Selling and negotiation skills

 Qualities of a professional sales

executive-
 Thorough analysis
 Market efficient qualitative and
quantitative personal-selling objectives
Selling and negotiation skills
 Appropriate sales policies
 Personal selling strategy
Selling and negotiation skills
 Skillful application of organizational
principles to the conduct of a sales
operation
 The ability to install, operate and use
control procedures appropriate to the
firm‘s situations and objectives
Responsibilities of a sales
executive
 1)to their organization
 2)to the customers
 3)to the society
Responsibilities towards the
organization
 1)obtaining sales volume
 2)providing profit contributions
 3)continuing business growth
Responsibilities towards the
customer
 Customers can be wholesalers, retailers
or industrial users
 All of them expect to supply easily
resalable products and services
Responsibilities towards the
customer
 Backed by supporting activities (training
to dealer’s sales personnel, help in
preparing local advertisement, provision
of credit etc
 Assurance that the products and
services are wise investment
Responsibilities to the society
 Society looks to them to assure the
delivery of goods and services that final
buyers wants at prices that final buyers
are willing to pay
 To develop and market products which
are minimal environment damaging
(socially responsible products)
Evolution of the sales
department
 Prior to industrial revolution, small-scale
enterprises dominated the economic
scene.
 Orders were obtained with minimum
efforts
 Single individual supervised all the
phases of the business
Evolution of the sales
department
 Manufacturing problems received the
most attention (selling and marketing
was handled on a part-time basis)
 With industrial revolution, which began
in 1760,in England (shortly after the
American revolution), finding new
markets became essential
Evolution of the sales
department
 Adjacent markets could not absorb the
increased quantities
 Sales departments were established
only after the activation of
manufacturing and financial
departments
Sales executive as a-
coordinator
 Coordination involving-
 1)the organization
 2)the planning
 3)other elements in the marketing
strategy
Organization and co-
ordination
 Coordination of the different order-
getting methods personal selling,
advertising etc)
 Inside the sales department, under
democratic administration, co-
ordination of units under respective
control
Planning and co-ordination
 In marketing objectives and draft plans
at optimum cost
 Determine the elements (personal
selling, advertising etc)
Planning and co-ordination
 Apportioning the relative amounts
 Seek to secure a marketing program
that is both appropriate for market
conditions and reflects the probable
contribution of the sales force
Coordination with other
elements
 Like advertising, display and other
promotional efforts
 Synchronizing personal selling with
advertising
Coordination with other
elements
 Point-of-purchase displays are set up in
retail stores where customers will see
them at the precise time that tie-in
advertisements appear in national and
local media
 Alerting dealers to special couponing or
sampling effort so that they can benefit
from heightened customer interest
Co-ordination with distributive
network
 Gaining product distribution
 Obtaining dealer identification to avoid
clogged distribution channels
 Reconciling business goals-of
manufacturers and middlemen
 Sharing promotional risks (co-operative
advertising)
Coordination and implementation
of overall marketing strategy
 Sales executives see that field sales
personnel integrate every phase and
segment of the promotional programs
of distributors and dealers
Personal selling situations
 1)services selling
 2)developmental selling
 3)developmental but unusual creative
Service selling
 1)inside order taker-sales clerk behind
neckwear counter at a store
 2)delivery sales person-delivering
bread,milk,oil
Service selling
 3)route or merchandising salesperson-
the soap or spice salesperson calling on
retailers
Service selling
 4)missionary-only to build goodwill, not
expected to take orders- pharma
detailing
 5)technical sales person-engineering
sales person
Developmental selling
 1)creative,selling tangibles-vacuum
cleaners, automobiles, encyclopedias
 2)creative,selling intangibles-insurance,
advertising services, educational
programs
Developmental-but unusual
creativity
 1)political,indirect or back-door
salesperson-getting large orders for
flour from baking companies by
catering to key buyer’s interests in
fishing, golfing etc
Developmental-but unusual
creativity
 2)salesperson engaged in multiple
sales-involves sales of big-ticket items
to committee consisting of several
individuals-ad agency account executive
Is selling an art or science?
 In a survey of 173 marketing
executives,
 46% perceived selling as an art
 8%as science
 46% as an art evolving into a science
Selling theories-
 1)AIDAS-
attention,interest,desire,action,satisfacti
on
 2)’Right set of circumstances theory-
 3)buying formula-
 4)Behavioral equation theory-
1)AIDAS
 Attention-can be grabbed by favorable
first impressions like proper attire,
neatness, friendliness and genuine
smile
 Opening remarks be about the prospect
or favorable comments about prospect’s
business
How to create interest?
 Develop a contagious enthusiasm for
the product or a sample
 Use flipcharts ,sales portfolios or other
visual aids in case of technical or bulky
products
 Find out basic motivation of prospects,
their mood (receptive, skeptical, hostile)
Kindling desire
 By keeping the conversation running on
the main course
 Obstacles must be faced and ways
found to get around them
Kindling desire
 Objections be answered, before they
are raised
Kindling desire
 External interruptions cause break.
After resuming,summarise what has
been said
 Digressive remarks be disposed off
tactfully with finesse (distracting
digression be handled bluntly)
Inducing action
 Buying is not automatic and as a rule
must be induced
 The trial close, close on a minor point
and the trick close are used to test the
prospect’s reactions
 Ask for the order straightforwardly
Building satisfaction
 By thanking the customer for the order
 Reassure the customer that the decision
was correct
Building satisfaction
 Customer should be left with the
impression that the sales person merely
helped in deciding
 The order is the climax of the selling
situation-possibility of anticlimax be
avoided
 Sales person should not linger too long
2)’Right set of circumstances’-
theory
 Situation response theory
2)’Right set of circumstances’-
theory
 Particular circumstances prevailing in a
given selling situation cause the
prospect to respond in a predictable
way
 More skilled the salesperson is in
handling the set of circumstances, the
more predictable is the response
3)Buying formula-theory of
selling
 1)if the prospect does not feel a need
or recognize a problem that can be
satisfied by the product or service, the
need or problem should be emphasized
3)Buying formula-theory of
selling
 2)if the prospect does not think of the
product or service when he or she feels
the need or recognizes the problem, the
association between need or problem
and product or service should be
emphasized
3)Buying formula-theory of
selling
 3)if the prospect does not think of the
trade name when he or she thinks of
the product or service, the associations
between product or service and trade
name should be emphasized
3)Buying formula-theory of
selling
 4)if need or problem, product or
service, and trade name are well
associated, emphasis should be put
upon facilitating purchase and use
3)Buying formula-theory of
selling
 5)if competition is felt, emphasis should
be put upon establishing in the
prospect’s minds the adequacy of the
trade-named product or service, and
pleasant feelings toward it
3)Buying formula-theory of
selling
 6)if sales to new prospects are desired,
every element in the formula should be
presented
 7)if more sales to old customers are
desired, the latter should be reminded
(developing new uses is comparable to
selling to new customers)
Behavioral equation theory
(j.a.howard)
 Is based on stimulus-response model
 Sophisticated version of the ‘right set of
circumstances theory
 4 elements of the learning process-
drives, cue, response and reinforcement
equation
 B=PXDXKXV where,
 B=response or the internal response tendency,i.e.the
act of purchasing a brand or patronizing a supplier
 P=predisposition or the inward response
 D=present drive level (amount of motivation)
 K=‘inventive potential' that is, the value of the
product or its potential satisfaction to the buyer
 V=intensity of all cues:triggering,product,or
informational
Summary of J A Howard
theory
 When the satisfaction (K) yields a
reward, reinforcement occurs, and,
technically, what is reinforced is the
tendency to make a response in the
future to the cue that immediately
preceded the rewarded response.
Summary of J A Howard
theory
 After reinforcement, the probability
increases that the buyer will buy the
product (or patronize the supplier) the
next time the cue appears-buyer has
learned
prospecting
 Is the planning work which is essential
in eliminating calls on non buyers
 Steps in prospecting-
 1)formulating prospect definitions
prospecting
 2)searching out potential accounts
 3)qualifying prospects and determining
probable requirements
 4)relating company products to each
prospect’s requirements
Formulating prospect
definition-
 Prospective customers-
 Must have the willingness
 The financial capacity
Formulating prospect
definition-
 Authority to buy
 Must be available to the sales person
 Key characteristics of profitable
accounts be found and used while
screening the prospects
Searching out potential
accounts
 Directories of all kinds
 News and notes in trade papers and
business magazines
 Credit reports
Searching out potential
accounts
 Membership lists of chambers of
commerce and trade and
manufacturer’s association
 Lists purchased from list brokers
 Responses to company advertising
Searching out potential
accounts
 Sales personnel of non-competing firms
calling on the same general class of
trade
 Conventions and meetings
 Bankers and other centers of influence
Searching out potential
accounts
 Salesperson’s own observation
 Endless chain (of satisfied customers)
 Insurance salesman uncover prospects
among their acquaintances, members of
their professional ,religious and social
organizations and referrals of friends
Qualifying prospects and
determining probable
requirements
 Prospects with requirements too small
to represent profitable business are
removed from further consideration
unless their growth possibilities show
promise
 Additional information by personal visit
to confirm prospects from nonprospects
Relating company products to
each prospect’s requirements
 By a tailored presentation
 Clear idea about specific likely
objections being raised and other
obstacles to the sale that may be
encountered
Relating company products to
each prospect’s requirements
 The salesperson is ready to contact the
prospect
 The remaining tasks are-making an
appointment, deciding how to open the
presentation and determining how to
persuade the prospect to become a
customer
Sales resistance-
 In the form of obstacles or an objection
 Obstacle is real or unreal
 Objection is sincere or insincere
Obstacles to sales
 E.g. “a temporary shortage of cash
prevents buying”
 Can be circumvented by explaining a
method for financing the purchase
Sales objections
 At best, an objection requires a
satisfactory answer; at worst, it blocks
the sale
 Sincere objections trace to
incompleteness, in-accuracy, or
vagueness in the sales presentation
Sales objections
 Prospects may be confused about their
own need or may react unfavorably to
the salesperson’s personality
 Sincere objections are overcome by
patient and thorough explanations
Sales objections
 Insincere objections are raised by the
customer to get rid of the salesman or
to check their competence
 Insincere objections should not be
allowed to provoke into an argument
Handling objections
 One theory says that each objection be
treated with utmost courtesy
Handling objections
 Another theory suggests to ignore
insincere objections
 The best defensive strategy often is the
strong counterattack and the
salesperson should try to regain the
initiative as he or she can gracefully
possible
Closing sales
 Low pressure sales are closed more
easily than high pressure ones
Closing sales
 In low pressure sales, prospects feel
that they are reaching the buying
decisions themselves, and primarily
through rational processes of thought,
so there is no need for extra push just
before the sales are consummated
Closing sales
 In high pressure sales, the main thrust
is to the prospect’s emotions, so
salespersons attempt to propel
prospects into buying decisions. Often
the prospect regains normal perspective
as the sale nears its climax,and,if this
happens, the salesperson needs
unusually effective persuasion to close
the sales
closing
 When an attempted close fails, the
salesperson should normally try
another.
 The refusal does not necessarily imply
an unwillingness to buy; it may indicate
the prospect’s need for additional
information or clarification of some
point
closing
 Some executives recommend that sales
personnel attempt as many as five
closes before giving up
closing
 Early closing attempts should be so
expressed that a refusal will not cut off
the presentation
 The sales person first uses an indirect
close,i.e.attempts to get the order
without actually asking for it
In-direct close
 The sales person may ask the prospect
to state a preference from among a
limited number of choice (as to models,
delivery dates, order size, or the like)
so, phrasing the question that all
possible responses are in the
salesperson’s favor.
In-direct close
 Secondly, the salesperson may
summarize, emphasizing features that
visibly impress the prospect, showing
how the reasons for the purchase
outweigh those opposed to it till he gets
a response like, go ahead and write the
order and hand it to the prospect for
approval-if the prospect balks, the issue
is clearer
In-direct close
 Perhaps one last objection is voiced,
but after it is answered, the sale is
made
Direct close
 When one or more attempts at an
indirect close fail, the sales person uses
the direct approach.
Direct close
 Few prospects respond negatively to a
frank request for the order
 Many people, especially those who are
themselves engaged in selling, do not
buy unless the order is asked for
outright
Personal selling- qualitative
objectives
 1)to do the entire selling job (as when
there are no other elements in the
promotional mix
 2)to ‘service' existing accounts (that is,
to maintain contacts with present
customers, take orders, and so forth)
Personal selling- qualitative
objectives
 3)to search out and obtain new
customers
Personal selling-qualitative
objectives
 4)to secure and maintain customer’s
cooperation in stocking and promoting
the product line
 5)to keep customers informed on
changes in the product line and other
aspects of marketing strategy
Personal selling- qualitative
objectives
 6)to assist customers in selling the
product line (as though ‘missionary’
selling)
 7)to provide technical advice and
assistance to customers (as with
complicated products and where
products are especially designed to fit
buyer’s specifications
Personal selling-qualitative
objectives
 8)to assist with (or handle) the training
of middlemen’s sales personnel
 9)to provide advice and assistance to
middlemen on management problem
 10)to collect and report market
information of interest and use to
company management
Quantitative objectives
 1)to capture and retain a certain market
share
 2)to obtain sales volume in ways that
contribute to profitability (optimum mix)
Quantitative objectives
 3)to obtain some number of new
accounts of a given types
 4)to keep personal-selling expenses
within set limits
 5)to secure targeted percentages of
certain account’s business
Some definitions-
 Market potential-is an estimate of the
maximum possible sales opportunities
present in a particular market segment
and open to all sellers of a good or
service during a stated future period
Some definitions-
 Sales potential-is an estimate of the
maximum possible sales opportunities
present in a particular market segment
open to a specified company selling a
good or service during a stated future
period
Some definitions-
 Sales forecast-is an estimate of sales, in
dollars or physical units, in a future
period under a particular marketing
program and an assumed set of
economic and other factors outside the
unit for which the forecast is made
Sales forecasting methods
 1)jury of executive opinion
 2)the Delphi technique
 3)poll of sales force opinion
 4)projectino of past sales
Sales forecasting methods
 5)time-series analysis
 6)exponential smoothing
 7)survey of customer’s buying plans
 8)regression analysis
 9)economic model building and
simulation
Sales related marketing
policies
 1)product policies (what to sell)
 2)distribution policies (to whom to sell)
 3)pricing policies
Product policies
 1)in relation to product objectives
 2)product line policy
 3)changes in product offerings
Product policies
 4)reappraising the product line and line
simplification
 5)reappraising the product line and line
diversification
 6)ideas for new products
 7)appraisal of proposed new products
Policies on distribution
intensity
 1)mass distribution
 2)selective distribution
 3)exclusive agency distribution
Pricing policies
 1)policy on pricing relative to the
competition-meeting the competition,
pricing above the competition, pricing
under the competition
 2)policy on pricing relative to costs-full
cost pricing, promotion pricing,
contribution pricing
Pricing policies
 3)policy on uniformity of prices to
different buyers-one price or variable
price
 4)policy on list pricing-either freedom to
middlemen or control his retail price
Pricing policies
 5)policy on discounts-trade discount,
quantity discount
 6)geographical pricing policies-FOB
pricing, delivered pricing,
Pricing policies
 7)policy on price leadership-initiate or
follow price change
 8)product line pricing policy
 9)competitive bidding policy
Choice of basic selling style
 1)trade selling
 2)missionary selling
 3)technical selling
 4)new business selling
The effective sales executive
 1)ability to define the position’s exact
functions and duties in relation to the
goals the company should expect to
attain
The effective sales executive
 2)ability to select and train capable
subordinates and willingness to
delegate sufficient authority to enable
them to carry out assigned tasks with
minimum supervision
The effective sales executive
 3)ability to utilize time efficiently
 4)abiilty to allocate sufficient time for
thinking and planning
 5)abiilty to exercise skilled leadership
Causes of turnover of sales
personnel
 Under control of the company-
 Poor recruiting
 Improper selection and assignment
 Training deficiencies
 Inadequate supervision and motivation
Causes of turnover of sales
personnel
 Breakdown in communications
 Unsatisfactory performance-customer
complaints etc
 Discharged for cause-alcoholism,
conviction of a felony, dishonesty etc
Causes of turnover of sales
personnel
 Cutbacks in personnel
 Transfer to another department
 Promotion to a higher position
Causes of turnover-not
controlled by the company
 Retirement
 Death
 Illness or physical disability
Causes of turnover-not
controlled by the company
 Personal and martial difficulties
 Dislike for the job-travel, type of work,
working conditions etc
 Military duty
 Better position elsewhere
Sales job analysis-
 To whom does this person report?
 who reports to this person?
 What products does this person sell?
Sales job analysis-
 To whom does this person sell?
 What information should this person
gather?
Sales job analysis-
 What reports should this person make
and to whom?
 Specific duties and responsibilities,
relations with customers, relations with
other sales department and company
personnel
Sales job description
 Is an organized factual statement
covering-
 1)the reporting relationship of a
particular job to other job
 2)the job objectives
Sales job description
 3)duties and responsibilities
 4)job performance criteria
 Tells to whom the sales jobholder
reports, what has to be done, how it is
done, and why and, in addition,
describes the standard against which
performance is measured
Duties and responsibilities-check
list-for sales job description
 1)sales
 2)service
 3)territory management
 4)sales promotion
 5)executive
 6)goodwill
Sales-
 Make regular calls
 Sell the line; demonstrate
 Handle questions and objections
 Check stock; discover possible product
uses
Sales-
 Interpret sales points of the line to the
customer
 Estimate customer’s potential needs
 Emphasize quality
 Explain company policy on
price,delivery,and credit
 Get the order
service
 Install the product or display
 Report product weaknesses, complaints
 Handle adjustments,returns,and
allowances
service
 Handle requests for credit
 Handle special orders
 Establish priorities, if any
 Analyze local conditions for customers
Territory management
 Arrange route for best coverage
 Balance effort with customer against
the potential volume
 Maintain sales portfolios,samples,kits
and so forth
Sales promotion
 Develop new prospects and accounts
 Distribute home office literature,
catalogues and the like
Sales promotion
 Make calls with customer’s salespeople
 Train personnel of wholesalers, jobbers
and so on
 Present survey reports, layouts and
proposals
executive
 Each night make a daily work plan for
the next day
 Organize field activity for minimum
travel and maximum calls
executive
 Prepare and submit special reports on
trends, competition
 Prepare and submit statistical data
requested by home office
 Investigate lost sales and reason for
loss
executive
 Prepare reports on
developments,trends,new objectives
met, and new ideas on meeting
objections
 Attend sales meetings
executive
 Build a prospect list
 Collect overdue accounts; report on
faulty accounts
 Collect credit information
goodwill
 Counsel customers on their problems
 Maintain loyalty and respect for the
company
 Attend local sales meetings held by
customers
Recruiting sales personnel
 1)sources within the company
 2)sources outside the company
Sources within the company-
 1)company sales personnel
 2)company executives
 3)internal transfers
Sources outside the company-
 1)Direct unsolicited applications
 2)Employment agencies
 3)Sales people making calls on the
company
 4)Employees of customers
Sources outside the company-
 5)Sales executive’s clubs
 6)sales forces of non competing
companies
 7)sales forces of competing companies
 8)educational institutions
 9)older persons
Recruiting effort-
 College recruiting
 Recruiting direct-to-consumer sales
personnel
 Recruiting consultants
 Indirect recruiting
 Recruiting brochures
Selecting sales personnel
 Preliminary interview and pre-interview
screening
 Formal application
 Interview (s)
Selecting sales personnel
 Reference and credit check
 Testing-ability, habitual characteristics
and achievement
 Physical examination
 Employment offer
Planning sales training
programs
 A-C-M-E-E-aims-content-method-
execution-evaluation
 training need are identified from sales
person’s reports, sales records,
observation of sales personnel etc
Planning sales training
programs
 Training need-1)initial sales training
(job specifications, individual trainee’s
background and experience and sales
related marketing policies
Planning sales training
programs
 2)continuous sales training-about basic
changes in products and markets,
changes in company related policies,
procedures & organization, careless or
sloppy habits of sales personnel
content
 1)product data-product use and
application, initial factory training,
training on competitor’s products
 2)sales technique-
content
 3)markets-customers,their locations,
product of their interest, buying habits
and motives
content
 4)company information-history,
importance in the industry and
economy, relations with
stockholders,unions,competitors,govern
ment and other group, pricing policies,
product service policy, spare parts and
repairs credit extension and customer
relations etc
Training methods
(group/individual)
 1)the lecture
 2)the personal conference
 3)demonsatration
 4)role playing
 5)case discussion
Training methods
 6)impromptu discussion
 7)gaming-simulation
Training methods
 8)on-the-job training-coach and pupil
method
Training methods
 9)programmed learning-subject matter
is broken down into numbered
instructional units called frames, which
are incorporated into a book or
microfilmed for use with a teaching
machine
Training methods
 10)correspondence courses-for
insurance field to acquaint new
salespeople with industry fundamentals
and to instruct in basic sales technique.
Also used to train distributor’s sales
force
Executing and evaluating sales
training programs
 Kipling’s six honest serving men
 What?
 Why?
 When?
 How?
 Where?
 Who?
Philosophies of sales training
 1)conditioned response philosophy-for
trade or missionary-requires and aids
designed to facilitate memorizing
programmed responses like multiple
choice test-can be measured objectively
Philosophies of sales training
 2)insight response philosophy-for
technical or new business requires
materials conducive to develop
analytical skills and internalizing of
responses like an essay test-can be
measured subjectively
Organization for sales training
 Who will be the trainees?
 Who will do the training?
 When will the training take place?
 Where will the training site be?
Who will be the trainees?
 Difficult to identify for continuous
training
 Criteria for selection-
 1)reward for good performance
Who will be the trainees?
 2)punishment for poor performance
 3)convenience of trainee and trainer
 4)seniority(greater seniority more
training opportunity)
Who will do the training?
 Initial sales training-either by top sales
executive if line function or personnel
director if staff function
 Continuous sales training-top sales
executive
Who will do the training?
 Sales training staff- in case of large
companies
 training the sales trainer-
 Outside expert-for sales techniques
(prospecting, selling by telephone,
objections handling etc)
When will the training take
place?
 Majority sales executives contend that newly
recruited trainees should receive formal group
training before starting to sell
 Sizeable minority however assign trainees to
selling jobs before sending them to sales
schools-(not suitable when highly technical
products are sold to sophisticated buyers)
When will the training take
place?
 In case of large number of new
personnel, group training is advisable
 Optimum group size-smaller than 12-15
involves inordinate high cost, larger
than 30-40 incur heavy losses in terms
of learning effectiveness
Training site decisions-
 Generally,
 Initial sales training at central office
(provides better product training but
higher costs)
Training site decisions-
 Separate programs at branch office
 Retraining programs are short and are
held either at centralized or
decentralized points
Instructional materials and
training aids
 1)manuals or workbooks
 2)other printed materials
 3)training aids
 4)advance assignments
manuals
 Are used in most group type sales training
programs
 Contains-
 Outlines or summaries of the main
presentation
 Related reading materials
 Statement of learning objectives for each
session
 Thought provokers
manuals
 Cases and problems
 Directions for sessions involving role
playing or gaming
 Concise statements of
selling,pricing,training of sales
personnel and other policies
manuals
 Details on company systems and
procedures
 Information on the products and their
application
 Purpose is-to serve as study guides
during training and as reference later
Other printed materials
 Include company bulletins
 Sales and product handbooks
 Information bulletins
 Standard texts
 Technical and trade books
 Industry and general business
magazines and journals
Training aids
 Is an auxiliary device capable of
transmission of sight and/or sound
stimuli
 Blackboard and chalk and other
mechanical training aids like Vue-graph
projector, transparency roll and screen
Training aids
 Motion picture projector and film are
effective to explain complex situations
Training aids
 Actual demonstration in case of
conveying technical information on
installation and operation of new
machine tool models
 All training films (company produced or
commercially produced) be previewed
before use
Training aids
 Tape recording and playback equipment
is ideal for training in sales techniques
Training aids
 Actual or simulated sales presentations
are taped and played back for individual
or group appraisal
Training aids
 Miniature (sometimes conceable)
cassette type recorders make it easy for
salespersons to tape their own sales
interviews and play them back later
Training aids
 Closed circuit TV is used when timing is
important (suitable for de-centralized
programs like new product lines are
introduced to salesperson or dealers or
in case of policy changes issues and as
a substitute for training at national sales
meetings
Advance assignments
 1)reading assignment to provide some
minimum comprehension of subjects
scheduled
 2)read a case and prepare a plan of
action
Advance assignments
 It is important that the trainees
understand the purposes of advance
assignments and receive clear
instructions (written instructions)
 They consume time outside formal
sessions, reducing trainee’s inclinations
to “go out on the town" or otherwise
goof off
Evaluating sales training
programs
 Compare the program’s aims with the
results
 Results, such as improved selling
performance may come at a later time
 Comparison of-
Evaluating sales training
programs
 Length of time new sales personnel
(who have completed initial sales
training) take to attain the productivity
level of the experienced salesperson
 The performance against standards of
trained and untrained sales personnel
Evaluating sales training
programs
 Respective training histories of the best
and worst performers
 Plotting graph of each sales person’s
sales records on a before –and-after
training basis, generally converting
them to market percentage
Evaluating sales training
programs
 Some companies use written tests (on a
before-and-after training basis)
 Send observers to work with sales
personnel who have completed training
programs and ask a report
Evaluating sales training
programs
 Solicit customers for their reactions to a
salesperson’s performance after training
 Effectiveness of program be measured
when the program is in progress and
after completion
Evaluating sales training
programs
 Tests and examinations measure
trainee retention of materials
presented, most appropriately when
trainees are to memorize certain
information
Evaluating sales training
programs
 For sales technique measurement tests
and examinations are not useful but
performance in role-playing assignment
is a better approach
Evaluating sales training
programs
 Rate each trainee’s performance in role
playing, panels and other discussions
 Trainees also rate training program
after they return to their territories
Motivating sales personnel
 Motivation as applied to sales personnel
is the amount of effort the salesperson
desires to expend on the activities
associated with the sales job, such as
calling on potential accounts, planning
sales presentations, and filling out
reports
Why motivation for sales
people?
 1)inherent nature of the sales job-away
from family,travelling,ups and downs
 2)salesperson’s boundary position and
role conflicts-linkages with 1)sales
management, 2)order fulfilling
dept,3)customers and 4)other company
sales personnel
Why motivation for sales
people?
 Conflicts faced by salesman-
 1)conflict of identification
Why motivation for sales
people?
 2)advocacy conflict
 3)because of dual role as an advocate
for both the customer and company
and pecuniary interest as an
entrepreneur
Why motivation for sales
people?
 3)tendency toward apathy-because of
routine customers and territories
 4)maintaining a feeling of group
identity-works alone, no team spirit
 5)salesperson’s linkages with groups
with divergent interests
How to reduce conflict of
salespeople?
 Improving sales training effectiveness
 Revising selection criteria
Motivation theories
 1)Hierarchy of human needs- Maslow-
physiological, safety and security,
belongingness and social relations
need, esteem needs, self-actualization
needs
Motivation theories
 2)Motivation-Hygiene theory-Hertzberg
 Hygiene factors-interpersonal
relations,peers,subordinates,supervisors
,company policy, job security
Motivation theories
 Motivation factors-achievement,
recognition,advancement,work itself,
growth potential, responsibility
 Deficiencies in hygiene factors lead to
job dissatisfaction
Motivation theories
 Fulfillment of hygiene needs does not
lead to job satisfaction but leads to ‘fair
day’s work’
 Motivation factors when fulfilled lead to
job satisfaction
Motivation theories
 3)Achievement motivation theory-David
McClelland-need for achievement
(nAch)
 nAch can be gauged by TAT (Thematic
apperception test)
 nAch qualities-
Motivation theories
 1)Like problem situations in which they
take personal responsibility for finding
solutions (ones in which the possibilities
of reaching them are reasonable)
Motivation theories
 2)tend to set attainable achievement
goals
 3)want feedback on how they are
doing?
Expectancy model-Vroom
 an individual's desire to produce at a
given time depends on that individual’s
specific goals and perception of the
relative worth of performance
alternatives as paths to attainment of
those goals
Other issues in motivating
sales personnel
 Interdependence and motivation
 Motivation and leadership
 Motivation and communications
 Interpersonal contact
 Written communications
Compensating sales personnel
 Purpose of the plan-
 1)provide a living wage
Compensating sales personnel
 2)adjust pay levels to performance
(expectancy motivation theory)
 3)provide a mechanism for
demonstrating the congruency between
attaining company goals and individual
goals (expectancy theory)
When total overhauling of
plan?
 1)when the morale is low because of
low compensation
 2)when a company is anticipating the
cultivation of new and different markets
7 requirements of a good
compensation plan-
 1)it provides a living wage preferably in
the form of a secure income
 2)fits with rest of the motivational
program
 3)is fair-equal pay for equal
performance
7 requirements of a good
compensation plan-
 4)easy for sales personnel to
understand
 5)adjusts pay to changes in
performance
 6)economical to administer
 7)helps in attaining the objectives of
the sales organization
Devising a sales compensation
plan
 1)define the sales job
 2)consider the company’s general
compensation structure
Devising a sales compensation
plan-
 3)consider compensation patterns in
community and industry
 4)determine compensation level
 5)provide for the various compensation
elements
Devising a sales compensation
plan-
 6)special company needs and problems
 7)consult the present sales force
 8)reduce tentative plan to writing and
pre-test it
 9)revise the plan
 10)implement the plan and provide for
follow-up
Define the sales job
 Up-to date written job descriptions
 Sales volume objectives
Define the sales job
 Distribution policies, credit policies,
price policies and other policies
 Current and proposed advertising and
sales promotional programs assist in
clarifying the nature of the
salesperson’s goals, duties and activities
General compensation
structure
 As per job evaluation
 Job evaluation methods-4
 1)simple ranking
 2)classification or grading
 3)point system
 4)factor-comparison method
Simple ranking
 Inexpensive
 Widely used by small businesses
 Executive committee sorts out job
descriptions in the order of worth
Simple ranking
 Without considering current individuals
in the job or their compensation levels
 No effort is made to determine critical
factors inherent in the job
 Only relative appraisal of the relative
worth of different jobs are made
Classification or grading
 The grades sometimes called classes,
are described in terms of job
responsibilitys,skills required,
supervision given and
received,exposure to hazardous and
unfavorable working conditions
Classification or grading
 Job descriptions are then classified into
appropriate grades by an executive
committee or by personal specialists
 All jobs within a grade are treated alike
with respect to base compensation
Point system
 Most widely used method
 Factors considered are-
 Mental and physical
skills,responsibility,supervision given
and received, personality requirements
and minimum education required
Point system
 Each factor is assigned a minimum and
maximum number of points (in line with
importance)
 Appraised factor scores are combined
into a total point value
Point system
 Finally, bands of points are decided
upon and become the different
compensation classes
 Point values make it possible to
determine the gap, or distance,
between job classes
Factor-comparison method
 Resembles the point system but more
complex
 Utilizes a scheme of ranking and cross-
comparisons to minimize error from
faulty judgment
Factor-comparison method
 Employs selected factors and evaluation
scales
Factor-comparison method
 Scale values are in dollars and cents,
and no upper limit exists to the
valuation that can be assigned to any
one factor
 A selected number of key jobs, typical
of similar jobs throughout the company
are then evaluated factor by factor
Factor-comparison method
 This is done by arranging them in rank
order from highest to lowest for each
factor
Factor-comparison method
 As a check against judgmental
evaluation, the compensation dollars
actually paid for each job are allocated
to the factor; the allocation
automatically establishes the
relationship among jobs for each other
Factor-comparison method
 The judgment ranking and the ranking
by allocation of compensation are
compared and differences are
reconciled, or else the jobs are removed
from the key list
Factor-comparison method
 On the basis of dollar amounts assigned
to the several factors making up key
jobs, additional jobs are evaluated and
their monetary values for each factor
interpolated into the scale
 This process is repeated until all jobs
are evaluated
Compensation patterns in
community and industry
 What compensation systems are being
used?
 What is the average compensation for
similar positions?
Compensation patterns in
community and industry
 How are other companies doing with
their plans?
 What are the pros and cons of
departing from industry or community
patterns?
Compensation patterns in
community and industry
 A sound compensation is possible only
if it considers the relation of external
compensation practices to those of the
company
 Vigil is to be maintained to see that the
pay of sales personnel will not get out
of line with that paid for similar jobs in
the community or industry
4-determine compensation
level
 Decide on the average
 Ascertain the caliber of the present
sales force measures up to what the
company would like to have
4-determine compensation
level
 Weigh the worth of individual persons
through estimating the sales and profit
dollars that would be lost, if particular
sales person resigns
4-determine compensation
level
 Another consideration is the
compensation company can pay
 Plot each cost estimate on a break-even
style chart
Similar companies but
different pay? Possibilities-
 The first group of sales people may be
overcompensated
 Sometimes, management does not
know the true worth of individual sales
personnel
Similar companies but
different pay? Possibilities-
 In other cases, management regards
some sales personnel as indispensable
or managerial inertia prevents
adjustment of the compensation level to
a changed selling conditions
Similar companies but
different pay? Possibilities-
 Sales managers are biased in favor of
high compensation for selling jobs
5-provide for the various
compensation elements
 4 basic elements-
 1)a fixed element, either a salary or
drawing account, to provide some
stability of income
 2)a variable element (a commission,
bonus or profit sharing arrangement) to
serve as an incentive
5-provide for the various
compensation elements
 3)an element covering the fringe or
‘plus’ factor-such as paid vacation,
sickness and accident benefits, life
insurance, pensions and the like
5-provide for the various
compensation elements
 4)an element providing for
reimbursement of expenses or payment
of expense allowances
 Generally fixed and variable component
will be 80/20 or 60/40
Special company needs and
problems
 1)Sales people over emphasizing low-
margin items and neglecting more
profitable products-stimulate the selling
of better balanced orders-variable
commission rates for different products-
higher rates to neglected products
Special company needs and
problems
 2)small order problem-design plan that
encourages larger order with a in-built
mechanism to vary call frequency with
account size
 3)securing retail displays-is normally
neglected when sales man are paid
based on sales volume-give incentive
payment for obtaining retail displays
Special company needs and
problems
 4)securing new customers and new
businesses
 5)improving the quality of salespeople’s
reports
Special company needs and
problems
 6)controlling expenses of handling
complaints and adjustments
 7)eliminating price shading by the sales
staff
Special company needs and
problems
 8)reducing traveling and other
expenses
 9)making collections and gathering
credit information
 For transitory issues, plan should not be
changed frequently
Consult the present sales
force
 Consult everybody but give more
importance to the opinions of desired
caliber sales force
Reduce tentative plan to
writing and pre-test it
 The more the difference in the tentative
plan and current plan, the greater the
amount of testing
 Pretests are generally mathematical and
computerized
Reduce tentative plan to
writing and pre-test it
 Past payrolls( a year or two) are
reworked to check operation of the
proposed plan against experience under
the old system
Reduce tentative plan to
writing and pre-test it
 If sales pattern shows considerable
fluctuation, calculations are made for
periods representative of average, good
and poor business
 The plan is tested for the sales force as
a group and for individuals faced with
unique selling conditions
Reduce tentative plan to
writing and pre-test it
 Analysis reveals whether the plan
permits earning in line with the desired
compensation level
 If deficiencies show up, the plan may
not be at fault; weaknesses can trace to
the way territorial assignments have
been made or to inaccuracies in sales
forecasts, budgets or quotas
Reduce tentative plan to
writing and pre-test it
 For pilot test, several territories
representative of different sets of
selling conditions are selected
Reduce tentative plan to
writing and pre-test it
 The proposed plan is applied in each
one long enough to detect how it works
under current conditions
 Pilot tests are invaluable for spotting
possible sources of trouble and other
deficiencies
revise
 Revision to eliminate trouble spots or
deficiencies
 If more alterations are there, the
revised plan goes through further
pretests and perhaps another pilot test
 For minor changes, further testing is
not necessary
Implement the plan and
provide for follow-up
 Explain it to sales personnel
 Convince them of its basic fairness and
logic
Implement the plan and
provide for follow-up
 Make them to understand what
management hopes to accomplish
through the new plan and how this is
done
Implement the plan and
provide for follow-up
 Details of changes from the old plan
and their significance requires
explanation
 Send copies to all sales personnel
Implement the plan and
provide for follow-up
 If complex, special training sessions are
held
Implement the plan and
provide for follow-up
 Inadequate understanding of the sales
compensation plan is common and
often a cause of low morale
 No effort is spared to make certain that
everyone fully comprehends the
compensation plan and its working
Implement the plan and
provide for follow-up
 Provision for follow-up are made
 From periodic check-ups ,need for
further adjustments is detected
 Periodic checks provide evidence of the
plan’s accomplishment ,and they
uncover weaknesses needing correction
Types of compensation plans
 1)straight salary
 2)straight commission
 3)combination of salary and commission
Straight salary
 Once popular now less importance
 @20%organizations use this
Straight salary
 Most common among industrial goods
companies
 Suitable when the selling job requires
extensive missionary or educational
work, when sales people service the
product or give technical or engineering
advice, or when sales people do
considerable sales promotion work
Straight salary
 If non-selling tasks bulk large in the
salesperson’s total time expenditure
 Commonly used for people involved in
trade-selling
 Sometimes for driver-sales people
selling liquor,beverages,milk,bread etc
Straight salary-advantages
 Provides strong control over sales
personnel
 Management can direct their activities
along the most productive lines
 Economical to administer
 Accounting costs are lower
Straight salary-advantages fro
salesman
 Stability of income
 Less burden of planning routing and
scheduling
Straight salary-disadvantages
 Many sales people do only an average
rather than an outstanding job
 There is tendency to under compensate
productive people and overcompensate
poor performer giving rise to turnover
and increased cost of recruiting
 Maintaining morale
Straight salary-disadvantages
 Difficult to adjust to changing conditions
during downswings
 During upswing, sales people will not
be ready to exceed previous sales
records by any large amount
Straight salary-disadvantages
 Through good administration, these
weaknesses can be overcome
 Measuring average, good and poor
performance is difficult
Straight commission
 Individual sales personnel should be
paid according to productivity
 Sales volume is the best productive
measure
 More complex than straight salary plan
Straight commission
 2 classifications-
 1)straight commission with sales
personnel paying their own expenses
 2)straight commission with the
company paying expenses, with or
without advances against earned
commissions
Straight commission
 Suitable where non-selling duties are
relatively unimportant and management
emphasizes order getting
Straight commission
 Common in the clothing,textile,and
shoe industries and in drug and
hardware wholesaling
 Insurance, investment securities,
furniture manufacturer, office
equipment
 Less than 10%companies use this plan
Advantages-straight
commission
 Provides maximum direct monetary
incentive for the salesperson to strive
for high level volume
Advantages-straight
commission
 A means for cost control-all direct
selling expenses except for traveling
and miscellaneous expenses fluctuate
directly with sales volume changes and
sales compensation becomes virtually
an all variable expense
 Great flexibility-by revising commission
rates applying to different products
Disadvantages-straight
commission
 Provides little financial control over
salespeople’s activities
 Negligence towards daily reports
etc,consider sales accounts as individual
property, high pressure tactics and loss
of goodwill
Disadvantages-straight
commission
 May push the easiest-to-sell-low margin
items and neglect harder-to-sell high-
margin items
Disadvantages-straight
commission
 Costs of checking and auditing
salespeople’s reports and of calculating
payrolls are higher than under the
straight salary method
 Some salespeople’s efficiency may
decline because of income certainties
(management needs to invest in time
and money to buoy up their spirits)
Determining commission base
 Company selling policies and problems
influence selection of the base
 If obtaining volume is the main
concern, the total sales is the base
 If sales personnel make collections on
sales, commissions are based on
collections
Determining commission base
 In case of excessive order cancellation
history, commission can be based upon
shipments, billings or payments
 Some companies base commissions on
gross margins
 Other companies use net profits as the
base
Drawing accounts
 Company establishes separate accounts for
each salesperson, to which commissions are
credited and against which withdrawals are
made
 Drawing accounts resemble salaries, since
customarily individual sales personnel are
allowed to overdraw against future earnings
 If sales personnel become greatly overdrawn,
they may lose incentive to produce, because
earned commissions are used to reduce the
indebtedness
Drawing accounts
 Some sales personnel become
discouraged with the prospect of paying
back overdrawn accounts and quit the
company
Drawing accounts
 To forestall quitting by overdrawn
salespeople, some firms use
“guaranteed" drawing account plans
(these do not require the paying back
of overdrawls)
 Commonly, drawing account plans
include a provision that covers the
possibility of overdrafts
Salary and incentive
combination plan-advantages
 Sales personnel have both the security
of stable income and the stimulus of
direct financial incentive
 Management has both financial control
over sales activities and the apparatus
to motivate sales efforts
Salary and incentive
combination plan-advantages
 Greater flexibility for adjustment to
changing conditions
 Cooperative spirit develops between the
sales personnel and the company
 Disagreement on pay increases and
territorial changes are less violent
Disadvantages of combination
plan
 Clerical costs are higher
 More records are maintained and in
great detail
 Generally 80-20 or 60-40 fixed and
variable element
bonus
 Is an amount paid for accomplishing a
specific sales task
 Are paid for reaching a sales quota, a
performing promotional activities,
obtaining new accounts, following up
leads, setting up displays or carrying
out other assigned tasks
bonus
 Is an additional financial reward to the
sales person for achieving results
beyond a pre-determined minimum
 Bonuses are never used alone-they
always appear with one of the three
main sales compensation methods
bonus
 The bonus conditions require thorough
explanation, as all sales personnel must
understand them
 The necessary records must be set up
and maintained
bonus
 Procedure for keeping sales personnel
abreast of their current standings
relative to the goals are needed
 Any bonus misunderstandings or
grievances arising should be dealt with
fairly and tactfully
Fringe benefits
 Range from 25 to 40% of the total sales
compensation package
Fringe benefits
 Do not bear direct relationship to job
performance
 Some fringe benefits like payments for
social security premiums,
unemployment compensation and
worker’s compensation are required by
federal and state law
Why fringe benefits?
 1)to be competitive with other
companies in the industry or community
 2)to furnish reasons for employees to
remain in the company’s service
 3)to comply with what employees
expect as fringe benefits
Fringe benefits-possible for
sales personnel
 1)time-holidays,vacations,sick-
leave,personal-
leave,sabbaticals,pregnancy leave
 2)organization dues-trade association,
civic clubs, country clubs, professional
association
Fringe benefits-possible for
sales personnel
 3)retirement programs-social security
(mandatory) ,pension plan, profit
sharing, salary reduction plans
Fringe benefits-possible for
sales personnel
 4)miscellaneous-automobile,use of vacation
spot,parking,dry cleaning and laundry,lunches(all or
part), secretarial services, employee stock purchase
plan, company-provided housing, legal services,
financial counseling,tution for continuing education
programs, financial support for dependent’s
education, discount for purchase of company
products, child care payments, matching funds to
charities and schools, company social events,
company sporting tournaments, retirement
counseling, career counseling, payment of moving
expenses
Fringe benefits-possible for
sales personnel
 5)insurance and medical-physical
examination, medical payments and
reimbursements, hospitalization insurance,
dental insurance, disability insurance, life
insurance, travel insurance, accident
insurance, worker's compensation
(mandatory), unemployment insurance
(mandatory), cancer insurance,
psychotherapy expense
Managing expenses of sales
personnel
 Generally @9% in the electrical
equipment industry
 @34%in the automotive parts and
accessories industry
 Most industries, amount from one-
fourth to one-half of sales
compensation
Managing expenses of sales
personnel
 Missionary selling incurs the lowest
expenses since involves calling on
professionals who are extremely busy
 New business selling results in the
highest selling expenses (calls are
promising investment)
Managing expenses of sales
personnel
 Technical selling requires longer calls,
more spending
 Trade selling-routine calls with short
times spent with each customer-most
expenses for travel and lodging and
little for entertainment
Managing expenses of sales
personnel
 It is wiser to be overly liberal than to
restrict salespeople’s activities through
insufficient expense reimbursement
Managing expenses of sales
personnel
 Some firms try to hold expenses within
a planned total amount or to some
percentage of sales volume of gross
margin
Managing expenses of sales
personnel
 Others control sales expenses only in a
general way by scrutinizing expense
reports or through policy statements
outlining the conditions under which the
expenses are reimbursable
Reimbursement of sales
expenses-policies and practices
 1)have sales personnel pay their own
expenses
 2)reimburse sales personnel for all or
part of their expenses
2 common sense principles for
expense reimbursement policies
 1)reimbursable expenses should be
large enough to permit the performance
of assigned duties in the expected
manner
 2)all expenses incurred because sales
personnel are away from home on
company business should be
reimbursable
Sales personnel paying their
own expenses
 Is the simpler by far
 Treat sales personnel as independent
businesspeople using straight
commission plan
 No records are necessary
Sales personnel paying their
own expenses
 It is essential that their regular
commission be sufficient to permit them
to further the company’s best interest
 Little management control can be
exercised
 Avoid missionary duties and ‘high spot’
(call on large account)
Full or partial reimbursement
 Factors affecting-
 Territorial size and characteristics
 Caliber of sales personnel
 Nature and breadth of product line
 Managerial efficiency
 Intensity of competition
 Mode of travel
How a expense reimbursement
policy should be?
 Take into account the customary living
standards of the salesperson and the
customers (more emphasis)
How a expense reimbursement
policy should be?
 The salesperson should eat and stay at
hotels of the class patronized by the
customers
How a expense reimbursement
policy should be?
 In some instances, different salespeople
in the same company should be allowed
different amounts for expense,
reflecting deviations in customer’s living
standards (actual expenses vary a great
deal from one territory to another)
 Keep expenses reasonable
How a expense reimbursement
policy should be?
 No bad feeling among the sales staff
 Easy to administer-minimum
supervision and record keeping
 Avoid tendency to over economize
Methods of controlling and
reimbursing expenses of sales
personnel
 1)flat expense account
 2)flexible expense account
 3)honor system
 4)expense quota
Flat expense account
 No need to keep reports and no need to
check expense accounts
 Makes possible the advance
determination of total sales expenses
 Forces sales personnel to control their
own expenses
 Works best when-
Flat expense account
 1)the exact amounts of expense
accounts do not need changing often
(selling staple products in small
territories)
 2)when expense allowances come up
for frequent review and possibly
revision
Flat expense account
 Should have flexibility built into them
 The weakness is the tendency of some
sales personnel to over economize
thinking it as a regular addition to
salary and do not spend all of it,
preferring to save a portion for personal
use
Flexible expense account
 Known as ‘exact' plan and most
common
 Sales personnel are reimbursed for all
allowable expenses incurred and
reported
 for this method to work management
must-
Flexible expense account
 1)know the total amount of sales
personnel’s probable expenses
 2)classify expenses into ‘allowable' and
‘non-allowable" categories with clear
descriptions of items under each
heading
Flexible expense account
 3)set up a system and forms for the
sales staff to use in periodic expense
reporting
 4)establish procedures for checking
itemized expense reports and for
expeditious handling of reimbursements
Flexible expense account
 Because of the flexibility sales
opportunities are fully capitalized on as
they arise
Flexible expense account
 Administrative costs are sizable because
of the large amount of clerical and
accounting work in checking expense
reports and making reimbursements
(good sales persons are generally poor
record keepers)
Flexible expense account
 Without close control, some people
spend the company’s money too
generously, further aggravated by the
opportunity for expense account
padding giving rise to disputes
Honor system
 Sales expenses are fully reimbursed
 Only total expenses are reported
 Indicates complete honesty of all sales
personnel
 Easy to administer thus paving way to
savings in both accounting expenses
and time
 Management control is weak
Honor system
 Sales personnel may become free
spenders spending on unwanted heads
 Regard expense accounts as sources of
income causing inequities in expense
allowances adversely affecting morale
Honor system
 To control,establish maximum ratios of
selling expense to sales
 Watch the trend of expenses; sudden
and sizable increase in reported
expenses unless accompanied by
parallel increase in sales
 Remedial action in case of dishonesty
Expense quota
 Permits week-by-week variations but controls
total expenses over long period of time
 Management first studies individual sales
territories and estimates the sales volume and
upper limit for each sales person
 Prompt and full reimbursements are made
Expense quota
 Drawback-the burden for controlling
expenses is upon the sales personnel
rather than upon management
Expense quota
 Skillful administration is necessary
 In case of wrong forecasts, the sales
personnel may curtail their activities
towards the end of budgetary periods
because of low balances left in accounts
Reimbursement of automobile
expenses
 1)flat mileage rate
 2)graduated mileage rate
 3)fixed periodic allowance
 4)combination fixed periodic allowance
and mileage rate
 5)runzheimer plan
Flat mileage rate
 Must set the mileage rate high enough to
cover all expenses of automobile ownership
and operation, yet low enough to permit the
company to buy transportation economically
 Works satisfactorily when a company’s sales
force covers small territories all in the same
geographical area
 Most local and regional wholesalers among
other small companies favor flat mileage
rates
Flat mileage rate
 Short-comings-
 Ignores cost differentials arising from
the use of various makes and models
Flat mileage rate
 Ignores territorial differences in
expenses (price of
gasoline,oil,tires,insurance coverage,
license and inspection fee etc)
 Hesitation in adjusting the rate upward
as well as downward in line with
changing actual expenses
Graduated mileage rate
 Different rates apply to mileages in
different ranges
 Setting the rate per mile is difficult
 Suitable when sales personnel travel
long distances annually and serve
concentrated geographic areas without
significant regional expense differences
Fixed periodic allowance
 To those who use their personal vehicle
on company business-on
day,week,month basis
 Assumes that total automobile expenses
vary with duration of use rather than
mileage
Fixed periodic allowance
 Difficult for sales personnel with large
territories requiring extensive traveling
 If allowances are uniform for all sales
personnel, morale suffers because of
the inequities
Fixed periodic and mileage
rate combination
 Fixed periodic allowance to cover fixed
and semi variable expenses such as
insurance premiums, license fees and
depreciation
Fixed periodic and mileage
rate combination
 Mileage payment for operating
expenses including cost of gasoline, oil
and tires
 Some companies using combinations
systems accumulate reserves to cover
depreciation on automobiles and
reimburse sales personnel when they
buy new cars
Runzheimer plan
 Originated by consulting firm
Runzheimer USA in 1933
 Divides USA into 29 auto-use basic cost
areas
Runzheimer plan
 Allowances are for 20,000 miles of
average annual travel within each of the
cost areas
Runzheimer plan
 Recommends that certain expense
items not provided for in the standard
allowance be reimbursed as incurred
and reported by sales personnel such as
local city license fees, property taxes,
daytime parking, overnight parking
away from home and toll charges etc
Runzheimer plan
 More than 1,50,000 drivers of business
automobiles are reimbursed over $500
million each year
Sales meetings and sales
contests
 5 major decisions for planning a sales
meeting-
 1)defining the specific training aims
 2)deciding meeting content
Sales meetings and sales
contests
 3)determining methods of conducting
the meeting
 4)deciding how to execute (hold) the
meeting
 5)how to evaluate the results
aims
 1)a new product may be ready for
introduction
 2)new insights on customer attitudes
and behavior (new research)
 3)deficiency of sales personnel in using
sales techniques as per the supervisor
aims
 4)improving the quality of sales force
reports
 5)orienting sales personnel on the
advertising program and its connect
with the sales force
aims
 6)time management for sales force
 7)introducing new services (such as
inventory control assistance) for
customers
Content-(agenda)
 New product being launched by
competitor-
 Content might include-
 1)what we know about X’s new product
Content-(agenda)
 2)what we think the trade’s reaction will
be and why
 3)what your company is doing
 4)what you should do and how
method
 Depends upon the aim and content as
well as upon the time available and
meeting place
 Most local meetings are short and
participative
method
 GD is used
 Regional or national meetings are held
less often and run for two or more
days have more ambitious aims and
wider content
Execution
 Room arrangement
 Audiovisual equipment and supplies
 Provision of materials to attendees
(including pads and pencils)
 Timing of breaks and refreshments
Execution
 Starting time and closing time
 1)Herringbone
 2)workshop
 3)Inverted U-shape
 4)seminar or the ‘British Square’
evaluation
 As per specially designed forms for each
meeting
National sales meetings
 When?
 Comprehensive changes in marketing or
sales policies are made
National sales meetings
 Major executives attend national
meetings which provides stimulation
than written or recorded messages
 Informal meetings of sales personnel
and interchange of experience
Drawbacks of national
meetings-
 Expense
Drawbacks of national
meetings-
 Difficult to find a convenient time for all
sales personnel to attend unless the
product line is seasonal
 Company routine is disrupted and
competitors may cut into market share
however more aggressive selling results
from the national meeting
Regional sales meetings
 Trend is towards regional meetings
from national meetings
 Reduction in total travel costs and
lowering lost selling time
Regional sales meetings
 HQ executives brought into direct
contact with field personnel learn about
current problems at first-hand
 Smaller attendance may increase
participation time per person attending
Regional sales meetings-
disadvantages
 Demands on executive time may be
excessive
 Top sales executives often rotate
attendance among regional meetings
Regional sales meetings-
disadvantages
 Total attendance is smaller developing a
spirit of contagious enthusiasm is more
difficult
 May not have top-flight speakers and
entertainers featured at national
meetings
Opposition to national and
regional sales meetings
 Likely results do not justify expected
costs
 Ill affordability to have sales personnel
away from the field even for a week
Opposition to national and
regional sales meetings
 Demands on their time
 Low sales force morale since sales
personnel will use the meetings to
compare complaints and to strengthen
their convictions that the company is a
bad place to work
Local sales meetings
 Are conducted by district sales
managers either weekly or biweekly
 May last from 15 minutes to several
hours
Local sales meetings
 Strengths-informality, opportunity to
pose personal questions and to state
personal views
 Occasion to get together, better
acquaintance and strengthen group
identity
Remote control and traveling
sales meetings
 1)closed circuit television
 2)sales meetings by telephone
 3)sales meetings at home
 4)traveling sales meetings
Closed circuit television
 Suitable for companies with large scale
sales force or large dealer organization
 The program is ‘live’
 Suitable to introduce new products or to
launch national sales campaigns
Sales meetings by telephone
 Uses for small group meetings and
discussions-not more than 20
 Rules-only one individual will speak at a
time and speaker to identify themselves
and their cities
 Save time and money
 Loose less time, (time away from jobs)
Sales meetings at home-
 Some companies mail recording or printed
materials to sales personnel at their homes
 One format is to record an executive
conference or meeting and to provide sales
personnel with cassette copies
 Another is to print an illustrated script of a
home office meeting for distribution to sales
personnel
Sales meetings at home-
 Advantages-
 1)sales personnel receive the
information at home, free from
distractions
 2)they can review the information many
times
 3)there are savings in time and money
Traveling sales meetings
 Suitable when manufacturer introduces
a new product line which needs to be
displayed and demonstrated
 Regional meetings become impossible,
since shifting and arranging of display
and demonstration is cumbersome
Traveling sales meetings
 Some companies use outfitting
motorized vans and trailers with
product displays and conference rooms
 Moves from city to city and at each
stop sales personnel and/or dealers
come aboard
Sales contests-why?
 1)to obtain new customers
 2)to secure larger orders per sales call
 3)to push slow-moving items, high
margin goods or new products
 4)to overcome a seasonal sales slump
 5)to sell a more profitable mix of
products
Sales contests-why?
 6)to improve the performance of
distributor’s sales personnel
 7)to promote seasonal merchandise
 8)to obtain more product displays
 9)to get re-orders
 10)to promote special deals to
distributors, dealers or both
Contest formats-
 1)direct-has a specific objective-Let’s go
after new customers
 2)novelty-focuses upon a current event,
sport or the like-e.g.-Let’s hunt for
hidden treasure( find new customers)
or Let’s start panning gold (sell more
profitable orders)
Themes for novelty formats
 1)Games-
 2)races
 3)card games
 4)hunting or fishing
 5)travel
Themes for novelty formats
 6)climbing
 7)the rising
thermometer,pressure,gauge etc
 8)building contests-skyscraper, other
new buildings, tower, smoke-stack etc
 9)military
 10)clothing contests
Themes for novelty formats
 A) team type-football, baseball, hockey,
bowling, tennis doubles, tug-of-war,
soccer etc.
Themes for novelty formats
 B) individual type-tennis
singles,golf,wrestling,archery,fencing
broad jump, high jump, pole vault,
hammer throw, discuss throw, shooting
match, javelin throw, bull fight, climbing
the greased pole etc
Races
 Team-type-crew, cross
country,relay,bobsled,yacht
 Individual type-horse race, dog race, air
race, soap box derby, auto
race,hurdles,dashes,marthons,dog sled,
trotting race, swimming races,
speedboat races
Card-games
 Poker
 Pinochle
 Bridge
 black jack etc.
Hunting or fishing
 Treasure hunt
 Big-game hunt
 Uranium rush
 Gold rush
 Land rush
 Fishing derby
 Trapping contest
Travel-
 Trip around the world
 to Miami
 to new York
 to Hollywood
 to Waikiki
 to the moon
 to space etc
climbing
 Ladders
 Stairs
 Mountains
 Cliff scaling
 Ascent to the stratosphere
The rising
thermometer,pressure,gauge etc
Building contests
 Sky scraper
 Other new buildings
 Tower
 Smokestacks
military
 Naval battles
 Artillery engagements
 Bombing runs
 Invasions
 Interplanetary wars
Clothing contests
 In one of these, the sales person earns
one item of clothing at a time and
appears at sales meetings clad only in
those items earned up to that point
Contest prizes
 Cash
 Merchandise
 Travel
 Special honors or privileges
cash
 Once basic physiological needs and
safety and security needs are satisfied,
whatever potency money retains as an
incentive relates to unfulfilled esteem
and achievement needs (non-cash
prizes fill these needs better than cash)
cash
 To be a strong incentive, it needs to be
substantial-10-25% of an individual’s
regular annual income
Cash-disadvantages
 A cash price of $100 means a little to
most sales personnel and they exert
token efforts to win it
 Winners mix cash prizes with other
income, thus have no permanent
evidence of their achievements
merchandise
 Is superior to cash in several respects
 Winners have permanent evidence of
their achievements
merchandise
 The merchandise prize is obtained at
wholesale, so it represents a value
larger than the equivalent cash
 For the same total outlay,too,more
merchandise prizes than cash awards
can be offered; hence the contest can
have more winners
Merchandise-selection
 Items should be desired by sales
persons or their families
 Allow winners to select from a variety of
offerings
 Merchandise incentive agencies can be
used
travel
 travel awards are popular and a strong
incentive
 Generally provide trips for winners and
their spouses
Special honors or privileges
 A letter from a top executive
recognizing the winner’s superior
performance
 A loving cup
 A special trip to a home office meeting
 Membership in a special group or club
(million dollar club for life insurance
salesman)
Special honors or privileges
 Publicity through house organs and in
hometown newspapers
 Are used by firms employing sales
personnel who are almost ‘independent
entrepreneurs”
Special honors or privileges
 These are suitable when management
desires to strengthen group identity and
build team spirit
 These appeal to the sales person’s
belongingness and social relations
needs
How many prizes and how
should they be awarded?
 Make it possible for everyone to win
 Present performance levels be
considered
 Basis for award be improvement rather
than total performance( not the total
sales volume but %of quota achieved)
Contest duration
 Be decided after considering the length
of time interest and enthusiasm
maintainability plus the period over
which the theme can be kept timely and
the interval needed to accomplish the
contest objective
 1-4 months,13 weeks, not longer than a
month etc
Contest promotion
 A planned barrage of promotional material
develops enthusiasm
 A teaser campaign may precede the formal
contest announcement; other times the
contest announcement comes as a surprise
 As per the progress of the contest, other
techniques hold and intensify interest
Contest promotion
 Results and standings are reported at
sales meetings or by daily or weekly
bulletins
 At intervals, new or special prizes are
announced
Contest promotion
 Reports of standings are addressed to
spouses to generate interest at home
 Flash reports be shown, additional
stimuli be added
Managerial evaluation of
contests
 Two levels-pre-evaluation and post-
evaluation
 Pre-evaluation aims to detect and
correct weaknesses
Managerial evaluation of
contests
 Post evaluation seeks insights helpful in
improving future contests
 Both cover alternatives, short-term and
long-term effects,design,fairness and
impact upon sales force morale
Short and long-term effects
 A sales contest accomplishes its
purpose if it increases sales volume,
brings in more profitable volume, or
does both in the short and the long run
 No contest is successful if it borrows
sales from preceding months,
succeeding months or both
Short and long-term effects
 Successful contest increase both
contest period sales and long-run sales
 Successful contests boost the spirits of
sales personnel to have a beneficial
carry over effect
design
 A well designed contest provides
motivation to achieve the underlying
purpose while increasing the gross
margin earned on sales volume by at
least enough to pay contest costs
design
 The format should tie in directly with
the specific objectives, include easy-to-
understand and fair contest rules and
lend itself readily to promotion
fairness
 Should be visible to all sales contestants
fairness
 While the contest is on, the sales
personnel should feel that they have
real chance of winning something
 If its format causes some to give up
before it starts and others to stop trying
before it is over indicates a unfair
format
Impact upon sales force
morale
 Successful sales contests result in
permanently higher levels of sales force
morale
Impact upon sales force
morale
 If the format causes personal rivalry, it
may have the counter productive effect
of creating jealousy and antagonism
among the sales force
 It is advisable to organize teams and
place the emphasis on competition
among teams for recognition than
individuals
Objections to sales contests
 Only 1 in 4 sales departments use contests, why?
 Sales persons are paid for their service under
provision of the basic compensation plan hence no
need to reward them further
 High caliber and more experienced sales personnel
consider sales contests juvenile and silly
 Contests lead to unanticipated and undesirable
results such as increased returns and
adjsutments,higher credit loss and overstocking of
dealers
Objections to sales contests
 Sales slump occur before and after the
contest
 The disappointment suffered by contest
losers causes a general decline in sales
force morale
Objections to sales contests
 Contests are temporary motivating
devices and if used too frequently have
a narcotic effect (no greater results in
the aggregate are obtained with
contests than without them
Objections to sales contests
 The competitive atmosphere of contest
weakens the team spirit
 Good contest design, intelligent contest
administration and proper handling of
other aspects of sales force
management will minimize objections
New topic-Controlling sales
personnel-evaluating and
supervising
 What is control?(4 steps)
 1)Establish performance standards
 2)recording performances
 3)evaluating performances against the
standards
 4)taking action
Quantitative performance
standards
 1)quotas
 2)selling expense ratio
 3)territorial net profit or gross margin
ratio
 4)territorial market share
 5)sales coverage effectiveness index
 6)call-frequency ratio
Quantitative performance
standards
 7)call per day
 8)order call ratio
 9)average cost per call
 10)average order size
 11)non-selling activities
 12)multiple quantitative performance
standards
quotas
 Is a quantitative objective expressed in
absolute terms and assigned to a
specific marketing unit
quotas
 May be dollars, or units of product with
the marketing unit being a salesperson
or a territory
 Quotas specify desired levels of
accomplishment for sales volume, gross
margin, net
profit,expenses,performance of non-
selling activities etc
Selling expense ratio
 Sales person can affect this both by
controlling expenses and by making
sales
 Selling expense ratios are determined
after analysis of expense conditions and
sales volume potentials in each territory
Selling expense ratio-
shortcomings
 Does not take into account variations in
the profitability of different products
Selling expense ratio-
shortcomings
 May cause the salesperson to over
economize on selling expenses to the
point where sales volume suffer
Selling expense ratio-
shortcomings
 In recession times, selling expense
ratios inhibit sales personnel from
exerting efforts to bolster sales volume
 Used by more industrial product firms
which require personal selling and
entertainment thus involving higher
costs of travel and subsistence