How many salespeople needed (or

salesforce size) to achieve a firms sales

and profit objectives is a key decision
Methods available to decide optimum
salesforce size are as follows:

Workload
Sales potential (or breakdown)
Incremental

We shall discuss these methods briefly:

Assumption: All salespeople have equal workload

Steps involved to calculate salesforce size are:
1) Classify customers as per their sales potential
2) Decide time per sales call and call frequencies for
each class of customers
3) Calculate total market workload = (1) x (2) in
hours
4) Decide total work time available per salesperson
5) Divide total work time available by different
activities per salesperson in hours
6) Calculate total number of salespeople needed

total market workload (3)

total selling time available per salesperson (5)

Workload Method (Continued)

Advantages: simple method, conceptually sound, used

for all types of selling situations
Disadvantages: Neglects sales productivity & sales
force turnover

Sales Potential / Breakdown Method

In this method, the Sales Manager assumes the

productivity of the average sales person. N=Number of
salespeople needed, or sales
force size
S
N

(1 T )

S=Annual sales forecast for the company in value (Rs.

Million)
P=Estimated productivity of the average salesperson in
sales (Rs. Million)
T=Estimated percentage of annual sales force turnover
Advantages: Simple and straight forward
Disadvantages: Conceptually weak; lead time needed
for a new salesperson to reach average productivity

It is based on marginal analysis theory of

economics
Basic concept: Net profits will increase when
additional salespeople are added, if the
incremental
sales
revenues
exceed
the
incremental costs
Merit: Conceptually accurate, as it quantifies
relationships between salesforce size, sales,
costs, profits
Demerit: Can not be used if historical data on
sales and costs are not available

It is one of the most challenging and

important responsibilities / activities of sales
management
Salesforce Staffing Process includes following
stages:
Planning
Recruiting
Selecting
Hiring
Socialisation
We shall briefly discuss each of the above
stages

It consists of three steps:

Establish responsibility for staffing process
Decide number of salespeople needed
Outline the type of salespeople needed
Establish responsibility for staffing process
Company management decides responsibilities
for various stages / activities of staffing process
Generally in a medium / large size company,
middle and senior levels H.R. and sales
managers are responsible
Proper coordination needed between sales,
marketing, and HR executives

Steps followed by each territory sales manager to

plan requirement of sales people:
1) Decide optimum salesforce size (using methods
discussed earlier)
2) Add number of promotions, retirements, transfers
out, terminations, resignations expected from
existing salespeople
3) Subtract expected transfers into the territory and
existing salesforce
4) Make a total of new salespersons needed
Territory sales managers submit their requirements
to national / general sales manager, who calculates
the total number of new salespersons to be hired

The steps involved in the process are:

Conducting a job analysis
Preparing a job description
Developing job qualifications / specifications

Conducting a Job Analysis

It is done by a person from sales / H. R.
department, or a consultant. It consists of two
tasks:
(1) Analyse environment in which the
salesperson would work E.G. nature of
customers, competitors, products.
(2) Determine duties and responsibilities of the
salesperson. Obtain information from sales
managers, customers, etc.

It is a written document developed from the

job analysis
The detailed job description is a useful tool
for
recruiting,
selecting,
training,
compensating, and evaluating salespeople
Some of the points it generally covers are:
Job title, reporting relationship, types of
products / services sold, types of customers,
duties and responsibilities, location and
geographic area to be covered

Recruiting include activities to get individuals

who will apply for the job
The general purpose of recruitment is to get
enough qualified candidates, to enable company
select the right persons
H.R.
and
sales
managers
must
update
information
on
government
employment
regulations
Recruiting stage / process includes following
activities:
Finding the sources of sales recruits
Evaluating and selecting recruiting sources
Contacting candidates through the selected
source

For identifying prospective candidates, firms use

internal and external sources. They include:
Internal Sources

Employee referral
programmes
Current employees
Promotions and transfers

External Sources
Advertisements in
newspapers and journals /
magazines
The Internet (job sites)
Educational institutions
Employment agencies
Job fairs
Other companies

Recruiting sources are evaluated based on the

database built over number of years
Evaluating factors are:
Performance rating of salespeople, after 2 years
working
Percentage of salespeople retained, after 2
years working
Total cost of recruiting
Selecting most effective source of recruiting at
least cost
For a new company, selection depends on cost
Contacting candidates through the selected
source is done by H. R. department

Selection process consists of seven major

selection steps / tools
Companies differ in using selection tools,
depending on expenditure budget and time
available
Major selection tools / steps are:
Screening resumes
Application blank
Initial interview
Intensive interview
Testing
Reference check
Physical examination

Screening Resumes

It is done when the company receives many

resumes
This step / tool not required, if somebody else like
employment agency does initial screening
Initial screening of resumes are done by
comparing with job specifications

Application Blank

Widely used, it is a methodical way of collecting

relevant information from the applicant
Advantages of using application blank (also called
formal application form) are:
(1) Easy comparison of many applicants
(2) Useful for asking question during interview
sessions

Widely used selection tool

A good predictor of the candidates performance
Initial interviews are used for screening candidates
Intensive interviews are conducted to get indepth
view of candidates
Interview structure / type of interviews:
Structured / patterned / guided interviews
Unstructured / non-directed / informal interviews
Semi-structured interviews
Behaviour and performance based interviews
Stress interviews
Purpose is to decide a candidates fitness for a job

Many firms use tests as a selection tool EG P&G, IBM

Purpose of testing: To find whether applicants have traits
/ characteristics that lead to success in sales job
Type of selection tests:
Aptitude tests measure ability for selling and learning
Intelligence tests find out mental intelligence or
intelligence quotient (IQ)
Interest tests find out level of interest in a sales career
Knowledge tests measure knowledge of products,
markets, etc
Personality tests find out attitude or traits like
empathy, self-confidence
Tests must have reliability and validity
Tests should be one of the selection tools and not the
only tool

Reference Checks

They are important due to possibilities of resume

frauds and false personal information
They are done by letters / e-mails, telephones, or
personal visits
Instead
of
candidates
references,
previous
employers / customers to be included for reference
checks

Physical Examination

Objective is to find a physical problem that may

prevent job performance of an applicant
Most companies want their prospective employees to
undergo physical examination
Increasing number of firms ask applicant to complete
the health information form without seeing a medical
doctor

Hiring Stage

After completing selection process, a list of candidates

to be hired is made
In hiring stage, two activities are performed:
(1) The company making the job offer
(2) Persuading the applicant to accept it

Socialisation Stage

It is the process through which new salespeople learn

values, norms, attitudes, and behaviour of people
working in the firm
Socialisation
process
starts
before
the
new
salesperson accepts the job offer and continues until
the person is assimilated into the company culture
Assimilation is the second stage of socialisation
process
Companies have this process, in order to retain new
salespeople

Compensation and Motivation of

Sales Force

Motivational theories or behavioural concepts that

are relevant to motivation of salespeople are:
Maslows hierarchy of needs
Hertzbergs dual-factor
Vrooms expectancy
Churchill, Ford, and Walker model of salesforce
motivation, shown hereunder:

Motivation

Effort

Performance

Reward

Satisfaction

Sales manager should know each salesperson

and understand his / her specific needs

For designing or selecting a mix of motivational

tools, a compromise between differing needs of
customers, salespeople, and the company
management becomes necessary

Motivational tools are divided into (1) financial,

and (2) non-financial. These are shown in the
next slide

Financial
Financial compensation plan
Salary
Commission/Incentive
Bonus
Fringe benefits
Combination
Sales contests

Non Financial
Promotion
Sense of accomplishment
Personal growth
opportunities
Recognition
Job security
Sales meetings
Sales training programmes
Job enrichment
Supervision

Financial compensation is the most widely used tool

of motivation, as salespeople give highest value to it

A good compensation plan should consider

objectives from the companys and salespeoples
viewpoint
Objectives of compensation plan from the
companys viewpoint
To attract, retain, and motivate competent
salespeople
To control salespeoples activities
To be competitive, yet economical: It is difficult
to balance these two objectives
To be flexible to adapt to new products, changing
markets, and differing territory sales potentials

To have both regular and incentive income

Regular income by fixed salary to take care of
living expenses
Incentive income for above average performance

To have a simple plan, for easy understanding

This is in conflict with the objective of flexibility

To have a fair payment plan

Fair or just payment to all salespeople is ensured
by selecting measurable and controllable factors

Designing a new compensation plan or revising

an existing plan consists of the following steps:
Examine job descriptions
Set up specific objectives for salespeople
Decide levels of pay / compensation
Develop the compensation mix
Decide indirect payment plan or fringe benefits
Pretest, administer, and evaluate the plan

We shall examine these steps briefly

Examine Job Descriptions

Separate job descriptions are required for different

sales positions or jobs E.G. missionary salesperson,
senior salesperson, key account executive
Each job description should include responsibilities
and key performance standards, to decide how much
to pay

Set up Specific Objectives for Salespeople

These are derived from companys sales and

marketing objectives
Salespeople should have some control on the
objectives E.G. number of sales calls made
Objectives should be measurable. E.G. sales volume,
selling expenses

It means the average pay or money earned per year (or

month)
It is important to decide levels of pay for all sales positions
It is decided based on the following factors:
Levels of pay for similar positions in the industry
Levels of pay for comparable jobs in the company
Education, experience, and skills required to do sales job
Cost of living in different metros and cities
Annual average pay levels vary between industries, within
the same industry, and sometimes within the company
Firms decide a range of average pay, instead of a specific
pay
Salespeople earn pay depending on their and company
performance

Widely used elements of compensation mix are:

(1) salaries, (2) commissions, (3) bonuses, (4)
fringe benefits (or perquisites)
Expense allowances or reimbursements like
travel, lodging, etc are not included
Basic types of compensation plans are:
Straight salary
Straight commission
Combination of salary, commission, and / or
bonus
68 percent companies use combination plan and
balance 32 percent firms use straight salary or
straight commission
We shall briefly examine above compensation
plans

Characteristics:
100 percent compensation is salary, which is a fixed
component
No concern for sales performance or salespersons efforts
This plan is suitable for sales trainees, missionary
salespeople, and when a company wants to introduce a
new product or enter a new territory
Advantages:
Salespeople get secured income to cover living expenses
Salespeople willing to perform non-selling activities like
payment collection, report writing
Simple to administer
Disadvantages:
No financial incentive to salespeople for more efforts and
better performance. Hence, superior performance may not
be achieved
May be a burden for new and loss-making firms

Characteristics:
It is opposite of straight-salary plan
Most popular commission base is sales volume or
profitability
Commission rate is a percentage of sales or gross
profit
This plan is generally used by real estate, insurance,
and direct-sales (or network marketing) industries
Advantages:
Strong financial incentive attracts high performance,
removes ineffective salespeople and improves
results
Controls selling costs and requires less supervision
Disadvantages:
Focus is on sales and not on customer relationship
Salespeople may pay less attention to non-selling
activities

Characteristics:
Combines straight salary & straight commission plan
Four types of combination plans used by companies:
1) Salary plus commission: suitable for getting
improved sales and customer service
2) Salary plus bonus: a bonus is a lumpsum, single
payment, for achieving short-term objectives. This
plan is used for rewarding team performance
3) Salary plus commission plus bonus: suitable for
increasing sales, controlling salesforce activities,
and achieving short-term goals. Also suitable for
selling seasonal products like fans
4) Commission plus bonus: Not popular. Used for
team selling activities for selling to major
customers

Advantages:
Flexible to reward and control salesforce activities
Security for living costs and incentives for superior
performance for salespeople
Rewards specific sales performance
Different plans for different sales positions / jobs
Disadvantages:
Complex and difficult to administer
May not achieve objectives if not properly planned,
implemented and understood
Indirect payment plan, also called fringe benefits or
perquisites, help in attracting and retaining people,
but have now come under government tax in India

Pretesting the new / proposed Compensation Plan:

Companies pretest a new (or proposed) plan, before
adoption
Either it is simulated on a computer, or pretested at
one / more branches for 6-12 months
It should involve all concerned people
Administering the new compensation plan
Announce the plan in advance
Explain the new plan and reasons for changing the
previous plan
Outsource administration if plans are changed
frequently
Evaluating the new compensation plan
Find if objectives of the plan are achieved
Some companies audit compensation plans

Leading the Salesforce

Leadership is the ability to

achievement of objectives
Leadership is necessary for
effectiveness

influence

people

managers

sales

to

Leadership Styles

Transactional leadership equates to supervision relating

to day-to-day operations & control, and task-orientation
Transformational leadership changes values and attitudes
of followers, who perform beyond expectations
Situational leadership uses a style that fits the situation

Leadership skills

Leadership skills required by an effective sales manager

are: communication, problem-solving, and interpersonal

Supervising is directing and controlling day-to-day

activities of salespeople
It is a part of leadership
Sales managers use a combination of methods to
supervise salespeople
Methods of supervision are classified into two
categories direct and indirect

Direct Supervisory Methods

Indirect Supervisory Methods

Telecommunications
Sales meetings
Personal contacts
Coaching / Mentoring

Sales reports
Compensation plan
Sales analysis
Expense accounts

Sales training process consists of need assessment,

designing, executing, evaluating, and reinforcing
Methods used for need assessment include
observation, survey, performance testing, job
description, and audit of salesforce
Designing sales training programme require five
decisions, called ACMEE: Aims, Content, Methods,
Execution, Evaluation
Execution of training programme includes preparing
time-table, arranging trainers, travel booking,
conference hall, teaching aids, etc.
Evaluation of training is done to improve design &
implementation, and find if expenditure was
worthwhile
Methods used for reinforcement include refresher
training, web-based, and coaching salespeople

Motivation is the effort salesperson makes to perform

various activities of sales job
Out of the various financial and non-financial tools of
motivation, financial compensation is most widely used
68 percent companies use combination compensation
plan, and 32 percent use straight salary / commission
plans
Leadership is necessary for a sales managers
effectiveness
Leadership styles are transactional, transformational,
and situational
Leadership skills include communication, problemsolving, and interpersonal
Supervising, a part of leadership, is directing &
controlling day-to-day activities of salespeople

Companies use sales meetings and conventions as an

additional motivating tool to stimulate sales force
effort.
Regularly held sales meeting provide:

A break from routine

A chance to meet senior managers and other sales people
It is important tool for motivation
Important tool for communication and education

Meeting can be in form of National or Regional

Convention
Local meetings are held weekly or monthly at the
district or at branch offices.
Many companies are realizing the benefits of
videoconferencing and are using them to inform and
motivate the entire sales force of the company at one
time.

Sales Training Program

Job enrichment
Supervision

Sales contests are short term Incentive programmes

that can be effective motivational tool.
A sales contest should have a specific purpose, such as:
Increase in Sales
Sales of slow-moving products
Getting new customers

The design of the sales contest should consider the

following points

Each Sales person has an equal opportunity to win

Use of Sales Quotas
Prizes should be attractive, consisting of cash prizes,
merchandize and travel
At least 10% of the contest budget should be spent on
promotion
Care should be taken to ensure that salespersons do not use
undesirable methods.

Non Financial Rewards

Promotion
Sense of accomplishment
Personal Growth opportunities
Recognition
Job Security

Sales

Budget

A sales budget is a detailed schedule showing

the expected sales for the budget period;
typically, it is expressed in both dollars and
units of production.

An accurate sales budget is the key to the

entire budgeting in some way.

If the sales budget is sloppily/Messily done

then the rest of the budgeting process is
largely a waste of time.

The sales budget will help determine how

many units will have to be produced.

Thus, the production budget is prepared

after the sales budget.

The production budget in turn is used to

determine the budgets for manufacturing
costs including the direct materials budget,
the direct labor budget, and the
manufacturing overhead budget.

These budgets are then combined with data

from the sales budget and the selling and
administrative expenses budget to
determine the cash budget.

In essence, the sales budget triggers a

chain reaction that leads to the
development of the other budgets.

The selling and administrative expenses

budget is both dependent on and a
determinant of the sales budget. This
reciprocal relationship arises because sales
will in part be determined by the funds
committed for advertising and sales
promotion.

What are Sales Quotas?

Sales quotas are sales goals or targets set by a
company for its marketing / sales units for a time
period
Marketing / sales units are regions, branches,
territories, salespeople, and intermediaries
Generally, company sales budget is broken down to
sales quotas for various marketing units
Objectives of Sales Quotas
To use quotas as performance standards or
performance goals
To control performance
To motivate people by linking quotas to compensation
plans
To identify strengths and weaknesses of the company

Organisations set many types of sales quotas: (1)

sales volume, (2) financial, (3) activity, (4)
combination
Sales volume quotas
For effective control, sales volume quota should
be set for the smallest marketing units, such as
salesperson, districts / branches, product
items / brands
Sales volume quotas can be stated in (a) rupees
/ dollars, (b) units, or (c) points
Rupees / dollars sales volume quotas are
appropriate when salespeople are required to
sell many products

Unit sales volume quotas are suitable

when
Salespeople are selling a few products
Prices of the product fluctuate rapidly
Price of each product / service is high

Point sales volume quotas are appropriate

when the company wants salespeople to
sell products that contribute more to
profits

Financial quotas control (a) gross margin or net profits,

and (b) expenses of marketing units
Gross-margin / Net-profit quotas
Calculate gross margin by subtracting cost of goods
sold (i.e. cost of manufacturing) from sales volume.
Sales managers are not responsible for cost of
manufacturing
Net profit quotas are generally accepted by sales
mangers as it is calculated by subtracting direct
selling expenses from the gross margin
Expense quotas
In many companies, expense quotas are stated as a
percentage of sales
Expense quotas to be administered with flexibility, to
make
salespeople
cost
conscious,
allowing
reasonable expenses

These are set when salespeople perform

both selling and non-selling activities
Objective is to direct salespeople to carry
out important activities
For
effective
implementation,
activity
quotas are combined with sales volume and
financial quotas
E.G. Calling on high potential customers,
payment
collection
from
defaulting
customers

Used when companies want to control salesforce

performance on key selling and non-selling activities
Focus on a few types of quotas, to avoid confusing
salespeople. An example:

Type of Quota

Sales Volume (Rs)

Quota

Actual

Percent
Weight
Quota (Importance)

5,00,000 4,50,000

Percent
Quota x
Weight

90

270

Receivables (days)

45

50

89

178

New Customers
(Nos)

04

05

125

125

573

Total

Total point score=573/6=95.5 for a salesperson

Typically use points as a common measure to resolve the
problem of different measures used by various types of quotas

 Several methods are used for establishing

sales quotas
In practice, companies use more than one of
the following methods to increase their
confidence in sales quotas
Total market estimates
Territory potential
Past sales experience
Executive judgement
Salespeoples estimates
Compensation plan
We shall briefly discuss each of the above
methods

The Process followed

companies is as under:

by

established

1) Estimate next years total market

demand, or industry sales forecast, using
sales forecasting methods
2) Decide the companys estimated market
share for next year
3) Companys next year sales forecast= (1)
x (2)
4) Find each territorys percentage share out
of the total company sales in the previous
year
5) Territory sales quota = (3) x (4)


1)
2)

3)
4)

The procedure followed by new companies is as

under:
Estimate next years industry sales forecast or
market potential, using sales forecasting methods
Estimate multiple factor index (MFI) for each
territory, based on factors that influence sales of
the product. These factors are given weights
corresponding to the degree of sales opportunity.
Industry sales forecast in a territory (or territory
market potential=(1)x(2)
Territory sales quota = (3) x estimated market
share of the company in the territory

The process consists of taking past one

years sales (or an average of previous 3
to 5 years sales), adding an arbitrary
percentage (or a percentage by which the
market is expected to grow), and thus
setting each territory sales quota
The assumption that future sales are
related to past sales may not be always
correct
This method should not be the only
method used
Past sales should be one of the factors
used for deciding sales quotas

Executive Judgement Method

Senior executives use their judgement when
the product, territories, and the company
are new or very little market information is
available
Executives predict company sales budgets
and also territory sales quotas
This method should generally be used along
with other methods
Salespeoples Estimate Method

Some firms ask their salespeople to set their

own quotas
Many salespersons either set very high or
too low sales quotas

Set realistic quotas

Understand problems in setting quotas
Ensure salespeople understand quotas
By allowing salespeople to participate in the
process
By continuous feedback to salespeople on their
performance compared to quotas
Have flexibility in administering quotas
Change quotas in cases of major changes in
market demand or company strategies
Use monthly or quarterly quotas for incentives
and annual quotas for performance evaluation
Select a few quotas that have relationships with
marketing environment and sales situations

Sales Territories

A sales territory consists of existing and potential

customers, assigned to a salesperson
Most companies allot salespeople to geographic
territories, consisting of current & prospective
customers

Major Reasons / Benefits of Sales

Territories

Increase market / customer coverage

Control selling expenses and time
Enable better evaluation of salesforce performance
Improve customer relationships
Increase salesforce effectiveness
Improve sales and profit performance

Select a control unit*

Find location and potential of present and
prospective customers within control
units**
Decide basic territories by using
Build-up method,
Or
Break-down method
*A control unit is a geographical territorial
base
**Unnecessary & expensive for consumer
products

Decide customer call frequencies

Calculate total customer calls in each

control unit

Estimate workload capacity of a salesperson

Make tentative territories

Develop final territories

Objective is to equalise the workload of

salespeople

Estimate company sales potential for total

market

Forecast sales potential for each control unit

Estimate sales volume expected from each

salesperson

Make tentative territories

Develop final territories

Objective is to equalise sales potential of

territories

Assigning Salespeople to Territories

Sales Manager should consider two criteria:
(A)Relative ability of salespeople
Based on key evaluation factors:
(1) Product knowledge, (2) market knowledge,
(3)
past
sales
performance,
(4)
communication, (5) selling skills
(B) Salespersons Effectiveness in a Territory
Decided by comparing social, cultural, and
physical characteristics of the salesperson
with those of the territory
Objective is to match salesperson to the
territory

It means: How salesperson should cover

the assigned sales territory

It

includes

three

tasks

for

manager:
Planning efficient routes for salespeople
Scheduling salespeoples time
Using time-management tools

sales

Routing is a travel plan used by a salesperson

for making customer calls in a territory

Benefits of or Reasons for routing:

Reduction in travel time and cost
Improvement in territory coverage

Importance of routing depends on the

application:
Nature of the product Important for FMCG
Type of jobs of salespeople Important for
driver-cum-salesperson job, but creative
selling job needs a flexible route plan

Identify current and prospective customers on a

territory map
Classify each customer into high, medium, or low
sales potential
Decide call frequency for each class of customers
Build route plan around locations of high potential
customers
Computerised mathematical models are developed
Commonly used routing patterns are:

Base
(B)

C
1

B
B

C
5

C
4

C
3

C
2

Straight line / Hopscotch

Circular

Clover Leaf

Scheduling is planning a salespersons visit time to

customers. It deals with time allocation issue
How to allocate salespersons time?
Sales manager communicates to salesperson
major activities and time allocation for each
activity
Salesperson records actual time spent on various
activities for 2 weeks
Sales manager and salesperson discuss and decide
how to increase time spent on major activities
Companies specify call norms for current customers,
based on sales and profit potentials, and also for
prospective customers

To help outside salespeople* to manage their time

efficiently and productively, the tools available
are:
High-tech equipment like laptop computers
and cellular phones
Inside salespeople to provide clerical support,
technical support, and for prospecting, and
qualifying, as they remain within the company
Outside salespeople can then spend more
time getting more orders & building
relationships with major customers
*Outside salespeople travel outside the
organisation

Salesforce expenses include travel, meals,

lodging, telephone, and customer entertainment
Firms have salesforce expense plans to ensure
proper spending
Objectives / Criteria of effective expense plans are:
It should be
Fair to the salesperson and company
Simple and economical to administer
Clear to prevent misunderstanding
Reimbursed without much delay
Allowing differences in expenses among different
territories

Four types of salesforce expense plans

Salespeople pay all expenses

Merits:
Simple,
less
cost
for
company,
salespeople get income tax advantage
Demerits: Less control on salespeoples activities;
non-selling activities not done properly
Company pays all expenses / Unlimited payment
plan
Merits: Good control on salespersons activities;
no anxiety for sales people on spending money
Demerits: Salespeople spend more and may
make money unethically

Company partially pays expenses / Limited payment plan

Merits: Useful in budget planning; less disputes; better
control on salespersons activities
Demerits: Needs more time to set expense limits and
administer; Inflexible plan, not liked by good salespeople

Combination plan / Expense-quota plan

Combines limited and unlimited plans
Advantages of both plans
Company has control on selling expenses; salespeople
have flexibility within total expense budget

Salesforce or sales management audit is a part of marketing

audit

A marketing or salesforce audit is a comprehensive,

systematic, diagnostic, and prescriptive tool, to be used
periodically

Purpose. To assess adequacy of process, improve performance,

recommend changes

Evaluation process of salesforce audit. It has 3 stages.

Company management should find out:
What happened by comparing actual performance with goals
Why it happened by identifying factors contributing to
negative variance. Difficult and time consuming task
What to do about it by taking corrective actions

Purposes / objectives / importance of performance

evaluation of salespeople are:
Mainly to find how salespeople have performed
This information is used for other purposes, such as:
Improving
salespersons
performance,
by
identifying causes of unsatisfactory performance
Deciding
salary
increments
and
incentive
payments
Identifying salespeople for promotion
Determining training needs
Motivating salespeople through recognition and
reward
Understanding strengths and weaknesses of
salespeople

The steps involved in the procedure are:

Set policies on performance evaluation and control

Decide bases
evaluation

Establish performance standards

Compare actual performance with the standards

Review performance evaluation with salespeople

Decide sales management actions and control

of

salespersons

We shall describe above steps briefly

performance

Most companies establish basic policies. Examples

are:
Frequency of evaluation. Mostly once a year.
Who conducts evaluation? Mainly immediate
supervisor
Assessment techniques to be used. E.G.
Management by objectives (MBO), 360-degree
feedback
Sources of information. Sales analysis, new
business reports, lost business reports, call
plans, etc
Bases of salesforce evaluation. (next slide)
Conducting performance review sessions with
salespeople

A firm should decide which of the following bases / criteria it would

use: (1) result / outcome based, (2) efforts / behavioural based, or
(3) both results & efforts based
A company selects performance bases or criteria from a list of
alternatives, some of them shown below:

Quantitative results /
outcome bases / criteria
Sales volume
In value / units
Percentage of quota
by products &
segments
Accounts / customers
New accounts nos.
Lost accounts nos.

Quantitative efforts /
Qualitative efforts /
behavioural bases / criteria behavioural bases / criteria
Customer calls
No. of calls per day
No. of calls per
customer
Non-selling activities
overdue payments
collected
No. of reports sent

Personal skills
Selling skills
Planning ability
Team player
Personality & Attitudes
Cooperation
Enthusiasm

Performance standards are also called sales

goals, targets, sales quotas, sales objectives
Performance standards for quantitative results
are related to the companys sales volume or
market share goals
Performance standards for efforts / behavioural
criteria are difficult to set
For this, companies do time and duty analysis
or use executive judgement
Performance standards should not be too high or
too low
After establishing standards, salespeople must be
informed

Salespersons actual performance is measured

and compared with the performance standards
For this, sales managers use different methods or
forms:
Graphic rating scales
Ranking
Behaviourally anchored rating scale (BARS)
Management by Objectives (MBO)
Descriptive statements
Companies combine some of the above methods
for an effective evaluation system

Performance review / appraisal session is conducted,

after evaluation of the salespersons performance
Sales manager should first review high / good ratings,
and then review other ratings
Both should decide objectives / goals and action plan
for future period
After the review, sales manager should write about
performance evaluation & objectives for the future
Guidelines for reviewing performance of salespersons
First discuss performance standards / criteria / bases
Ask the salesperson to review his performance
Sales manager presents his views
Establish mutual agreement on the performance

Many companies combine this step with the

previous step i.e. performance review
During
performance
review
meeting
with
salesperson, sales manager does the following:
Identifies the problem areas. E.G. Sales quotas
not achieved
Finds causes. E.G. less sales calls, poor market
coverage,
or
superior
performance
of
competitors
Decides sales management actions E.G. train
salesperson, redesign territories, or review
companys sales / marketing strategies
If a salespersons performance is good, he / she
should be rewarded and recognised

Sales managers and salespeople have

responsibilities

Some of the ethical situations are:

ethical

Relations with the company. EGs. Expense

statements, credit for damaged merchandise
Relations with customers. EGs. Gifts, false
information
to
get
business,
customer
entertainment

Ethical guidelines
A code of ethics developed by the company would
be effective if it is enforced by top management

To know what happened, companies analyse

their sales, costs, profits, and productivity
Effectiveness model of a sales organisation
Sales Analysis
Effectiveness
of a
Sales
Organisation

Cost Analysis
Profitability Analysis
Productivity Analysis

We shall examine each of the above factors

Sales analysis of a company can be done in different ways:

Different alternatives are shown in a framework below:
National and/or international levels sales organisation

All levels
In Sales
Organisation

Regional level
Branch /district level
Territory level
Individual level

Sales Analysis

Different
Type of
Sales

Total sales of the company

By type of products
By type of distribution channels
By type of customer classifications
By size of orders

Different
Type of
Analysis

Comparisons with sales quotas / targets

Comparisons with previous periods
Comparisons with industry / competitors
Comparisons within sales organisations
Comparisons with sales forecasts

Sales analysis is done at all levels of the sales organisation

Reasons
(1) For evaluation and control: sales analysis needed at different
organisation levels like regional, district, territory
(2) For identifying problems:
Use hierarchical sales analysis. E.G.
Sales performance at national level below sales volume budget
Find which regions have problems in achieving sales quotas
Focus sales analysis of branches reporting to problematic
regions
Do sales analysis of territories under problematic branches
Further analysis of problematic territories to be done by talking
to salespeople, customers, branch managers
Corrective actions can then be taken to improve sales
Extend hierarchical sales analysis to different type of sales
Out of different type of analysis, comparisons with sales quotas
are widely used

Purpose: To measure profitability of companys

marketing units such as territories, market
segments, products, channels, & customers
This information helps to decide which marketing
units to be expanded, reduced, or eliminated in
future.
Procedure
State purpose of the analysis
Identity major functional (or activity) expenses
Convert natural accounting expenses into
functional expenses
Allocate functional expenses to marketing units
Prepare profitability of marketing units, by using
full-cost approach, or contribution approach

Purpose of the Analysis

Before starting cost and profitability analysis, it is

necessary to know for which marketing units the
analysis would be done

This helps to classify costs into direct and indirect. E.G.

Salespersons salary is direct cost for territory analysis,
but indirect cost for analysis of products or segments

Identify Major Functional Expenses

The company should prepare a list of major functions

or activities with respect to marketing expenses

E.G. Personal selling expenses, order processing

expenses, packing and delivery expenses, warehousing
and inventory expenses, administration expenses

Natural or traditional expenses are to be converted to

functional expenses, for doing marketing cost analysis
An example will make this point clear

Natural /
Traditional
Expenses

Total

Functional Expenses
Personal
Selling

Adv. and
Sales
Promotion

Warehousing &
Inventory

Administration

Salaries

20,000,000

10,000,000

4,000,000

2,000,000

4,000,000

Rent

10,000,000

2,500,000

1,000,000

5,000,000

1,500,000

5,000,000

5,000,000

__

__

__

Adv. and
Sales
Promotion

15,000,000

__

15,000,000

__

__

Total

50,000,000

17,500,000

20,000,000

7,000,000

5,500,000

Travel

Note: All figures are in Rupees

A better method for allocating costs is activity-based costing (ABC),

which allocates costs based on cause of expenses

Functional expenses are allocated to the marketing unit under

study, depending on several bases shown below, as examples
Function

Bases of allocation of expenses

Personal selling

Directly to sales territories

Selling time given to each product and market
segment
Sales calls x average time per call to customers &
channels

Advertising and
sales promotion

Circulation of media to sales territories

Media space for each product & market segment
Equal charges to customers & channels

Administration

Equal charges for all marketing units

Above allocations are done to find marketing costs and profitability of

marketing units

This is done by preparing profit & loss statements for

the marketing units under study
Two approaches are available in allocating marketing
costs for profitability analysis: (1) Full-cost, (2)
Contribution
Full-cost approach: All marketing costs, both direct &
indirect, are allocated to the marketing unit
Useful for long-term profitability studies of
products and market segments
Contribution approach: Only direct marketing costs
are allocated to the marketing unit
Useful for short-term decisions like profitability of
branches / regions

Productivity is generally measured by ratio between output

& input
Some of the productivity ratios in sales management are:
Sales per salesperson (used by many companies)
Selling expenses per salesperson
Sales calls per salesperson
Improvement in productivity leads to increase in profitability
Some of the methods used by firms to improve productivity
Reducing salesforce size
Hiring manufacturers reps. or agents on commission basis
Using the internet, telemarketing, direct mail to reach
customers
Increasing sales volume substantially

Corporate social responsibility means distinguishing right

from wrong and doing the right
Social responsibility is the managements responsibility to
take decisions and actions for welfare and interests of
society and the company
A company has following four responsibilities to its eight
stakeholders:
Customers,
Community,
Creditors,
Government,
Owners,
Managers,
Employees,
and
Suppliers, acronym: CCCGOMES
Ethical responsibilities. Deal with fairness, equity,
impartiality
Legal responsibilities. Follow laws and regulations
Economic responsibilities. Produce and market goods /
services that society wants, and make reasonable profits
Voluntary responsibilities. Make social (EG philanthropic)
contributions

Laws and regulations by local, state, or central

governments have impact on sales management
Price discrimination. As per MRTP act, 1969, seller
should not discriminate prices among similar buyers
(e.g. retailers)
Price fixing. Under MRTP act, it is unlawful for
suppliers to fix prices
Consumer protection. As per Consumer Protection
Act, 1986, it is illegal to make false or misleading
claims about products / services
Bribes. Payment of money or giving gifts to gain a
customer is illegal under Indian Contracts Act 1872
and Sale of Goods act, 1930. Sales managers must
take responsibility that laws are not violated