional tone;
  • Enhancement of relationships.

Definition of Motivation

Motivation is basically the collective set of ideas and forces that influence people to think in certain ways or do certain things. It can be defined then, as an internal or external factor that might rouse /incite an individual to work towards a goal. There are a variety of ways to motivate people, including the fear of losing a job, financial incentives, self- fulfillment goals and goals for the organization or groups within the organization.

Motivational theories

A number of theories have evolved that are pertinent (relevant) to the motivation of salespeople.

  1. Maslow’s hierarchy of needs theory

This theory proposes a tiered system of importance for factors of motivation; them being physiological (basic necessities), safety, love (inclusion into society), esteem (recognition in society), and self-actualization–i.e. the completion of the individual. Maslow advanced the following propositions about human behavior:

  • Man is a wanting being.
  • A satisfied need is not a motivator of behavior, only unsatisfied needs motivate.
  • Man’s needs are arranged in a series of levels – a hierarchy of importance. As soon as needs on a lower level are met those on the next, higher level will demand satisfaction. Maslow believed the underlying needs for all human motivation to be on five general levels from lowest to highest, shown below. Within those levels, there could be many specific needs, from lowest to highest.

 

  • Physiological – the need for food, drink, shelter and relief from pain.
  • Safety and security – once the physical needs of the moment are satisfied, man concerns himself with protection from physical dangers with economic security, preference for the familiar and the desire for an orderly, predictable world.
  • Social – become important motivators of his behavior.
  • Esteem or egoistic – a need both for self-esteem and the esteem of others, which involves self-confidence, achievement, competence, knowledge, autonomy, reputation, status and respect.
  • Self-fulfillment or self-actualization – is the highest level in the hierarchy; these are the individual’s needs for realizing his or her own potential, for continued self-development and creativity in its broadest sense.
  1. Herzberg’s dual factor theory

This theory distinguished factors which can cause dissatisfaction but cannot motivate (hygiene factors) and factors which can cause positive motivation.

Motivating (hygiene) factors included physical working conditions, security, salary and interpersonal relationships. He assumed that directing managerial attention to these factors would bring motivation up but would not result in positive motivation. If this were to be achieved, attention would have to be given to true motivators. These included the nature of the work itself which allows the person to make some concrete achievement, recognition of achievement, the responsibility exercised the person, and the interest value of the work itself. The inclusion of salary as a hygiene factor rather than as a motivator was subject to criticisms from sales managers whose experience led them to believe that commission paid to their salespeople was a powerful motivator in practice. Herzberg accommodated their view to some extent arguing that increased salary through higher commission was a motivator through the automatic recognition it gave to sales achievement.

The salesperson is fortunate that achievement is directly observable in terms of higher sales (except in missionary selling, where orders are not taken, e.g. pharmaceuticals, beer and selling to specifiers). However, the degree of responsibility afforded to salespeople varies a great deal. Opportunities for giving a greater degree of responsibility to (and hence motivating) salespeople include giving authority to grant credit (up to a certain value), discretion to offer discounts and handing over responsibility for calling frequencies.

This theory has been well received in general practitioners, although academics have criticised it in terms of methodology and oversimplification.

  1. Vroom’s expectancy theory

This theory assumes that people’s motivation to exert effort is dependent upon their expectations for success. Vroom based his theory on three concepts – expectancy, instrumentality and valence.

  1. Expectancy: This refers to a person’s perceived relationship between effort and performance, i.e. to the extent to which a person believes that increased effort will lead to higher performance.
  2. Instrumentality: This reflects the person’s perception of the relationship between performance and reward; for example, it reflects the extent to which a person believes that higher performance will lead to promotion.
  3. Valence: This represents the value placed upon a particular reward a person. For some individuals promotion may be highly valued; for others it may have little value.

According to the theory, a salesperson believes that working harder they will achieve increased sales (high expectancy) and that higher sales will lead to greater commission (high instrumentality) and higher commission is very important (high valence), a high level of motivation should result.

It can be noted that different salespeople will have different valences (values) for the same reward. Some might value increased pay very highly; while for others higher pay may have less value. Also, different salespeople may view the relationship between performance and reward, and between effort and performance, in quite different ways. A task of sales management is to specify and communicate to the salesforce these performance criteria, which are important in helping to achieve company objectives, and to relate rewards to these criteria. Further, this theory supports the notion that for performance targets (e.g. sales quotas) to be effective motivators they should be regarded as attainable (high expectancy) each salesperson. This model provides a diagnostic framework for analysing motivational problems with individual salespeople and an explanation of why certain managerial activities can improve motivation. Training in sales skills, for example, can improve motivation raising expectancy levels.

 

  1. Adams’s inequity theory

Feelings of inequity (unfairness) can arise when an individual’s effort or performance on the job exceeds the reward they receive. Salespeople who feel they contribute more than others to the organisation expect to receive proportionately greater rewards. This is the essence of Adams’s inequity theory.

For a salesperson, inequity can be felt in the following areas:

  • monetary rewards;
  • workload;
  • promotion;
  • degree of recognition;
  • supervisory behaviour;
  • targets;

The outcome of a salesperson perceiving significant inequities in any of these areas may be reduced motivation as a result of the feeling of unfairness.

The implication is that sales managers must monitor their sales force to detect any feelings of unfairness. This can be done informally during sales meetings or through the use of questionnaires. Some sales organizations survey their sales representatives periodically to measure their perceptions of inequity and the effectiveness of the company’s motivational programme in general.

Motivation is often equated with incentives but Adams’s work emphasizes that the elimination of disincentives (e.g. injustices, unfair treatment) may be an equally powerful influence.

 

  1. Likert’s sales management theory

Unlike Herzberg, Maslow and Vroom, who developed ‘general’ theories of motivation, Likert based his theory on research that looked specifically at the motivation of salespeople. His research related differing characteristics and styles of supervision to performance. One of the hypotheses he tested was that the sales managers’ own behaviours provide a set of standards which, in themselves, will affect the behaviour of their salespeople. He found that there was a link. High performing sales teams usually had sales managers who themselves had high performance goals.

His research also investigated the methods used sales managers in the running of sales meetings. Two alternative styles were compared i.e. group method and monopolist.

Sales managers who used the group method of leading sales meetings encouraged their team both to discuss sales problems that had arisen in the field and to learn from one another.

Sales managers who monopolised the meeting discouraged interaction between salespeople and used it as an opportunity to lecture them rather than to stimulate discussion.

There was a strong tendency for higher producing sales teams to use the group method because:

  1. It is likely that a problem faced one salesperson has been met previously another who may have found a way of overcoming it; e.g. A troublesome objection to one salesperson may have been successfully dealt with another. The group method of leading a sales meeting encourages problem-solving and stimulates communication.
  2. Second, the more open style of meeting enables the sales manager to gain a greater understanding of the needs and problems of the salesforce.
  3. Finally, the group method promotes a feeling of group loyalty since it fosters a spirit of co-operation.

Thus, the research conducted Likert suggests that to produce a highly motivated salesforce, the sales manager should have high performance goals and encourage analysis and discussion of salespeople’s performance and problems through the group method of conducting sales meetings.

 

  1. The Churchill, Ford and Walker model of salesforce motivation

This theory developed a model of salesforce motivation that integrated some of the ideas of Herzberg and Vroom.

This suggests that the higher the salesperson’s motivation, the greater the effort, leading to higher performance. This enhanced performance will lead to greater rewards which will bring about higher job satisfaction. The circle will be completed the enhanced satisfaction causing still higher motivation.

The implications of this model for sales managers are:

  1. They should convince salespeople that they will sell more working harder or being trained to work ‘smarter’ (e.g. more efficient call planning, developing selling skills).
  2. They should convince salespeople that the rewards for better performance are worth the extra effort. This implies that sales manager should give rewards that are valued and attempt to ‘sell’ their worth to the salesforce. E.g. a sales manager might build up the worth of a holiday prize stating what a good time they personally had when there.

NB: The theory also found that the value of rewards differed according to salesperson type.

Older salespeople who had large families valued financial rewards more. Younger, better educated salespeople who had no family or small families tended to value higher order rewards (recognition, liking and respect, sense of accomplishment).

 

Factors that have potential to motivate sales force

Financial incentives

Most companies, whether selling consumer or industrial goods, pay commission or bonus to their salespeople. The most usual form of payment is the salary plus commission system since this provides a level of security plus the incentive of higher earnings for higher sales. However, in some instances salespeople are paid on a straight commission basis so that earnings are entirely dependent upon achievement.

A commission system may thus comprise a given percentage, e.g. 1.5 per cent of total sales revenue generated per salesperson; or a percentage, e.g. 5 per cent of sales revenue for all sales in excess of a sales quota. Some companies may construct more complicated commission systems wheredifferent products have varying commission rates.

Higher rates may be paid on higher profit items, lines regarded as being harder to sell or products with high inventory levels. Thus the commission system can be used not only to stimulate greater effort in general, but also to direct salespeople towards expending greater energy on those products the company particularly wants to sell.

Commission may work in motivating salespeople through providing a direct reward for extra effort (Vroom) and giving recognition for achievement (Herzberg).

 

Setting sales targets or quotas

Quota – this is a share of sales that someone is entitled to contribute

If a sales target or sales quota is to be effective in motivating a salesperson, it must be regarded as fair and attainable and yet offer a challenge to them. Because the salesperson should regard the quota as fair, it is usually sensible to allow them to participate in the setting of the quota. However, the establishment of the quotas is ultimately the sales manager’s responsibility and they will inevitably be constrained overall company objectives. If sales are planned to increase 10 per cent, then salespeople’s quotas must be consistent with this. Variations around this average figure will arise through the sales manager’s knowledge of individual sales personnel and changes in commercial activity within each territory; for example, the liquidation of a key customer in a territory may be reflected in a reduced quota. The attainment of a sales target usually results in some form of extra payment to the salesperson.

An advantage of the sales quota is that it can be used flexibly to motivate salespeople to attain specific goals. For example, sales quotas can be based on overall sales targets, sales to new customers, or sales of particular types of product. However, they have their drawbacks: non-quota areas may be neglected, they may encourage cheating and result in unethical selling practices (e.g. deception) when the pressure to meet a sales quota is great.

Meetings between managers and salespeople

These are highly regarded sales managers in the motivation of their sales teams. Managers have the opportunity to meet their salespeople in the field, at head office and at sales meetings/conventions. They provide a number of opportunities for improving motivation.

  • First, they allow the sales manager to understand the personality, needs and problems of each salesperson. The manager can then better understand the causes of motivation and demotivation in individual salespeople and respond in a manner that takes into account the needs, problems and personality of the salesperson. demotivation than the sales management believed. Such misunderstandings can lead to wasted managerial effort devising motivational schemes and compensation plans that are not valued salespeople. The remedy is to meet regularly with the sales force to understand their value systems, so that what is prescribed management is effective in raising salesforce motivation.
  • Second, meetings in the field, which may form part of an evaluation and training programme, can also provide an opportunity to motivate. Sales technique can be improved and confidence boosted, both of which may motivate restoring in the salesperson the belief that performance will improve through extra effort.
  • Third, according to Likert, group meetings can motivate when the sales manager encourages an ‘open’ style of meeting. Salespeople are encouraged to discuss their sales problems and opportunities so that the entire sales team benefits from each other’s experiences. This leads to a greater sense of group loyalty and improved performance.
  • Finally, meetings between manager and salespeople provide the opportunity for performance feedback where weaknesses are identified and recognition for good work is given.

Promotion

Sales managers believe that a merit-based promotion system do act as a motivator. If the promotion is to a managerial position, there are grave dangers of promoting the company’s best salesperson. The skills required of a sales manager are wider than those required of a salesperson. A sales manager must be able to analyse and control the performance of others, motivate and train them. These skills are not required to sell successfully.

If promotion is to be tied to sales performance, it is sensible to consider the creation of a dual promotional route. The first path follows the normal managerial career sequence. The second is created to reward outstanding sales success. An example of such a merit-based promotional ladder is:

Sales contests

Sales contests are a popular form of incentive for consumer salesforces. The purpose of the sales contest varies widely. It may be to encourage a higher level of sales in general, to increase the sales of a slow-moving product or to reward the generation of new customers. The strength of a sales contest lies in its ability to appeal to the competitive spirit of salespeople and their need for achievement and recognition. As with other financial incentives, to be effective the contest must be seen to be fair and each salesperson must believe that they are capable of winning.

However, problems can occur. Contests can encourage cheating. In one company which used a sales contest to promote sales at a series of promotional events around the country with its dealers, salespeople ‘stored up’ orders achieved prior to the vents in order to increase the apparent number of orders taken at the events. By pitching salesperson against salesperson, contests may militate against the spirit of mutual help and co-operation that can improve salesforce performance.

Sales managers need to be sensitive to the differences in cultural ideas and expectations of overseas salespeople when devising motivational programmes. Examples of how such differences can impact on salesforce motivation are given in the boxed case discussion.

Training

Training of Sales force

Training is the process of enhancing the skills, capabilities and knowledge of employees for doing a particular job.

Training process moulds the thinking of employees and leads to quality performance of employees. It is continuous and never ending in nature.

Benefits of sales training

  1. Enhanced skill levels – Training in needs analysis, presentation and demonstration, negotiation, objection handling, closing and relationship management will enhance skill levels, and lead to greater customer orientation.
  2. Improved motivation – Vroom suggested that motivation is dependent on a salesperson’s belief that increased effort will lead to higher performance. Increasing skill levels through training should strengthen that belief.
  3. Improved self-confidence – Training improves self-confidence, which has been shown to be related to improve sales performance.
  4. Reduced costs – Training in self-management and journey planning should reduce costs. Higher skills should mean fewer call backs to close the sale. Better use of technology should also reduce costs (e.g. using email rather than site visits where appropriate).
  5. Fewer complaints – Better meeting of customer needs and higher service levels should reduce the number of customer complaints.
  6. Lower staff turnover – Training shows staff that the company is willing to invest in them raising morale and loyalty.
  7. Reduced management support – Well trained salespeople require less managerial support as they can manage their own activities.
  8. Higher job satisfaction – The confidence and success which accompanies higher skill levels developed during training lead to higher job satisfaction.
  9. Higher sales and profits – The result of the above advantages of training is that sales should be higher and costs lower resulting in higher company profits.

Components of a training programme

A training programme will attempt to cover a combination of knowledge and skill development. Five components can be identified:

 

  1. The company, in terms of objectives, policies and organization: The first component will probably include a brief history of the company, how it has grown and where it intends to go in the future. Policies relevant to the selling function, e.g., how salespeople are evaluated and the nature of the compensation system will be explained. The way in which the company is organised will be described and the relationship between sales and the marketing function, including advertising and market research, will be described so that the salesperson has an appreciation of the support they are receiving from headquarters.
  2. Its products:  product knowledge will include a description of how the products are made and the implications for product quality and reliability, the features of the product and the benefits they confer on the consumer. Salespeople will be encouraged to carry out their own product analyses so that they will be able to identify key features and benefits of new products as they are launched.
  3. Its competitors and their products: Competitors will be identified and competitors’ products will also be analysed to spotlight differences between them and the company’s products.
  4. Selling procedure and techniques: This component involves an examination of the factors analysed in and will include practical sessions where trainees develop skills through role-playing exercises. For example, the Xerox Professional Selling Skills training programme focuses on five selling steps: opening sales calls; effective listening; objection handling; closing and follow-up.
  5. Work organisation and report preparation: This will endeavor / try to establish good habits among the trainees in areas which may be neglected because of day-to-day pressures. Work organisation training includes time and territory management skills. The importance of these activities on a salesperson’s performance and, hence, earnings will be stressed.
  6. Relationship management: The importance of is to ensure that training programmes will place heavy emphasis on people skills. For example, the IBM consultative sales training programme emphasises working with clients as consultants to build close relationships and work jointly to solve problems. The case components of the programme involve people and communication skills.

 

The benefits of training can be summed up as:

  1. Improves morale of employees – Training helps the employee to get job security and job satisfaction. The more satisfied the employee is and the greater is his morale, the more he will contribute to organizational success and the lesser will be employee absenteeism and turnover.
  2. Less supervision – A well trained employee will be well acquainted with the job and will need less of supervision. Thus, there will be less wastage of time and efforts.
  3. Fewer accidents – Errors are likely to occur if the employees lack knowledge and skills required for doing a particular job. The more trained an employee is, the less are the chances of committing accidents in job and the more proficient the employee becomes.
  4. Chances of promotion – Employees acquire skills and efficiency during training. They become more eligible for promotion. They become an asset for the organization.
  5. Increased productivity – Training improves efficiency and productivity of employees. Well trained employees show both quantity and quality performance. There is less wastage of time, money and resources if employees are properly trained.

Ways/Methods of Training

The lecture – This method is useful in giving information and providing a frame of reference to aid the learning process. The lecture should be supported the use of visual aids, e.g.   professionally produced PowerPoints. Trainees should be encouraged to participate so that the communication is not just one way. Discussion stimulates interest and allows misunderstandings to be identified and dealt with.

Films – These are a useful supplement to the lecture in giving information and showing how a skill should be performed. They add an extra dimension to a lecture demonstrating how the principles can be applied in a selling situation. They will show what they are required to do, but they will lack the experience to put the theory into practice successfully.

Role playing – This learning method moves the trainees into the stage of being consciously able to perform a skill. It allows the trainees to learn their own successes and failures in a buyer–seller situation. Feedback is provided other group members, the sales trainer and audio-visual means.

Seeing oneself perform is an enlightening and rewarding experience and can demonstrate to the trainee the points raised other members of the group.  Playback allows the trainee to see the situation through the eyes of a third person and problems are more easily recognised and accepted.

Role playing has its critics. Some say that trainees do not take it seriously enough and that its very nature it is not totally realistic.

The degree of success achieved role playing is heavily dependent upon the skills of the sales trainer.

Case studies

Case studies are particularly appropriate for developing analytical skills. Trainees are asked to analyse situations, identify problems and opportunities and make recommendations for dealing with them. They can be used, for example, in setting call objectives. A history of a buyer–seller relationship is given and the trainee is asked to develop a set of sensible objectives for their next visit.

In-the-field training

It is essential that initial training given to trainees is reinforced on-the-job training. The experience gained real-life selling situations plus the evaluation and feedback provided the sales manager should mean that the salesperson moves solidly into the final stage of the learning skills process – unconsciously able. The salesperson does the right things automatically, just as a driver can co-ordinate the set of skills necessary to drive a car without consciously thinking.

In order to achieve field training the sales manager needs to do the following:

  • Analyse each salesperson’s performance;
  • Identify strengths and weaknesses;
  • Gain agreement with the salesperson that a weakness exists;
  • Teach the salesperson how to overcome the weaknesses;
  • Monitor progress to check that an improvement has been realized.

E-learning

The heavy time constraints place on modern salespeople mean that taking days off work to attend a traditional sales training course may not be feasible. Technological advances mean that an alternative method of disseminating information is via the internet. Using technology to package information is an inexpensive and effective alternative to traditional programmes. This approach means that training can take place over long distances and at a time which fits in with salespeople’s work patterns.

 

TOPIC SIX

SALES ORGANIZATION

Organizational structure

Def: This defines how activities such as task allocation, coordination and supervision are directed towards the achievement of organizational aims.

This is a system that is used to define the hierarchy within an organization. It identifies each job, its function and where it reports to within the organization.

This is a diagrammatic representation showing how departments or divisions in an organization, as a large corporation, are related to one another along lines of authority.

 

Forms of Organizational structures

  • Geographical structure
  • Product specialization structure
  • Industry – based structure
  • Account size structure

 

  1. Geographical structure
  • This is a structure where each salesperson is assigned a territory over which to have sole responsibility for sales achievement.
  • Salesperson close geographical proximity to customers encourages the development of personal friendships which aids sales effectiveness.
  • Compared with other organizational forms, e.g. product or market specialisation, travelling expenses are likely to be lower.
  • This form has an advantage of its simplicity.

 

 

Weaknesses

  • Salesperson is required to sell the full range of the company’s products
  • Sales person may be very different technically and sell into a number of diverse markets.
  • Salespeople in disconnected geographical territories are relatively weak in interpreting buyer behaviour patterns and reporting changes in the operational circumstances of customers compared with salespeople organised along more specialised lines.

 

  1. Product specialization structure

 

This can be along;

  1. Along product lines
  • This structure is conducive to a firm offers a wide range of technically complex and diverse products and where key members of the decision-making unit of the buying organizations are different for each product group.
  • Incase company’s products sell essentially to the same customers, problems of route duplication, higher travel costs and customer annoyance can arise.
  • Improper use of the method can lead to a customer being called upon different salespeople representing the same company on the same day.

 

NB: A move from geographic to a product-based structure raises costs as keeping the same number of salespeople means increased territory size.

 

  1. Functional Specialization
  • This is where sales force are divided according to new and existing products
  • In industrial selling, firms sometimes separate their sales forces into development and maintenance sales teams.
  • The development salespeople are highly trained in handling very technical new products. They spend considerable time overcoming commercial, technical and installation problems for new customers.
  • Companies move to a development/maintenance structure is belief that one of the causes of new product failure is the inadequacy of the salesforce to introduce the product. The cause of failure is the psychological block each salesperson faces in terms of possible future problems with buyer–seller relationship if the product does not meet expectations.
  • Employment of a development sales team can reduce this problem, although it is often only large companies that can afford such a team.
  • This approach allows salespeople to specialise in the skills needed to sell new products, ensures that new products receive the attention needed to sell them, and eliminates competition for a salesperson’s time between the selling of new and existing products providing clarity of purpose. Some pharmaceutical companies use this form of salesforce organisation.

 

  1. Industry based structure

 

 

  1. Customer-based structures

 

  • This structure has a problem of the same customer being served product divisions of the same supplier or company
  • There is the complexity of buyer behaviour, which requires not only input from the sales function but from other functional groups (such as engineering, finance, logistics and marketing).
  • Due to centralisation of purchasing and the immense value of some customers, the supplying firms have been forced to rethink how they organise their salesforce.
  • Companies are increasingly organising around customers and shifting resources from product or regional divisions to customer-focused business units.

 

  1. Market-centered structure
  • Another method of specialization is the type of market served.
  • Often industrial selling the market is defined industry type where the range of products sold is essentially the same.
  • Examples of such industries are banking, manufacturing companies and retailers where different industry groups have widely varying needs, problems and potential applications.
  • This structure allows salespeople to gain greater insights into these factors for their particular industry
  • It also enables them to monitor changes and trends within the industry that might affect demand for their products.
  • The cost of increased customer knowledge is increased travel expenses compared with geographically determined territories.

 

  1. Account-size structure

 

  • This structure is employed in many trade and industrial markets that experience importance of a few large customers and leads to establishment of a key or major account salesforce.
  • The team comprises senior salespeople who specialise in dealing with large customers that may have different buying habits and demand more sophisticated sales arguments than smaller companies.
  • The team needs to be conversant with negotiation skills since they are likely to be given a certain amount of discretion (judgement) in terms of discounts, credit terms, etc., in order to secure large orders.
  • Some organisations adopt a three-tier system, with senior salespeople negotiating with key accounts, ordinary salespeople selling to medium-sized accounts, and a telemarketing team dealing with small accounts.

 

 

Advantages for a key account salesforce structure

  1. Close working relationships with the customer The salesperson knows who makes what decisions and who influences the various players involved in the decision. Technical specialists from the selling organisation can call on technical people (e.g. engineers) in the buying organisation and salespeople can call upon administrators, buyers and financial people armed with the commercial arguments for buying.
  2. Improved communication and co-ordination The customers know that a dedicated salesperson or sales team exists hence know who to contact when a problem arises.
  3. Better follow-up on sales and service – Due to extra resources devoted to the key account mean there is more time to follow up and provide service after a major sale has been made.
  4. More in-depth penetration of the DMU (Decision Making Unit) There is more time to cultivate relationships within the key account. Salespeople can ‘pull’ the buying decision through the organisation from the users, deciders and influencers to the buyer, rather than the more difficult task of ‘pushing’ it through the buyer into the organization.
  5. Higher sales Most companies who have adopted key account selling claim that sales have risen as a result.
  6. The provision of an opportunity for advancement for career salespeople A tiered salesforce system with key account selling at the top provides promotional opportunities for salespeople who wish to advance within the salesforce rather than enter a traditional sales management position.

 

New/Existing account structure

  • A further method of sales organisation is to create two teams of salespeople. The first team services existing accounts, while the second concentrates on seeking new accounts.

This structure recognizes the following:

  1. Gaining new customers is a specialised activity demanding prospecting skills, patience, ability to accept higher rejection rates than when calling upon existing customers, and the time to cultivate new relationships.
  2. Placing this function in the hands of the regular salesforce may result in its neglect since the salespeople may view it as time which could be better spent with existing customers.
  3. Salespeople may prefer to call upon long-established customers whom they know, rather than prospects where they might face rejection and unpleasantness.

 

  • New account salespeople spend more time exploring the prospect’s needs and provide more information to management regarding buyer behaviour and attitudes than salespeople working under a conventional system.
  • The deployment of new account salesforces is applicable for large companies with many customers
  • Can also be deployed where continual turnover of key accounts have to be replaced.
  • This structure allows better planning of this vital function and eliminates competition between prospecting and servicing.

 

Determining the Number of Salespeople

Workload approach – This method allows the number of salespeople needed to be calculated, given that the company knows the number of calls per year it wishes its salespeople to make on different classes of customer.

 

Steps followed:

  1. Group customers  into categories according to the value of goods bought and potential for the future
  2. Assess the call frequency (number of calls on an account per year) for each category of customer
  3. Calculate the total required workload per year is multiplying the call frequency and number of customers in each category and then sum for all categories
  4. Estimate the average number of calls per week per salesperson
  5. Calculate the number of working weeks per year
  6. Calculate the average number of calls a salesperson can make per year multiplying (4) and (5)
  7. Determine the number of salespeople required dividing the total annual calls required the average number of calls one salesperson can make per year

 

 

 

 

  • The applicability of this method is largely dependent on the ability of management to assess confidently the number of calls to be made on each category of customer.
  • Where optimum call rates on customers within a particular category vary considerably, management may be reluctant to generalize.
  • The method is of relevance to companies who are expanding into new geographical territories. For example, a company expanding its operation from England to Scotland could use a blend of past experience and judgment to assess feasible call frequencies in Scotland. Market research could be used to identify potential customers. The workload approach could then be used to estimate the number of salespeople needed.

 

Establishing Sales Territories

  • Territory design is an important task since it is a major determinant of salespeople’s opportunity to perform well.
  • Poor territory design decisions prevent the best use of expensive selling activities and can harm salespeople’s attitudes, behaviour and effectiveness when they believe they have been treated unfairly in territory allocation.

Methods

  1. Workload Approach

This is where Workload is defined as follows:

W = niti +ntk

Where W = workload; ni = number of calls to be made to customers in category i; ti = average time required at call for each category i; n = total number of calls to be made; , tk = average time required to travel to each call.

A weakness of this approach is that equalizing workload may result in territories of widely differing potential.

 

  1. Sales potential
  • This is where salespeople are located territories based on their sales potential. Best sales people are allocated territories of higher potential and vice versa.
  • By using this approach then moving salespeople from lower to higher potential territories could be used as a form of promotion.
  • In cases where company policy dictates that all salespeople should be treated equally, then a commission scheme based on the attainment of sales quotas, which vary according to territory potential, should establish a sense of fairness.

 

Territory revision

Factors that may suggest the need territory revision

  • Change in consumer preference
  • Competitive activity
  • Diminution (decrease) in the usefulness of chosen distribution channels
  • Complete closure of an outlet or group of stores
  • Increases in the cost of covering territories
  • Salesforce complacency (satisfication) i.e where they fill satisfied to work

 

 

Compensation

Def:     This is the money received an employee from an employer as a salary or wages

The combination of money and other benefits (rewards) that an employee receives for doing the job.

Compensation Objectives

  • To motivate a salesforce linking achievement to monetary reward.
  • To attract and hold successful salespeople providing a good standard of living for them, rewarding outstanding performance and providing regularity of income.
  • To help design compensation schemes which allow selling costs to fluctuate in line with changes in sales revenue. E.g in poor years lower sales are offset to some extent lower commission payments, and in good years increased sales costs are financed higher sales revenue.
  • Compensation plans can be formulated to direct the attention of sales personnel to specific company sales objectives. Higher commission can be paid on product lines the company particularly wants to move. Special commission can be paid to salespeople who generate new active accounts if this is believed to be important to the company

 

Types of sales people

There exist five types of salespeople as identified Darmon based on urge of motivation;

  1. Creatures of habit These salespeople try to maintain their standard of living earning a predetermined amount of money.
  2. Satisfiers These people perform at a level just sufficient to keep their jobs.
  3. Trade-offers These people allocate their time based upon a personally determined ratio between work and leisure that is not influenced the prospect of higher earnings.
  4. Goal orientated These salespeople prefer recognition as achievers their peers and superiors and tend to be sales quota orientated with money mainly serving as recognition of achievement.
  5. Money orientated These people aim to maximize their earnings. Family relationships, leisure and even health may be sacrificed in the pursuit of money.

 

The basic types of compensation plan:

  • Fixed salary
  • Commission only
  • Salary plus commission

 

  1. Fixed salary
  • This plan encourages salespeople to consider all aspects of the selling function rather than just those which lead to a quick sales return.
  • Salespeople are likely to be more willing to provide technical service, complete information feedback reports and carry out prospecting than if they were paid solely commission.
  • The system provides security to the salesperson who knows how much income they will receive each month.
  • The plan relatively cheap to administer since calculation of commissions and bonuses is not required.
  • The system overcomes the problem of deciding how much commission to give to each salesperson when a complex buying decision is made a number of DMU (Decision Making Units) members who have been influenced different salespeople, perhaps in different parts of the country.

 

Drawbacks of the method

  • No direct financial incentive is provided for increasing sales (or profits)
  • High-performing salespeople may not be attracted, and holding on to them may be difficult using fixed salary as they perceive the system as being unfair.
  • Selling costs remain static in the short term when sales decrease; thus the system does not provide the inbuilt flexibility of the other compensation systems.
  • It is used primarily in industrial selling where technical service is an important element in the selling task and the time necessary to conclude a sale may be long.
  • It is appropriate when the salesperson sells very high value products at very low volumes.

 

  1. Commission only

This plan provides an obvious incentive to sell.

  • Since income is dependent on sales results, salespeople will be reluctant to spend time on tasks, which they do not perceive as being directly related to sales.
  • Sales personnel may pursue short-term goals, to the detriment (loss) of activities, which may have an effect in the longer term.
  • They may be reluctant to write reports providing market information to management and to spend time out of the field to attend sales training courses.

From management perspective

  • The system has the advantage of directly financing costs automatically
  • It allows some control over sales activities through the use of higher commission rates on products and accounts in which management is particularly interested.
  • It is often used in situations where there are a large number of potential customers, the buying process is relatively short and technical assistance and service is not required. Insurance selling is an example where commission-only payments are often used.

 

  1. Salary plus commission
  • This plan provides financial incentives with a level of security.
  • Management gains a greater degree of control over the salesperson’s time than under the commission-only system
  • Sales costs are to some extent related to revenue generated.
  • The method is attractive to ambitious salespeople who wish to combine security with the capability of earning more greater effort and ability.
  • It is the most commonly used method of compensating salespeople, although the method of calculating commission may vary. Extra payment may be linked to profits, sales generated at a constant rate for all sales or only after a certain level of sales has been generated.

 

TOPIC SEVEN

BUDGETING AND EVALUATION

The purpose of Planning is to allocate company resources in such a manner as to achieve these anticipated sales.

BUDGETING

Def:    This is an estimation of the revenue and expenses over a specified future period of time.

This is establishing a planned level of expenditures, usually at a fairly detailed level. A company may plan and maintain a budget on either an accrual or a cash basis.

Purpose of budgeting

  • It forces managers to do better forecasting – managers should be constantly scanning the business environment to spot changes that will impact the business
  • Budgeting motivates managers and employees providing useful yardsticks for evaluating performance
  • Budgeting can assist in the communication between different levels of management
  • Budgeting is essential in writing a business plan
  • Budgeting ensures that organizations expenditures does not exceed planned income
  • Budgets states the limits of spending therefore act as a means of control

 

Types of budgeting

  1. Zero based budgeting- In a dynamic business it often makes sense to ‘start afresh’ when developing a budget rather than basing ideas too much on past performance. This is appropriate because the organization is continually seeking to innovate. Each budget is therefore constructed without much reference to previous budgets. In this way, change is built into budget thinking.
  2. Strategic budgeting – This involves identifying new emerging opportunities, and then building plans to take full advantage of them. This is closely related to zero based budgeting and helps to concentrate on gaining competitive advantage.
  3. Rolling budgets – Rolling budgets involve evaluating the previous twelve months’ performance on an ongoing basis, and forecasting the next three months’ performance. US companies typically report to shareholders every three months, compared with six months in the United Kingdom. Given the speed of change and general uncertainty in the external environment, shareholders seek quick results.
  4. Activity based budgeting – This examines individual activities and assesses the strength of their contribution to company success. They can then be ranked and prioritized, and be assigned appropriate budgets.

 

Budget Determination

  • Departmental budgets are not prepared cost accountants, in conjunction with general management; apportion overall budgets for individual departments. It is the departmental manager who determines how the overall departmental budget will be utilized in achieving the planned-for sales (and production).
  • For instance, a marketing manager might decide that more needs to be apportioned to advertising and less to the effort of selling in order to achieve the forecasted sales.
  • The manager therefore apportions the budget accordingly and may concentrate upon image rather than product promotion; it is a matter of deciding beforehand where the priority lies when planning for marketing.
  • Thus, the overall sales forecast is the basis for company plans, and the sales department budget.

 

Sales department budget vs. Sales budget

The sales department budget is merely the budget for running the marketing function for the budget period ahead. Cost accountants split this sales department budget into three cost elements:

The selling expense budget that includes those costs directly attributable to the selling process, e.g. sales personnel salaries and commission, sales expenses and training.

The advertising budget includes those expenses directly attributable to above-the line promotion (e.g. television advertising), and below-the-line promotion (e.g. a coupon redemption scheme).

Methods of establishing the level of such a budget are as follows:

  1. A percentage of last year’s sales
  2. Parity with competitors, wheresmaller manufacturers take their cue from a larger manufacturer and adjust their advertising budget in line with the market leader
  3. The affordable method, where expenditure is allocated to advertising after other cost centres have received their budgets. In other words, if there is anything left over it goes to advertising.
  4. The objective and task method calls for ascertainment of the advertising expenditure needed to reach marketing objectives that have been laid down in the marketing plan.
  5. The return on investment method assumes that advertising is a tangible item that extends beyond the budget period. It looks at advertising expenditures as longer term investments and attempts to ascertain the return on such expenditures.
  6. The incremental method is similar to the previous method; it assumes that the last unit of money spent on advertising should bring in an equal unit of revenue.
  1. The administrative budget represents the expenditure to be incurred in running the sales office. Such expenses cover the costs of marketing research, sales administration and support staff.

 

Sales Budget

  • This can be described as the total revenue expected from all products that are sold.
  • Note that sales budget comes directly after the sales forecast.
  • Sales budget is the starting point of the company budgeting procedure because all other company activities are dependent upon sales and total revenue anticipated from the various products that the company sells.
  • This budget affects other functional areas of the business, namely finance and production, because these two functions are directly dependent upon sales.

 

Sales budgeting procedure

This figure represents the way that cost accountants view the budgeting procedure

 

From the sales budget comes the sales department budget. The production budget covers all the costs involved in actually producing the products. The administrative budget covers all other costs such as personnel, finance, etc., and costs not directly attributable to production and selling.

The sales budget is thus the revenue earner for the company and other budgets represent expenditures incurred in achieving the sales. Cost accountants also have cash budgets and profit budgets, each with revenue provided from company sales. It is not proposed to go into why they split into cash and profit budgets.

 

Budget Allocation to sales force

  • The figure that reaches the individual salesperson is sometimes called the sales quota or sales target and this is the amount that must be sold in order to achieve the forecasted sales.
  • Sales quotas or targets are therefore performance targets that must be reached, and quite often incentives are linked to salespeople reaching such quotas or targets.
  • Each salesperson knows the individual amount they must sell to achieve their quota, and are effectively performance targets.
  • Quotas need not necessarily be individually based, but can be group based, collectively throughout a region – with everybody from the regional or area manager downwards equally sharing the sales commission.
  • Quotas may be for much shorter periods than the one year. The entire year’s budget may be broken down in the same manner, say, month month.
  • For established firms the most common practice of budget allocation is simply to increase (or decrease) last year’s individual budgets or quotas an appropriate percentage, depending on the change in the overall sales budget.
  • It is sensible to review individual sales quotas to establish if they are reasonable given current market conditions.

 

Budget Allocation procedure

  1. Determine the sales potential of territories – For consumer products, disposable incomes and number of people in the target market may be used to assess relative potential.
  2. For industrial products, the number and size of potential customers may be used. Another factor to be taken into account is workload.
  3. Two territories of equal potential may justify different quotas if one is compact while the other is more widespread.
  4. By assessing sales potential for territories and allowing for workload, the overall sales budget can be allocated in as fair a manner as possible between salespeople.

 

Sales force Evaluation

Salesforce evaluation is the comparison of sales force objectives with respective results.

 

The Purpose of Evaluation

  • To attempt to attain company objectives – By measuring actual performance against objectives, shortfalls can be identified and appropriate action taken to improve performance.
  • Evaluation can help improve an individual’s motivation and skills – Motivation is affected since an evaluation programme will identify what is expected and what is considered good performance.
  • It provides the opportunity for the recognition of above-average standards of work performance, which improves confidence and motivation.
  • Evaluation allows identifying areas of skill weakness and effort to be directed to the improvement of skills in those areas. Thus, evaluation is an important ingredient in an effective training programme.
  • Evaluation provides information that affects key decision areas within the sales management function.

 

Salesforce Evaluation Process

  1. Setting of salesforce objectives which may be financial, such as sales revenues, profits and expenses; market-orientated, such as market share; or customer-based such as customer satisfaction and service levels
  2. Determine the sales strategy that must show how the objectives are to be achieved
  3. Set the performance standards for the overall company, regions, products, salespeople and accounts.
  4. Measure the results and compare with performance standard
  5. Take action to improve performance

 

Setting Standards of Performance

  • Evaluation implies the setting of standards of performance along certain lines that are believed to be important for sales success.
  • The control process is based upon the collection of information on performance so that actual results can be compared against those standards.
  • For the sales team as a whole, the sales budget will be the standard against which actual performance will be evaluated.
  • This measure will be used to evaluate sales management as well as individual salespeople. For each salesperson, their sales quota will be a prime standard of sales success.
  • Standards provide a method of fairly assessing and comparing individual salespeople.
  • Simply comparing levels of sales achieved individual salespeople is unlikely to be fair since territories often have differing levels of sales potential and varying degrees of workload.

 

 

Measures of Performance

Quantitative measures of performance

These measures exist in two groups

One group is a set of input measures which are essentially diagnostic in nature – they help to provide indications of why performance is below standard. Key output measures relate to sales and profit performance. Most companies use a combination of input (behavioural) and output measures to evaluate their salesforces. Specific output measures for individual salespeople include the following:

  • sales revenue achieved
  • profits generated
  • percentage gross profit margin achieved
  • sales per potential account
  • sales per active account
  • sales revenue as a percentage of sales potential
  • number of orders
  • sales to new customers
  • number of new customers.

 

The second group of measures relates to input and includes:

  • number of calls made
  • calls per potential account
  • calls per active account
  • number of quotations (in part, an output measure also)
  • Number of calls on prospects.

 

Qualitative measures of performance

Assessing using qualitative lines is more subjective and takes place in the main during field visits. This may be through;

Sales skills – They can be rated using a number of sub-factors

  • Handling the opening and developing rapport (connection)
  • Identification of customer needs, questioning ability
  • Quality of sales presentation
  • Use of visual aids
  • Ability to overcome objections
  • Ability to close the sale

 

Customer relationships

  • How well received is the salesperson?
  • Are customers well satisfied with the service, advice, reliability of the salesperson, or are there frequent grumbles and complaints?

Self-organisation – How well does the salesperson carry out the following?

  • Prepare calls.
  • Organise routing to minimise unproductive travelling.
  • Keep customer records up to date.
  • Provide market information to headquarters.
  • Conduct self-analysis of performance in order to improve weaknesses.

Product knowledge – How well informed is the salesperson regarding the following?

  • Their own products and their customer benefits and applications.
  • Competitive products and their benefits and applications.
  • Relative strengths and weaknesses between their own and competitive offerings.

Co-operation and attitudes – To what extent will the salesperson do the following?

  • Respond to the objectives determined management in order to improve performance, e.g. increase prospecting rate
  • Co-operate with suggestions made during field training for improved sales technique
  • Use their own initiative

What are their attitudes towards the following?

  • The company and its products
  • Hard work

NB: A number of companies measure their salespeople on the basis of the achievement of customer satisfaction.

 

Sales management response to the results of carrying out salesforce evaluation can be through

  1. Good quantitative/good qualitative evaluation The appropriate response would be praise and monetary reward. For suitable candidates promotion would follow.
  2. Good quantitative/poor qualitative evaluation The good quantitative results suggest that performance in front of customers is good, but certain aspects of qualitative evaluation, e.g. attitudes, report writing and market feedback, may warrant advice and education regarding company standards and requirements.
  3. Poor quantitative/good qualitative evaluation Good qualitative input is failing to be reflected in quantitative success. The specific causes need to be identified and training and guidance provided. Lack of persistence, poor closing technique or too many/too few calls might be possible causes of poor sales results.
  4. Poor quantitative/poor qualitative evaluation Critical discussion is required to agree problem areas. Training is required to improve standards. In other situations, punishment may be required or even dismissal.

 

TOPIC EIGHT

EMERGING TRENDS AND ISSUES IN SALES MANAGEMENT

This refers to new issues that are coming up as far as selling is concerned.

  • Use of advanced technology-computers which have come up with new changes ranging from less paper work and many people are unemployed.
  • E-Commerce
  • E-Government-Application of advanced ICT to deliver government services
  • E-procurement

 NB Outsourcing- It is management strategy which an organization outsources major non-core functions to specialized, efficient service providers. The basic objective is normally cost reduction and concentration on core activities.

Benefit of outsourcing

  1. a) Time management
  2. b) Reduced staff costs
  3. c) Increased flexibility
  4. d) Cost certainty
  5. e) Reduction in staff management problems
  6. f) Improved consistency of service
  7. g) Reduced capital requirements
  8. h) Reduced risk

 Problems of outsourcing

  1. a) Redundancy costs
  2. b) Quality of service maintenance problems
  3. c) Long term commitment absent
  4. d) Over dependence on suppliers
  5. e) Lack of suppliers flexibility
  6. f) Lack of management skills to control suppliers
  7. g) Possible loss of competitive advantage particularly in the loss of skills and expertise of staff
  8. h) Insufficient internal investment and the passing of knowledge and expertise to the supplier who may sieve the initiative.
  • Emergence of automatic teller machines.
  • Emergence of mobile banks.
  • Emergence of customer care services department to handle financial matters only.
  • Emergence of m banking
  • Globalization-This is interaction and integration among people, companies and governments of different nations.

It is a process wheredifferent systems and parts of a related trade, function as a closely-knit system at the international level. Communication and transport have vastly improved and affects many aspects of economics from competition policy to monetary policy and agricultural policy.

  • Mergers and joint ventures of institutions so as to increase the institutions capital base.
  • Drug abuse menace.
  • Pollution-air, water, noise and solid waste due to drastic economic changes.
  • Environmental Corruption.
  • Depletion of natural resources.
  • Rogue economics-recent credit crisis shows how financial deregulation and globalization has contributed to many new problems which leave economies vulnerable to financial speculation.
  • Pressure on commodities-the world is used to dealing with a situation of abundant supply of raw materials, but diminishing supply and growing demand threatens to change that. Oil prices are rising due to speculation and due to fact demand is simply rising faster than supply.
  • Shifting balance of global economy-in post war period, US economy was dominant. The old phrase when America sneezes, the rest of the world catches a cold was very much appropriate. Sleeping giants have risen.
  • Dealing with commodity shortages there is the introduction of government quotas, tariffs, protectionism etc.
  • Growth of china economies.
  • HIV aids menace.
  • Emergence of consumerism movements-this is an organized movement of citizens and government agencies to improve the rights and power of buyers in relation to sellers
  • Destruction of environment e.g. lumbering, desertification etc.
  • Emergence of fraudsters who produce counter fake products.
  • Emergence of environmentalism movement-this is an organized movement of concerned citizens and government agencies to protect and improve people’s current and future living environment.
  • Liberalization-this is removal of trade barriers-i.e. free trade.
  • Regional economic integration- e.g. EAC, COMESA, PTA boundaries become irrelevant.
  • Emergence of export processing zones-this are areas set aside government where industries can set up firms to process goods for export at little or no charge.
  • Enactment of new government policies ranging from quotas, rules, regulations and law enactment e.g. media bill, mututho law,traffic law and tobacco bill.
  • Establishment of National Employment Authority(NEA) to address the issue of unemployment in Kenya
  • Infrastructural advancement-Red lines in Thika super highway to usher in Bus Rapid Transit System, Direct flights to US( A major milestone)
  • Crafting of National Addressing System to assist in dissemination of information.
  • Emergence of drones in Rwanda to supply drugs in interior areas.
  • . Business Ethics 1. Ethics: this is a set of moral principal that govern the action of an individual or group
  • Social Responsibility Refers to the roles undertaken business organization on the surrounding environment

 

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