Module - 2

Compensating Sales
Force
Compensation Plans - Objectives
Balancing the needs of personnel
Secure income and security
Desire for personal recognition and status
Reinforcement for doing good work
Managing effects of time
Compensation Plans - Characteristics
Fairness to all
Flexibility
Provide incentive and motivation
Lead to direction of efforts towards company
objectives
Ease of administration and comprehension
Compensation Plans - Types
Straight Salary

Straight Commissions

Combination Salary Plans

Compensation Plan - Designing
Determining specific objectives
Income & security
Equity
Flexibility
Economy
Establishing desired level of earnings
Compensation Plan - Designing
Methods of payment
Salary
Commission
Bonus
Employee stock option
Specialize prizes
Drawing account
Special cash incentives
Non cash incentives
Fringe benefits
Sales force expenses
Compensation Plan - Implementation
Pre-testing

Periodic monitoring

Sales contest
Planning sales contests
Evaluating sales contest
Sales Force Expenses
Expense plans
Beneficial to sales person
Beneficial to organization
Easy to administer
Easy to understand

Types of expense plans

Company pays all’ expenses
‘Sales person pays all’ expenses
‘Company partially pay’ expenses
Fringe Benefits
Elements in Fringe Benefits
Social security
Pension and retirement program
Insurance
Holiday
Time-off with pay
Other benefits
Advantage of Fringe Benefits
Motivating Sales Force
Concept of Motivation
Motivation deals with the force within a person, or
which acts on a person, to initiate desired behavior and
directs it towards the attainment of organizational
goals
Motivational Theories
Maslow’s Hierarchy
of Needs
Herzberg’s Two-Factor Theory
Hygiene Factors
Working conditions
Job security
Salary
Company policies
Quality of technical supervision
Interpersonal relations
Herzberg’s Two-Factor Theory
 Motivational Factors
Responsibility
The work itself
Promotion
Recognition
Achievement
Goal Setting Theory
By Edwin Locke
To fulfill specific needs and aspirations setting of
certain goals
Setting higher goals produces higher output
Setting goals encourages to work persistently towards
achieving goals
Expectancy Theory
By Victor Vroom
The perceived consequences of actions motivate an
individual
Motivation is a function of three factors
Expectations
Valence
Instrumentality
Job Design Theory
These theories correlate motivation with job
satisfaction
Job satisfaction
Feeling of pleasure that one derives from one’s
experience in job
Job Enrichment
Job Rotation
Job Enlargement
Motivation and Productivity of the Sales
Force
Productivity
The ratio of output to input and is represented in the
form of the following equation

Productivity = Output
Input

Sales productivity = Sales revenues

Sales expenses
Effects of Personal Characteristics on Sales
Force Motivation
Competitor

Achiever

Ego-driven

Service-oriented
Sales Motivational Mix
Sales culture
Sales training
Leadership
Basic compensation
Special financial incentives
Non financial rewards
Performance evaluation
 Exploration stage

Establishment stage
Stages of Their Career

Maintenance stage

Disengagement stage
Motivating the Sales Personnel at Different
Time and Territory
Management
Time Management and Its Importance
Better market coverage
Reduce selling costs
Improved customer services
More accurate evaluation of sales force personnel
Territory Management and Its Importance
Benefits of Territory Management
Better customer coverage
Increased sales
Equitable rewards
Reduced traveling costs
Territory Design - Criteria
Sufficient potential

Reasonable size

Adequate coverage

Minimum impediments (Less physical hurdles like

traffic and bridges)
Territory Design - Methods
Build up Method
Assessing the potential or attractiveness of both current
and prospective customers
Breakdown Method

Incremental Method
Developing territories - Procedures
Identify objectives and criteria for territory formation
Bases for developing territory
Geography
Service requirements
Potential
Workload
Assigning sales personnel territories
Operating the Territory Management System
Routing
Scheduling
Territory coverage by sales personnel
Sales Quota
Sales Quota - Meaning
Quotas are quantitative sales goals assigned to
salespeople
A standard of measurement of performance in a sales
organization
Sales Quotas - Objectives
To provide quantitative performance standard
To obtain tighter sales and expense control
To motivate desired performance
To use in connection with sales contests
Sales Quotas - Importance
Provide performance targets
Provide standards
Provide control
Provide change of direction
Tool for motivating sales people
Sales Quotas - Types
Sales volume quota
Profit quota
Expense quota
Activity quota
Characteristics of A Good Sales Quota
Fair
Challenging
Flexible
Easily understandable
Help marginal coordination
Setting Sales Quota - Methods
Quota based on sales forecast and market potential
Quota based on sales forecast alone
Quota based on past experience
Quota based on judgment
Quota based on sales force compensation
Quota set by sales force themselves
Sales Quotas - Administration
Minimizing acceptance problems
Briefing
Conference
Periodical meetings
Managing and controlling people through quota
Coaching
Non-monetary incentives
Sales Quotas - Limitations
Time consuming process
Reduce risk taking among salespersons
Sometime give birth to unethical practices
Difficulty in comprehending if complicated statistical
calculations have been used
Focusing on attaining sales volumes at the cost of
ignoring important selling activities
Estimating Market Potential &
Forecasting Sales
Analyzing Market Potential
Ability to Buy
Willingness to Buy
Sources of Data
Primary data sources
Secondary data sources
Sales Forecasting Method
Qualitative Methods
User Expectations
Sales Force Composite
Jury of Executive Opinion
Delphi Technique
Market Test
Sales Forecasting Method
Quantitative Methods
Time Series Analysis
Moving Average
Exponential Smoothing
Regression and Correlation Analysis
Multiple Regression Model
Selecting a Forecasting Method
Accuracy
Cost
Types of Data Available
 Requirements of the Software
 Experience of the Company
Criteria for Effective Forecasting
Accuracy
Plausibility
Durability
Flexibility
Availability of Statistical Indexes
Organizational Participation
Demand patterns in the Market for the Product
Difficulties Associated with Forecasting
Lack of Adequate Sales History
Lack of Time, Money and Qualified Personnel
Changing Customer Attitude
Fashions and Fads
Evaluating Sales Force
Performance
Determinants of Sales Force
Performance
Internal Factors
Motivation
Skill Level
Job Satisfaction
Role Perception
Personal Factors
Ego Derive
Empathy
Determinants of Sales Force
Performance
External Factors
Environmental Factors
Organizational Factors
Sales Management Function
 Performance Evaluation
Sales Force Evaluation Process

Determine Factors that Influence Sales Force Performance

Select the Criteria for Sales Force Evaluation

Establish the Performance Standard

Compare Sales Force Performance

Performance Review and Feedback

Performance Evaluation
Purpose and reason
To be aware of company objectives
To improve motivation skills
To appraise the past performance
To develop a sales plan to increase future sales
Who should evaluate
When to evaluate
Information Source for Evaluation
Company records
Reports from salespersons
Customers
Manager’s field visit
Manager’s personal insight
Other sources
Criteria for the Evaluation of Sales Force
Performance
Qualitative Criteria
Sales Skills
Territory Management
Personality
Criteria for the Evaluation of Sales Force
Performance
Quantitative Criteria
Sales volume
Average calls per day
Sales orders
Ratio of selling costs to sales
Gross profit obtained from new customer
Establishing Performance Standards
Quantity standards
Quality standards
Time-based standards
Cost-based standards
Method of Sales Force Evaluation
 Essays
 Rating scales
 Forced Choice Method
 Ranking
 New Methods of Evaluation
Critical incident appraisal
Work standard method
Management by objectives
Behavioral anchored rating scale
Family measures as a method of sales force performance
evaluation
Monitoring and Reviewing Sales Force
Performance
Sales force performance can be measured with the help
of…
Sales reports
Invoices
Order forms
Accounting records
Direct interaction
Sales and Cost Analysis
Sales Control - Nature
Objectives of Sales Control
Performance measurement
Problem identification
Identifying opportunities

Sales Control Process

Setting goals
Comparing actual with targets
Taking necessary measures
Sales Analysis
Elements of Sales Analysis
Purpose of evaluation
Comparison standard
Reporting and control system
Hierarchical sales analysis
Sales Analysis - Steps
Determining the Sources of Sales
Information

Collection of Sales Data

Processing of Sales Data

Studying the Results

Sales Analysis - Variations
Variations
Sales analysis by region
Sales analysis by sales representatives
Sales analysis by customers
Sales analysis by product line
Sales analysis by distribution channels
Sales analysis by unit sold

Problems in Sales Analysis

Sales Audit
Elements of Sales Audit
Sales management environment
Sales management planning system
Sales management organization evaluation
Sales management functions
Marketing Cost Analysis
Types of Costs
 Natural and functional cost
 Direct and indirect cost
 Fixed and variable cost

Procedure for Cost Analysis

Spread of natural cost
Functional cost allocation
Determining the efficiency and profitability of sales units
Initiation of action
Marketing Audit
Procedure for Marketing Audit
Setting objectives
Collecting data
Report preparation and presentation

Components of Marketing Audit

Marketing environment audit
Marketing strategy audit
Marketing organization audit
Marketing system audit
Marketing productivity audit
Marketing function audit
Profitability Analysis
Break-even analysis
Capital budgeting tools