chapter 6 introduction to sales management and its evolving roles powerpoint presentation prepared...

Chapter 6

Introduction to Sales Management

and Its Evolving Roles

PowerPoint presentation prepared byDr. Rajiv Mehta

New Jersey Institute of Technology

Copyright © Houghton Mifflin Harcourt Publishing Company. All rights reserved. 6 | 2

Chapter Outline

• Purpose and Levels of Organizational Planning

• Sales Management Planning Process

• Causes of Unsuccessful Planning

• Organizing the Sales Force

Source: Flying Colours Ltd.


Learning Objectives

After reading this chapter, you should be able to do the following:1. Understand the purpose and levels of organizational

planning.2. Apply the sales planning process, including strategic

and tactical sales planning.3. Avoid unsuccessful sales planning.4. Describe different ways to organize the sales force,

including calculating its optimal size.


The Purpose and Benefits of Planning

• improving morale when the entire sales organization actively participates in the planning process

• providing direction and focus for organizational efforts

• improving cooperation and coordination of sales force efforts

• developing standards by which sales force performance can be measured and deviations can be identified to take corrective actions

• increasing the sales organization’s flexibility in dealing with unexpected developments


Type Participants Focus

Strategic planning

CEO, boards, president, senior VPs

company mission, vision, goals, primary strategies, overall budgeting

Tactical planning general sales manager, director of marketing

departmental, yearly, and quarterly plans, policies, procedures, budgets

Monthly and weekly planning

regional sales managers branch plans and budgets

Daily planning sales supervisors and sales reps

unit plans and budget

Planning at Different Levels of Management


Sales and Operational Planning Process

6. Develop and

enforce controls

6. Develop and

enforce controls

5. Direct tactics

5. Direct tactics

4. Devise strategies

4. Devise strategies

3. Establish procedures

3. Establish procedures

2.Set policies

2.Set policies

1. Define goals

and objectives

1. Define goals

and objectives

Sales &operational

planning process

Sales &operational

planning process

Objectives are specific results desired within a designated time frame, for example, become best service-oriented sales force.

Objectives are specific results desired within a designated time frame, for example, become best service-oriented sales force.

Predetermined approaches for handling routine matters or reoccurring situations are called policies.

Predetermined approaches for handling routine matters or reoccurring situations are called policies.

Develop performance standard controls so they can compare actual performance to predetermined standards.

Develop performance standard controls so they can compare actual performance to predetermined standards.

Tactics are day-to-day actions that make up the strategic plan, for example, using special sales contests to spur sales of products.

Tactics are day-to-day actions that make up the strategic plan, for example, using special sales contests to spur sales of products.

A strategy is an overall program of action for using resources to achieve a goal or objective. A strategy is an overall program of action for using resources to achieve a goal or objective.

Detailed descriptions of specific steps for carrying out actions are called procedures.

Detailed descriptions of specific steps for carrying out actions are called procedures.


Sales and Operational Planning Process

Define goals and

objectives.

Define goals and

objectives.

Set policies.

Set policies.

Establish procedures.Establish

procedures.Devise

strategies.Devise

strategies.Direct tactics.Direct tactics.

Develop and

enforce controls.

Develop and

enforce controls.


Planning Components for Managers

1. Diagnosis: Where are we now?

2. Prognosis: Where are we headed if no changes are made?

3. Objectives: Where should we be headed?

4. Strategy: What is the best way to get there?

5. Tactics: What actions need to be taken by whom, and when?

6. Control: What measures must be monitored so we know how we’re doing?

Source: Digital Vision


Stages in the Sales Management Planning Process

Analyze the situation.Analyze the situation.

Determine market potential and forecast sales.

Determine market potential and forecast sales.

Develop strategies.Develop strategies.

Allocate resources and develop budgets.

Allocate resources and develop budgets.

Evaluate and control.Evaluate and control.

Set goals and objectives.Set goals and objectives.


Analyze the Situation

6. Distribution systems

6. Distribution systems

5. Promotional mix

5. Promotional mix

4. Benefits offered

4. Benefits offered

3. Sales, cost, and

profit data

3. Sales, cost, and

profit data

2.Competition

2.Competition

1. Market

characteristics

1. Market

characteristics

Analyze the situation

Analyze the situation

the number and types of potential buyers, their demographic and behavioral profiles, their attitudes and buying patterns, and their servicing needs

the number and types of potential buyers, their demographic and behavioral profiles, their attitudes and buying patterns, and their servicing needs

competitor:

• numbers

• strengths, weaknesses

• products

• prices

• market shares

• sales trends for each brand

competitor:

• numbers

• strengths, weaknesses

• products

• prices

• market shares

• sales trends for each brand

channels of distribution, channel partners, storage and transportation facilities, and intensity of distribution

channels of distribution, channel partners, storage and transportation facilities, and intensity of distribution

personal selling, advertising, sales promotion, and emerging Internet strategies

personal selling, advertising, sales promotion, and emerging Internet strategies

financial data by product, market, territory, and time period

financial data by product, market, territory, and time period brand names,

prices, packages, and service

brand names, prices, packages, and service


Set Goals and Objectives

1.

Sales goals 1.

Sales goals 2.

Sales objectives 2.

Sales objectives Set goals

and objectivesSet goals

and objectives

• implement a sales management training program for new sales managers within two years

• reduce sales force turnover to below the industry average over the next five years

• implement a sales management training program for new sales managers within two years

• reduce sales force turnover to below the industry average over the next five years

• increase sales by 15% next year

• reduce customer complaints by 10% next year

• increase the number of new customer accounts by 20% in the next six months

• increase sales by 15% next year

• reduce customer complaints by 10% next year

• increase the number of new customer accounts by 20% in the next six months


Determine Market Potential and Forecast Sales

1.

Market potential 1.

Market potential

3. Market capacity

3. Market capacity

2. Sales potential

2. Sales potential

Determine market potential

and forecast sales

Determine market potential

and forecast sales

the maximum possible sales for a company

the maximum possible sales for a company

the maximum possible sales for an entire industry

the maximum possible sales for an entire industry

the units the market will absorb if the product or service is free

the units the market will absorb if the product or service is free


Develop Strategies: Four Types Of Growth Strategies

A. Market penetration

Market penetration focuses on increasing sales of current products in current markets by more intensive marketing efforts.

B. Product development

Product development creates new or improved products for current markets by adding new sizes, models with new features, alternative quality versions, or creative new alternatives to satisfy the same basic needs.

C. Market development

Market development seeks to open up new markets for current products.

D. Product diversification

Diversification refers to expansion into new product lines or by purchasing new businesses.N

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Current productCurrent productCurrent productCurrent product New productNew productNew productNew product


Four Types of Growth Strategies

A. Market penetration

Modifying an existing product in an existing market (also new uses)

for example, Honda Accordfor example, Toyota Camryfor example, Nissan Maxima

B. Product development

Introducing a new product into an established market

for example, BMW X5, Volvo SUV for example, Toyota Prius, Scion (Gen Y)for example, LandRover’s RangeRoverfor example, Honda Element (Gen Y)

C. Market development

Finding a new market for an existing product (also new users)

for example, Harley Davidsonfor example, Gatoradefor example, Power Bars

D. Product diversification

Creating a new product for a new market

for example, Sony electronics to VAIOfor example, Hooters Restaurants, Airlinesfor example, Ford (Jaguar), Honda (Acura)for example, Virgin Airlines, Megastores, soft drinks, and cell phones

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Current productCurrent productCurrent productCurrent product New productNew productNew productNew product


Business Portfolio Approach: Strategic Business Units (SBU)

• SBUs are divisions of major firms within multiple product companies.

• A division, product line, or single product may be classed as an SBU.

• Each SBU has its own management.• SBUs are evaluated on their profit and growth potential as

standalone firms.• SBUs have several characteristics:

– distinct mission– separate management– unique customer segments– their own competitors– planning independent of other company units


Three Levels of Strategy: Strategic Business Units

Corporation

Strategic business

unit A

MarketingFinance andaccounting

Production

Strategic business

unit C

Strategic business

unit B

Strategic business

unit D

Humanresources

Research and

development

Corporate level strategy:

What business are we in?

Functional level strategy: How do we support business level strategy?

Business level strategy: How do we compete?


General Motors Corporation: Organized by Strategic Business Units

GMC

Chevrolet


Production

BuickCadillacGMC Truck

Humanresources

Research and

development

Saturn Hummer Saab Pontiac OldsmobileElectronic

Data Systems

GMCFinance

Firms are treated as products in a portfolio (like stocks in an individual’s portfolio), for example, keep and expand those that do well; sell those that don’t.


Ford Motor Corporation: Organized by Strategic Business Units

FMC

Ford


Production

MercuryLincoln Jaguar

Humanresources

R&D

VolvoAston Martin

Why was Aston Martin was sold?

Why might Ford sell Jaguar?

Why did Ford buy Jaguar and Volvo?

Firms are treated as products in a portfolio (like stocks in an individual’s portfolio), for example, keep and expand those that do well; sell those that don’t.


United Technologies Corporation: Organized by Strategic Business Units

UTC

Carrier


Production

Hamilton Sunstrand

Chubb OTIS

Humanresources

R&D

Pratt &

WhitneySikorsky

UTCPower

Blackhawk Helicopters


Boston Consulting Group’s Market Share/Market Growth Matrix

Stars

generate considerable income

Problem children (aka question marks)

have potential to become stars or cash cows

Cash cows

generate strong cash flow

Dogs

generate little profits or make losses

HighHighHighHigh LowLowLowLow

Relative Market ShareRelative Market Share

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Hig

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Hig

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BCG Matrix: What Strategy Would You Employ?

Stars



can become stars or cash cows

Cash cows


Dogs



Strategy? Strategy?

Strategy?


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Hig

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BCG Matrix: What Strategy Would You Employ?

Stars



can become stars or cash cows

Cash cows


Dogs




Lo

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Hig

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Hig

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Strategy: invest funds for future growth

Strategy: invest more funds for growth or divest

Strategy: milk profits to help stars and question marks

Strategy: consider divesting SBU or product


Stakeholders

6.Investigative

reporters

6.Investigative

reporters

5. Suppliers

5. Suppliers

4. Financial

community

4. Financial

community

3. Stockholders

3. Stockholders

2.Company employees

2.Company employees

1. Government:federal, state,

local

1. Government:federal, state,

local

StakeholdersStakeholders


Allocate Resources and Develop Budgets

• Given detailed sub-plans and tactics, managers must allocate resources—money, people, materials, equipment, and time—to carry out the plans.

• The sales budget is the expected expenditures required to achieve projected sales revenues.


Implement the Plan

• Sales managers often use management by objectives (MBO) to involve subordinates in planning and budgeting.

• A program evaluation and review technique (PERT) diagram specifies a project’s critical path—the sequence of tasks to be completed, the time to complete each activity, and the responsible individuals.


Performance Standards and Measures

Performance standards and

measures

Performance standards and

measures

Customer Service Components

Customer Service Components

ReliabilityReliability

TangibilityTangibility

ResponsivenessResponsiveness

Internal measures

Internal measures

1. Industry

averages

1. Industry

averages

3. Managerial

expectations

3. Managerial

expectations

External measures External

measures

1. Customer

satisfaction

1. Customer

satisfaction

2. Societal

satisfaction

2. Societal

satisfaction

2. Past

performance

2. Past

performance


Planning Tools

1. Dialectic planning

1. Dialectic planning

2. Contingency

planning

2. Contingency

planning

Planning toolsPlanning tools

A contingency plan is a backup plan to the one adopted, and it will be executed only if events occur beyond the control of the major plan.

A contingency plan is a backup plan to the one adopted, and it will be executed only if events occur beyond the control of the major plan.

• Dialectic planning examines the validity of assumptions in a forecast.

• Calls for making a new set of assumptions to revaluate previous plans.

• Plans are rigorously challenged; a second plan is prepared.

• Dialectic planning examines the validity of assumptions in a forecast.

• Calls for making a new set of assumptions to revaluate previous plans.

• Plans are rigorously challenged; a second plan is prepared.

• Unsuccessful planning may result from making erroneous assumptions.

• Thus, management must make assumptions about the future by using these two tools:


Organizing the Sales Force

• The purpose of organizing the sales force is to accomplish marketing and sales objectives by taking these steps:– shortening the time a sales manager needs to

evaluate and respond to changing market needs– arranging activities efficiently– establishing and maintaining open channels of

communication with customers, salespeople, support staff, and concerned stakeholders


Types of Organizations

3.Functional

3.Functional

2.Line and staff

2.Line and staff

1. Line1.

Line

4.Matrix

organization

4.Matrix

organization

Types of organizations

Types of organizations

• Staff specialists have line authority, for example, a sales manager directs salespeople, but the sales training director also has authority over the sales force for training.

• Staff specialists have line authority, for example, a sales manager directs salespeople, but the sales training director also has authority over the sales force for training.

• Matrix organizations revolve around projects.

• Matrix organizations revolve around projects.

• Line organizations have few managers who have authority over specific functional areas of the business, such as production, finance, or sales

• Line organizations have few managers who have authority over specific functional areas of the business, such as production, finance, or sales

• Line and staff organizations have more functional areas and staff assistants to complete specialized support activities, such as marketing research or sales forecasting.

• Staff managers only make recommendations or assist line managers.

• Line and staff organizations have more functional areas and staff assistants to complete specialized support activities, such as marketing research or sales forecasting.

• Staff managers only make recommendations or assist line managers.


Matrix Organizations

• Matrix organizations encourage teamwork to maximize individual contributions.

• Team leaders are viewed as coordinators rather than as bosses.

• Matrix organizations are most effective in these circumstances:– projects or products are unique– team members are professionals in terms of expertise

and skills– project is of a short duration– speed and creativity are as important as cost


Line Organization for Marketing and Sales


Line-and-Staff Organization


Functional Organization


Matrix Organizations


Types of Sales Department Organizations

4.Market

4.Market

3.Function

3.Function

2.Product

2.Product

1. Geographic

1. Geographic

5. Combination of the

preceding four

5. Combination of the

preceding four

Types of salesdepartment

organizations

Types of salesdepartment

organizations


Geographic Sales Organization


Product Sales Organization

Honda has product lines that include the following:• automobiles• lawn mowers• generators• motorcycles


Functional Sales Organization


Customer/Market Sales Organization

• Aircraft manufacturers have different marketing efforts for the following :

• government

• military

• commercial markets


Combination Sales Organization—Organized by

Geography, Products, and Customers


Team Selling

• Selling teams frequently include individuals from diverse functional areas such as operations, finance, research and development, marketing, and sometimes even the CEO.

• Here are some reasons for adopting a team selling approach:– Information needs of customers are large.– Several people are involved in the

decision to buy.– The potential sale is large for the selling or

buying company or both.– Complexity of the products or services is

high and therefore beyond a single individual’s capabilities.

Source: Flying Colours Ltd.


Guidelines for Developing Sales Organizations

5.Flexibility

5.Flexibility

4.A reasonable

span of control

4.A reasonable

span of control 3.

Defined areas of authority and responsibility

3.Defined areas of

authority and responsibility

2.Approach

designed aroundsales activities

2.Approach

designed aroundsales activities

1. A market-oriented

approach

1. A market-oriented

approach

6. Coordination and

balance

6. Coordination and

balance

Salesorganizationsdevelopment

guidelines

Salesorganizationsdevelopment

guidelines


Size of the Sales Force

1.

Equalized workload

1. Equalized workload

3. Sales potential

3. Sales potential

2. Incremental productivity

2. Incremental productivity

Size of the sales forceSize of the sales force

assumes the sales force should be increased until profits added by the last salesperson hired equal the costs of employing that salesperson.

assumes the sales force should be increased until profits added by the last salesperson hired equal the costs of employing that salesperson.

assumes that the total workload in covering the market consists of three factors:a) customer sizeb) sales volume potentialc) travel time

assumes that the total workload in covering the market consists of three factors:a) customer sizeb) sales volume potentialc) travel time based on assumption of what

the average sales representative will achieve in annual sales volume, then divide by year sales forecasted

based on assumption of what the average sales representative will achieve in annual sales volume, then divide by year sales forecasted


Guidelines for Developing a High-Quality Sales Organization

• Be willing to delegate. • Be sure authority equals

responsibility. • Put salespeople where they fit

best. • Be more than just an efficiency

expert. • Hold sales personnel accountable

for what they do. • Be flexible. • Know what needs to be done. • Organize the sales force to avoid

unequal workloads.


Developing Sales Organizations

• To learn about optimizing sales organizations, go to– http://www.optimalthinking.com/sales-optimization.html

• To read a good article on sales force planning, go to – http://www.allaboutmedicalsales.com/articles/salesforcebusiness

planning_julianashley_291101.html

• To read white papers on organizing the sales force, go to– http://whitepapers.zdnet.com/presentation.aspx?&docid=81288&

promo=100511 (sign-in required)

– http://whitepapers.zdnet.com/presentation.aspx?&docid=81296&promo=100511 (sign-in required)


Ethical Situation: What Would You Do?

Discussion Question Each year, your regional sales manager asks you and the other district sales managers reporting to him to submit their requests for additional salespeople, if needed. You know that you already have enough salespeople to achieve next year’s assigned quota for your district, but you generally follow the self-serving budgeting rule: “Always request more salespeople and a higher sales budget than you actually need.” Even if you don’t get the additional resources, you can always use the lack of adequate resources as an excuse if your district underperforms.

chapter 6 introduction to sales management and its evolving roles powerpoint presentation prepared...

Documents

sales planning process

tactical sales planning

unsuccessful sales planning

sales of products

sales force performance

sales force source

budget planning

benefits of planning