07/06/10 1

By :

Prof. Amit Kumar

07/06/10 2

“A student pursuing management education from IILM-

Graduate School of Management, for example may find

himself or herself placed in a firm as a Sales Manager.

Our goal is to prepare the student for the exciting

challenges related to leading sales organizations in

today’s hyper-competitive global economy”.

IILM-GSM

Importance of this course

Selling & Sales Management

07/06/10

IILM-GSM

Selling & Sales Management

07/06/10

Contents

• Different Organization Structures

• Establishing Sales Territories

• Advantages of designing a sales territory

• Strategy Planning Matrix

• Factor Influencing the Design of Compensation Plan

• Types of Compensation Plan

– Financial

– Non-Financial

• Steps in Designing Compensation Plan

IILM-GSM

Selling & Sales Management Organization and Compensation

07/06/10

Sales Territory

A group of present and potential customers

assigned to an individual sales person, a group

of sales person, a branch, a dealer, a distributor or

a marketing organization at a given period of time.

IILM-GSM

Selling & Sales Management Designing and Organizing the Sales Force

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Sales Territory

Advantages of designing a sales territory :

it ensures better market coverage effective utilization of the sales force efficient distribution of workload among sales people it is convenient to evaluate the performance of sales people to control over the direct and indirect costs of the sales function optimum utilization of sales time by sales people

IILM-GSM

Selling & Sales Management Designing and Organizing the Sales Force

07/06/10

Designing Sales TerritorySelect the basic geographic

control units

Decide on the criteria for allocation

Decide on the starting point

Combine control units adjacent to starting point

Compare territories on allocation criteria and

conduct workload analysis

Assign sales force to new territories

Factors influencing the modifications of a territory:• mergers• market consolidation• split in division• sales force turnover• customer relocations• product life cycle change• product line change

Modify territorial boundaries to balance workload and potential

IILM-GSM

Selling & Sales Management Designing and Organizing the Sales Force

07/06/10

Territory Shapes

circlewedge

Clover leaf

IILM-GSM

Selling & Sales Management Designing and Organizing the Sales Force

07/06/10

Strategic Planning Matrix

Opportunity

Strategy

Opportunity

Strategy

Strategy

StrategyAllocate a moderate level of resources to maintain current advantage.

Either commit a minimal level of

resources to the account or consider

abandoning the account altogether.

The account offers stable opportunity since the sale organization has differential advantages to serving them.

Opportunity

Opportunity

The account offers little opportunity. Its potential is small and the sales organization is at a competitive disadvantage in serving it.

The account offers a good opportunity. It has high potential and the sales organization has a differential advantage in serving it.

Commit high levels of sales resources to take advantage of the opportunity.

The account may represent a good opportunity. The sales organization needs to overcome its competitive disadvantages and strengthen its position to capitalize on the opportunity.

Either direct a high level of sales resources to improve the position and to take advantage of the opportunity or shift resources to other accounts.

Strong Weak

High

Low

IILM-GSM

Selling & Sales Management Designing and Organizing the Sales Force

07/06/10

IILM-GSM

Selling & Sales Management Organization and Compensation

07/06/10

Factors Influencing the Design of a Compensation Plan

• Financial stability

• Size of the market

• Nature of the product

IILM-GSM

Selling & Sales Management Organization and Compensation

07/06/10

Factors Influencing the Design of a Compensation Plan

• Financial stability

The most important factor is the financial stability of a firm to pay to employee on a continuous basis at the current and future period of time. Org with higher profit margin will pay more.

If the company follows ‘pull strategies’, Reps will act as simply order taker, hence their salary will be less.

IILM-GSM

Selling & Sales Management Organization and Compensation

07/06/10

Factors Influencing the Design of a Compensation Plan

• Size of the MarketIf the size of the market is limited and salesperson has to put more efforts, he will demand higher salary.

When the organization launches a new product, it is difficult to sell the product in the market. Companies need to pay higher to the salespeople for pushing the new line product.

IILM-GSM

Selling & Sales Management Organization and Compensation

07/06/10

Factors Influencing the Design of a Compensation Plan

• Nature of the product

In an industrial market, where the sales is primarily B2B, the salesperson has to put more efforts in closing the sales compared to the B2C market. So, the salary expected in B2B markets are higher compared to those in B2C markets.

When unit price of the product is lower, salesperson will get lower remunerations.

IILM-GSM

Selling & Sales Management Organization and Compensation

07/06/10

Types of Compensation Plans

• Financial compensation

• Non-financial compensation

IILM-GSM

Selling & Sales Management Organization and Compensation

07/06/10

Financial Compensation

• Straight salary plan

• Straight commission plan

• Bonus and incentive

• Salary plus incentive (combination plan)

• Allied methods

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Selling & Sales Management Organization and Compensation

07/06/10

Financial Compensation

• Bonus is defined as one sum supplemental payment for above average

performance. Though it can be paid at any point of time, many companies

pay them at the end of the financial year. In Indian companies (MNE)

there is a practice of paying bonus during festival times for the benefit of

the people and in supporting their additional spending for celebrations.

• A good Incentive program costs nothing to the org. as the

salespeople are eligible to qualify for the incentive only after the

desired performance, but it can motivate people to deliver more to

achieve that goal.

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Selling & Sales Management Organization and Compensation

07/06/10

Financial Compensation

Allied Methods

• Profit Sharing Plan

– In this the company shares a part of profit with its sales staff and

sometimes distributes the equity holding of the company. It helps

to establish a sense of ownership and cordial relationship with

the salespeople.

• Special Remuneration Plan

• Expense Allowance Plan

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Selling & Sales Management Organization and Compensation

07/06/10

Non-Financial Compensation

• Promotions

• Recognitions programmes (GE Capital in India)

• Fringe benefits (medical, retirement, life insurance)

• Perks (Perks are a special category of compensation available to

employees with some special status or expertise in the

company. Like, provision for a car, housing, driver, club

membership )

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Selling & Sales Management Organization and Compensation

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Steps in Designing a Compensation Plan

• Determine sales force and compensation objectives

• Determine major compensation issues

• Implement long-term and short-term compensation plans

• Relate rewards to performance

• Measurement of performance

• Appraise the compensation plan

IILM-GSM

Selling & Sales Management Organization and Compensation