Dr. S. BornaDr. S. BornaMBA 671MBA 671

Lecture OutlineLecture Outline

Conditions under which Conditions under which personal selling effort is morepersonal selling effort is moreimportantimportant

Sales Force Management DecisionsSales Force Management Decisions

Sales force organizationSales force organization

Sales force SizeSales force Size

Sales force CompensationSales force Compensationsales force evaluationsales force evaluation

Promo-toolsPromo-tools

Ad.Ad. PersonalPersonal Sales PublicitySales Publicity SellingSelling PromotionPromotion

Conditions under which Conditions under which personal selling effort is morepersonal selling effort is moreimportant:important:

1. Product is complex and requires1. Product is complex and requires a good deal of presale or post a good deal of presale or post sale service;sale service;

2. Target market is large and 2. Target market is large and geographically concentrated;geographically concentrated;

3. Firm is pursuing a marketing 3. Firm is pursuing a marketing strategy aimed at taking marketstrategy aimed at taking market share away from the establishedshare away from the established competitors;competitors;

4. Firm has limited promotional4. Firm has limited promotional resourcesresources

Advantages of Sales Force As AAdvantages of Sales Force As ACommunication Tool:Communication Tool:

1. It is face-to-face communication1. It is face-to-face communication with potential customer.with potential customer.

2. Message can be tailored to the 2. Message can be tailored to the needs of the target audience.needs of the target audience.

3. Because of immediate feedback,3. Because of immediate feedback, sales representative knows whensales representative knows when a particular sales approach is a particular sales approach is working or not.working or not.4. More complex and large amounts4. More complex and large amounts of information can be transmittedof information can be transmitted to the customer.to the customer.5. Personal relationship can be5. Personal relationship can be established.established.

The average cost of a personalThe average cost of a personalsales call: 250-500.sales call: 250-500.

It takes between 3 to 4 calls to It takes between 3 to 4 calls to close a sale close a sale

Need for Effective ManagementNeed for Effective Managementof Sales forceof Sales force

Sales Force Management Sales Force Management DecisionsDecisions

1. Defining Sales Force 1. Defining Sales Force ObjectivesObjectives

2. Planning the sales force program2. Planning the sales force programa. Sales force organizationa. Sales force organizationb. Territory design & deploymentb. Territory design & deploymentc. Setting quotasc. Setting quotas

d. Formulating accountd. Formulating account management policiesmanagement policies

3. 3. Implementing the sales planImplementing the sales plana. selecting & recruitinga. selecting & recruitingb. training salespeopleb. training salespeoplec. compensation & rewardc. compensation & reward

4. 4. Evaluation and controlEvaluation and control

Personal Selling ObjectivesPersonal Selling Objectives

Objectives can vary acrossObjectives can vary acrosscompanies.companies.

A company may focus on one orA company may focus on one ormore of the following objectives:more of the following objectives:

1. Winning acceptance of new products by 1. Winning acceptance of new products by existing customers existing customers

2. Developing new customers 2. Developing new customers for existing products for existing products (a push strategy)(a push strategy)

3. Maintaining Customer Loyalty3. Maintaining Customer Loyalty

4. Communicating product information 4. Communicating product information to potential customers. to potential customers.

5. Gathering market information.5. Gathering market information.

Salesforce ObjectivesSalesforce Objectives

ProspectingProspectingCommunicatingCommunicatingSellingSellingServicingServicingInformation Information gatheringgathering

HuntersHuntersDetail menDetail menFarmersFarmersMaintenanceMaintenanceIntelligenceIntelligence officersofficers

Territorial-structured sales forceTerritorial-structured sales force

Product-structured sales forceProduct-structured sales force

Customer-structured sales forceCustomer-structured sales force

Organization by selling functionOrganization by selling function

Sales force organizationSales force organization

The Question of Territory SizeThe Question of Territory Size

Two ApproachesTwo Approaches

Equal Territory PotentialEqual Territory Potential

Equal Work-LoadEqual Work-Load

Sales force SizeSales force SizeDifferent Sales force Size DecisionsDifferent Sales force Size Decisions

Size of Total Generalized Size of Total Generalized Sales forceSales force

Total size of all SpecializedTotal size of all Specialized Sales forcesSales forces

No. of salespeople assignedNo. of salespeople assigned to districts, zones, or regionsto districts, zones, or regions

Size ofSize ofeach each specializedspecializedsales forcesales force

Workload Approach to Sales Workload Approach to Sales Force SizeForce Size

Workload Approach to Sales Workload Approach to Sales Force SizeForce Size

Classify customers by sizeClassify customers by size Determine desirable call frequenciesDetermine desirable call frequencies Determine total sales calls needed per Determine total sales calls needed per

yearyear Determine average number of sales Determine average number of sales

calls per sales representative per yearcalls per sales representative per year Divide total by number per repDivide total by number per rep

Allocation of Sales force EffortAllocation of Sales force Effort (Call Norms)(Call Norms)

How much selling effort is needed toHow much selling effort is needed tocover accounts and prospects?cover accounts and prospects?

Three analytical tools are availableThree analytical tools are availableto answer the above question:to answer the above question:

1. Single factor models1. Single factor models2. Portfolio models2. Portfolio models3. Decisions models3. Decisions models

Decision ModelsDecision Models

Increase the sales Increase the sales callscalls until the until the marginal costs equals theirmarginal costs equals theirmarginal revenues.marginal revenues.

Need to develop a responseNeed to develop a responsefunctionfunction

Portfolio ModelsPortfolio ModelsAccount OpportunityAccount Opportunity

Competitive Pos.Competitive Pos.

(Competitive position: Strength of the (Competitive position: Strength of the relationship)relationship)

LL HH

HH

LL

Single Factor ModelsSingle Factor Models

The typical procedure is to classifyThe typical procedure is to classifyall accounts on one factor, such asall accounts on one factor, such asmarket potential, size, etc. and market potential, size, etc. and assign all accounts in the sameassign all accounts in the samecategory the samecategory the same number of salesnumber of salescalls.calls.

Single factorSingle factormodelsmodels

Easy to develop and useEasy to develop and use

Low AnalyticalLow AnalyticalRigorRigor

PortfolioPortfoliomodelsmodels

High AnalyticalHigh AnalyticalRigorRigor

Decision Decision modelsmodels

Difficult to develop and useDifficult to develop and use

Sales Force CompensationSales Force Compensation

How Companies compensate theirHow Companies compensate theirsales forcessales forces

Straight Salary 23%Straight Salary 23%All Commission Plans 27%All Commission Plans 27%

Straight Commissions 24%Straight Commissions 24%Commissions + Bonus 3%Commissions + Bonus 3%

All Commission Plans 50%All Commission Plans 50%Salary + Commissions 11%Salary + Commissions 11%Salary + Bonus 28%Salary + Bonus 28%Salary+Comm.+Bonus 11%Salary+Comm.+Bonus 11%

Managing Sales force Reward Managing Sales force Reward SystemsSystems

Types of Sales force rewardTypes of Sales force rewardRanked in order of Preference:Ranked in order of Preference:

PayPayPromotionPromotionSense of AccomplishmentSense of AccomplishmentPersonal Growth OpportunitiesPersonal Growth OpportunitiesJob SecurityJob Security

30,00030,000

8% commission

8% commission

$300,000$300,000

salessales

straightstraightsalarysalary

24,00024,000

20,00020,000

$$

Management must determineManagement must determinethe the levellevel andand componentscomponents ofofan effective compensationan effective compensationplanplan

Level: Should it be higher orLevel: Should it be higher orlower thanlower than going market rategoing market rate??

Components: Fixed and variableComponents: Fixed and variableamounts; fringe benefitsamounts; fringe benefits

NON-FINANCIAL COMPENSATION NON-FINANCIAL COMPENSATION

1. Career advancement through1. Career advancement through promotionpromotion

2. Sense of accomplishment 2. Sense of accomplishment note:note: cannot be delivered to thecannot be delivered to the salesperson from the salesperson from the organization.organization.

cont.cont.

3. Opportunity for Personal Growth3. Opportunity for Personal Growth (example, college tuition(example, college tuition reimbursement programs)reimbursement programs)

4. Recognition4. Recognition

5. Job Security5. Job Security

Setting QuotasSetting Quotas

Starting point is sales forecasts forStarting point is sales forecasts foreach territory, product line, etc.each territory, product line, etc.

Goals in dollar salesGoals in dollar salesunit salesunit salesprofit marginsprofit marginsor specific activitiesor specific activities(e.g. to make 24 presentation)(e.g. to make 24 presentation)

Setting Sales QuotaSetting Sales Quota

Advantages and disadvantagesAdvantages and disadvantagesof setting sales quotas tooof setting sales quotas toohigh or too lowhigh or too low

Implementing the sales plan:Implementing the sales plan:

a. Selecting & recruitinga. Selecting & recruitingb. Training salespeopleb. Training salespeoplec. Compensation & rewardc. Compensation & reward

Staffing the Sales force: RecruitmentStaffing the Sales force: Recruitmentand Selectionand Selection

Importance of Recruitment and Importance of Recruitment and selection:selection:1. Reduction in training costs1. Reduction in training costs2. Less supervisory problems2. Less supervisory problems3. Lower turnover rates3. Lower turnover rates4. “Optimum” sales force 4. “Optimum” sales force performanceperformance

What makes a good What makes a good salesperson?salesperson?

Looking for good predictorLooking for good predictortraits.traits.

Steps involved in Recruiting and Steps involved in Recruiting and Selecting Salespeople:Selecting Salespeople:

StepStep oneone

Planning for Recruiting and SelectionPlanning for Recruiting and Selection

1. R. and S. Objectives1. R. and S. Objectives2. Job Analysis2. Job Analysis3. Job Qualifications3. Job Qualifications4. Job Description4. Job Description

Recruitment:Recruitment:

Locating prospective candidatesLocating prospective candidatesInternal SourcesInternal SourcesExternal SourcesExternal Sources

Step 2Step 2

Selection: Evaluation and HiringSelection: Evaluation and Hiring

1. Screening Resumes and 1. Screening Resumes and Applications.Applications.

2. Initial interview2. Initial interview

3. Intensive Interview3. Intensive Interview

4. Testing4. Testing

Step 3Step 3

cont.cont.

5. Assessment Centers5. Assessment Centers

6. Background Investigations6. Background Investigations

7. Physical Examination7. Physical Examination

8. Selection Decision (Job Offer)8. Selection Decision (Job Offer)

Continual Development of the Continual Development of the Sales force: Sales TrainingSales force: Sales Training

Knows the company?Knows the company?YES YES NONO

KnowsKnowsthetheProduct?Product?

NONO

New proceduresNew proceduresNew productsNew productsNew customersNew customers

Emphasis onEmphasis onProductProduct

CompanyCompanyregulationregulationProceduresProcedures

Both Both Product &Product &CompanyCompany

YESYES

Sales force MotivationSales force Motivation

INTENSITYINTENSITY: Amount of Physical and: Amount of Physical andmental effort put forth by the mental effort put forth by the salespersonsalespersonPERSISTENCEPERSISTENCE: : Salesperson’s Salesperson’s choice to expend effort over a choice to expend effort over a period of time.period of time.DIRECTIONDIRECTION: Where the efforts of : Where the efforts of salesperson will be spent.salesperson will be spent.

Evaluation and ControlEvaluation and Control

Evaluating Sales RepresentativeEvaluating Sales Representative

Formal Evaluation of Formal Evaluation of Performance (need for Performance (need for developing evaluative criteria)developing evaluative criteria)

Person-to-Person ComparisonsPerson-to-Person Comparisons

Current-to-past Sales Current-to-past Sales ComparisonsComparisons

Evaluation and Control of SalesEvaluation and Control of SalesPerformancePerformance

Limitation of Limitation of Total Dollar Sales Vol.Total Dollar Sales Vol.

1. Product or Product Group1. Product or Product Group2. Class of Customer2. Class of Customer3. Marketing Channel3. Marketing Channel4. Time Periods4. Time Periods

Salesman ActivitySalesman ActivityDays worked; calls per day; Days worked; calls per day; calls per customer; orders per call; calls per customer; orders per call; size of ordersize of order

Supervising SalespeopleSupervising Salespeople

Establishing Standard ofEstablishing Standard ofPerformancePerformance

Maintaining Communication LinkMaintaining Communication Link

Interpreting and Enforcing PolicyInterpreting and Enforcing Policyand Proceduresand Procedures

Step 1. Prospecting and Qualifying

Step 1. Prospecting and Qualifying

Identifying and Screening For Qualified Potential Customers.

Steps in the Selling ProcessSteps in the Selling Process

Learning As Much As Possible About a Prospective Customer

Before Making a Sales Call.

Learning As Much As Possible About a Prospective Customer

Before Making a Sales Call.Step 2. Pre-approachStep 2. Pre-approach

Step 3. ApproachStep 3. ApproachKnowing How to Meet the Buyer

to Get the Relationship Off to a Good Start.

Knowing How to Meet the Buyerto Get the Relationship Off

to a Good Start.

Step 4. Presentation/ Demonstration

Step 4. Presentation/ Demonstration

Telling the Product “Story” to the Buyer, and Showing the

Product Benefits.

Telling the Product “Story” to the Buyer, and Showing the

Product Benefits.

Steps in the Selling ProcessSteps in the Selling Process

Step 5. Handling Objections Step 5. Handling Objections

Step 6. Closing Step 6. Closing

Step 7. Follow-Up Step 7. Follow-Up

Seeking Out, Clarifying, and Overcoming

Customer Objections to Buying.

Asking the Customerfor the Order.

Following Up After the Sale toEnsure Customer Satisfaction

and Repeat Business.