Beruflich Dokumente
Kultur Dokumente
CLOWES^
The results of this study of sales response functions in the retail apparel
industry indicate that territorial potential and sales representative's workload
are important predictors of sales. The findings are used to derive a model
to assist management in determining sales force size and evaluating sales
performance.
INTRODUCTION
Sales management has the responsibility of evaluating sales territories and the sales force. One important
step in this evaluation process is to identify variables
associated with sales. Although past research has
suggested the importance of territory characteristics
and workload as predictors of sales [1,2, 10], the
sample sizes have been small and the methodology,
in at least one case, questionable. This article presents
the results of a study of sales response as a function
of potential and workload in a situation offering much
better data than have been available in the past.
Review of Problem
The underlying research problem is to study the
relationship between sales achieved by a salesperson
and variables like territory potential and sales representative workload. Of course, these are not the only
variables which are useful in estimating sales results
in a territory; such characteristics as type of customers,
strength of competition, and company reputation as
well as the salesperson's own abilities and experience
can be important. However, potential and workload
are expected to be the most significant variables related
Past Research
Despite the fact that personal selling expenditures
exceed advertising expenditures by a considerable
amount, a search of the literature for the past 15
years found only 3 published studies which related
data on territory characteristics to sales [2, 6, 10].
Similarly, very few analytic approaches have been
published for resolving sales force allocation problems.
Some notable approaches are a method for designing
sales territories [5], procedures for allocating sales
representatives over customers [7] and products [9],
and several articles dealing with sales force compensation [3, 4, 12].
Although Semlow's study [10] is widely quoted,
Weinberg and Lucas [11] have shown that Semlow's
results are based on a spurious relationship. The major
problem with [10] is that the independent or predictor
variable, P,., appears in the denominator of the dependent or criterion variable, SyP:.
where:
Sj =
p. =
Wj =
XjpXjj, ...X^j =
*Henry C. Lucas, Jr. is Associate Professor of Computer Applications and Information Systems, New York University; Charles
B. Weinberg is Associate Professor of Marketing, Stanford University; Kenneth W. Clowes is a doctoral candidate in Computer and
Information Systems, Stanford University.
sales in territory i,
potential in territory i,
workload in territory i, and
k other factors pertaining to territory i or salesman i.
298
Journal of Marketing Research
Vol. XII (August 1975), 298-305
299
Table 1
VARIABLES IN THE STUDY
Symbol
Variable name
Sales
Potential
Number of buying
entities
Number of counties
Number of accounts
Description
Bookings by salesperson during
1972 season
Total men's and boy's retail sales
in 1972 in salesperson's territory apportioned according to
percentage of sales in the
county
Number of locations (e.g., sportswear section of men's department) capable of placing an
order
Number of counties in which
salesperson has accounts
Number of accounts in salesperson's territory
300
Table 2
TERRITORY CHARACTERISTICS
n
Si
Q.
Characteristics
Number of salespersons
Average sales (000)
Average potential (000)
Average number of buying entities
Average number of counties
Average number of accounts
East
83
Central
65
West
100
745(265)"
15,900(8200)
240(80)
9(6)
50(25)
680(270)
27,700(19,700)
345(100)
19(10)
62(25)
650(325)
61,000(37,800)
355(135)
20(14)
69(35)
S, = a , , + b , , P , +
(3)
S, =
W,. +
W,
In Sj = In a^ + ''21'"
+ ''22'"
'"
(5)
1 > b^i a 0
1 > bj2 ^ 0
0 > foj3> -
Table 3
COLLINEARITY ANALYSIS: SIMPLE CORRELATION MATRIX
Number of
buying Number of
Potential entities
counties
National (n = 129)'
Number of buying entities
Number of counties
Number of accounts
East (ft = 39)"
Number of buying entities
Number of counties
Number of accounts
Central (n = 33)"^
Number of buying entities
Number of counties
Number of accounts
West (n = 57)"
Number of buying entities
Number of counties
Number of accounts
.52=
.28'
.16
.64'
.59'
.48'
-.11
-.22
-.29
.71'
.75'
.61'
.32
.32
.38'
-.27
.30
.20
.54'
.11
.09
.58'
.58'
.46'
"Significant Regression Variables:
Linear: Potential, Counties
Curvilinear: Accounts, Potential.
''Significant Regression Variables:
Linear: Potential
Curvilinear: Potential.
'Significant Regression Variables
Linear: Potential, Buying Entities, Counties
Curvilinear: Potential, Buying Entities, Counties.
''Significant Regression Variables
Linear: Potential, Counties
Curvilinear: Potential, Accounts.
'Significant at .01 level, ( value varies according to sample size.
'Significant at .05 level, t value varies according to sample size.
301
302
Table 4
NATIONAL SAMPLE RESULTS
N^ = 119
N == 129"
Linear (Sates)
F = 11.04
R2 = .14")
Variable
Potential
Number of counties
Constant
F = 11.40
R2 = .24 Rl = .06
.003
-6.971
680.831
.35
-.29
4 .12
3 .34
Variable
Ln (Number of accounts)
Ln (Potential)
Constant
-.177
.111
6.020
-.32
.23
3.88
2.80
Table 5
REGIONAL SUBSAMPLE RESULTS
EAST
jV=39a
N^ = 44
Curvilinear (Ln (Sales))
Linear (Sates)
R2 = .52" Ill = .57=
R2 = .47 R2 = .57
F = 41.28
Variable
.024
372.980
Potential
Constant
p
.73
F =: 25.57
.479
1.971
Ln (Potential)
Constant
6.43
Variflb/e
.64
5.06
CENTRAL
N = 33
N , = 32
Curvilinear (Ln (Sales))
Linear (Sales)
Variabte
Potential
Number of buying entities
Number of counties
Constant
F- = 7.29
R2 = .38 Rl = .15
F = 8.24
R^ = .40 R \ = -23
.006
1.252
-9.279
245.237
.46
.46
-.35
3.13
3.03
2.30
Variabte
Ln (Potential)
Ln (Number of buying entities)
Ln (Number of counties)
Constant
.241
.608
-.227
1.143
.43
.46
-.39
2.97
2.95
2.50
WEST
57
N^ = 43
Curvilinear (Ln (Sales))
Linear (Sates)
R2 = .24 R I = -39
Variabte
Potential
Number of counties
Constant
R2 = .27 Rl = .28
F = 9.74
.004
-6.593
539.910
.46
-.28
3.92
2.37
Variabte
Ln (Potential)
Ln (Number of accounts)
Constant
F =
B
.272
-.180
4.168
10.33
/3
.43
-.29
t
3.67
2.51
RESULTS
For the national sample results in Table 4 and the
regional subsample results in Table 5,'* all of the
predicted structural conditions are met. Potential and
''The subsample regression results might be an artifact because
each region has a different penetration. Since penetration is SJ P.,
the sum of sales divided by potential is constrained in the regression.
However, the standard deviation of penetration was the highest
in the Eastern Region, next highest in the Central, and lowest in
the West. Therefore, it does not appear that a reduction in variance
of S|/Pj is responsible for the findings.
account quality have positive coefficients in the equations, while workload measures have coefficients
which are less than zero. For the curvilinear model,
the exponent parameters have an absolute value between 0 and 1 indicating decreasing returns to scale
as predicted by the relations in (5). In all cases except
for the curvilinear model run on the national data,
potential is the first variable to enter and has the
highest beta weight on the independent variables. In
the national curvilinear model, potential was the second variable to enter.
It is interesting to note that there is little difference
303
Maximize
,P
W\
Z = mnf | , | - en
>n n
where:
m = profit margin per unit sold,
n = number of salesmen,
c = cost per salesman (not including commissions
which are deducted from m),
P = total corporate potential, and
VV = total corporate workload.
An optimization procedure can be developed to find
the value of n which maximizes Z.
Before solving (6), it is necessary to discuss some
of the limitations of the model. First, it is virtually
impossible to create equal potential or equal workload
territories given geographic differences in almost all
demographic and economic indicators. In addition,
the characteristics of an area change over time while
territory boundary decisions tend to be relatively long
term. Second, the controllable variables are not
independent. Thus, it may not be possible to create
a set of territories with a specific set of potential
and workload characteristics. Third, even if the above
304
(7)
(8)
In addition to the limitations of this approach mentioned earlier, (8) should be used with caution. The
solution for n is very sensitive to the magnitude of
b, + i)^- ^f '^he reciprocal of this sum is large, say
greater than 1.5 or 2, the solution for n will be extremely
sensitive to the variations in the other variables in
(8). Also, n is very sensitive to the ratio m/c, the
profit margin per unit divided by the cost of employing
a sales representative.
To use the normative model, the sales manager
should estimate the appropriate sales response functions and determine the values for the other parameters
in (6). Then (8) can be solved and a thorough sensitivity
analysis performed. If the sensitivity analysis shows
that the model is robust for the estimated parameter
values, the optimal value of n should be used as
directional information indicating whether or not to
alter the size or allocation of the sales force.
CONCLUSIONS
This study has shown that territorial potential and
sales representative's workload are associated with
territorial sales for a company in the retail apparel
industry. Linear and curvilinear sales response models
both fit the data about equally well. Regional analyses
of the sales response functions were more informative
than an analysis for the entire nation, possibly reflecting variations across regions which were a result of
the past marketing efforts of the company and the
competition. The results suggest that territorial potential is a more important determinant of territorial sales
than sales representative's workload for this company,
but, more generally, that both should be measured
in future studies.
There has been a dearth of research on sales force
response functions despite the importance of personal
selling and the magnitude of money spent on it. Further
research should include replications of the study
presented here in other settings. It should also include
additional data, if possible, on characteristics of territories or regions to help explain the regional variations
that may be observed and data on other marketing
and competitive variables which may change differentially across territories. Finally, there is a need to
try to measure dynamic effects.
REFERENCES
1. Cravens, David W. and Robert B. Woodruff. "An
Approach for Determining Criteria of Sales Performance," Journal of Applied Psychology, 57 (June 1973),
242-7.
2.
, and Joe C. Stamper. "An Analytical Approach
for Evaluating Sales Territory Performance," Journal
of Marketing, 36 (January 1972), 31-7.
3. Davis, Otto A. and John U. Farley. "Allocating Sales
Force Effort With Commissions and Quotas," Management Science, 18, Part II (December 1971), P55-P63.
4. Farley, John U. "An Optimal Plan For Salesman's
Compensation," Journal of Marketing Research, I (May
1964), 39-43.
5. Hess, Sidney W. and Stuart A. Samuels. "Experience
With a Sales Districting Model: Criteria and Implementation," Management Science, 18, Part II (December
1971), P41-P54.
6. Lambert, Zarrel V. Setting the Size For the Sales Force.
State College, Penn.: Pennsylvania State University
Press, 1968.
7. Lodish, Leonard M. "Call Plan: Interactive Salesmen
Call Planning System," Management Science, 18, Part
11 (December 1971), P24-P40.
305