Module 4

Sales and Distribution management

Module IV: Managing Sales Force
• Sales audit
• Concept of sales force management. Recruitment and Selection of
sales personnel (domestic and international perspective).
• Cross Cultural challenges.
• Sales training.
• Compensating and motivating sales personnel.
• Controlling and evaluating sales personnel.
 Sales Organization Effectiveness vs. Salesperson
Performance

Salesforce
Environmental Control
Factors System

Salesforce
Salesforce Sales
Salesforce Selling
Outcome Organization
Characteristics Behavioral
Performance Effectiveness
Performance

Salesforce
Nonselling
Organizational Behavior
Factors Performance
Sales Control and Cost Analysis
Companies need to have proper mechanisms in place so that salespeople adhere
to the top line and bottom line objectives

Sales Audit is a systematic, critical & unbiased review and appraisal of the basic
objectives and policies of the selling function and of the organisation, policies,
methods, principles and personnel employed to implement those policies and
achieve those objectives
Salespeople tend to lose sight of this core objective over time; that is why this
becomes critical to preform audit timely
 Sales Audit – Areas of Coverage
People
• Assessment of your key sales and marketing personnel, from the executive team to
the sales reps.
• Do you currently have the right resources and infrastructure to reach your goals?
Processes
• Are your current sales and marketing processes operating efficiently and maximizing
profits
Marketing
• Are your marketing activities measured directly with sales increases?
Measurements
• What are your Key Performance Indicators (KPI’s) and are they being effectively
measured, reported, and managed.
Technology
Are your sales and marketing teams taking advantage of technology to maximize
profitability, or are they held hostage to technology that hinders their effectiveness.
Strategy- Is your sales strategy in line with your core values?
Culture - • Is your team farmers or hunters? What is their level of satisfaction and motivation?
• Does marketing, sales and other key departments or individuals in your company communicate effectively
with each other?
Sales Channels
• Are you currently utilizing the most effective sales channels for your service or product?
• Are you effectively managing your current channels to maximize the relationship and profitability?
• Client Satisfaction
• Do your clients share the same opinion of you as you do? How do they describe you as a company?
• Why did your clients choose you? What do they think of the sales process they experienced with your team?
• Compensation Plans
• Are your management and staff effectively compensated to achieve sales targets?
• Are you achieving the right balance between base and performance-based pay?
• Customer Satisfaction
Sales Organization Audit
• Comprehensive, systematic, diagnostic and prescriptive tool.
• Assesses a firm’s sales management process
• Provides direction for improved performance and prescription for
needed changes.
• Should be performed regularly,
• Should be conducted by someone from outside the sales
organization.

Although it is an expensive and time-consuming process, the sales

organization audit generates benefits that usually outweigh the costs.
Sales Organization Audit Framework
SALES ORGANIZATION ENVIRONMENT
Extra-organizational Factors
• Economic-Demographic
• Political-Legal
•Technological
• Competitive
• Market
• Customer
Intra-organizational Factors
• Company Organization
• Sales-Marketing Department Links
• Sales-Other Department Links
• Marketing Mix
SALES MANAGEMENT EVALUATION
Adequacy of Sales Managers
Adequacy of Management Practices
SALES ORGANIZATION PLANNING SYSTEM
Objectives
Sales Management Program
Implementation of the Program
Sales force
Management SALES MANAGEMENT FUNCTIONS
Sales force Organization
Auditor
Recruitment and Selection
Sales Training
Compensation and Expenses
Supervision, Morale, and Motivation
Sales Forecasting
Budgeting
Quotas
Territories and Routing
Sales Analysis
Cost/Profitability Analysis
Sales force Evaluation
WHAT IS SALES ANALYSIS?

Sales analysis is the detailed examination of a company’s sales

data and involves assimilating, classifying, comparing, and drawing
conclusions.
Use of Sales Analysis
•Planning sales force activities.
• Evaluation of salespeople’s performance.
• Measuring the effect of advertising and other sales
promotional activities.
• Evaluating channels of distribution.
•Modifying channels of distribution
Sales Analysis Framework
Sales Analysis

Organizational
Level of Analysis Type of Sales Type of Analysis

Sales Total Sales Comparisons with Forecasts

Organization Type of Product
Comparisons with Sales quotas
Zones Comparisons with Previous period
Type of Account Comparisons within Sales Organization
Regions Type of Comparisons with Industry/Competitors
Districts Distribution
Territories Order Size
Accounts
Types of Sales Representatives
 THE PERSONAL SELLING PROCESS

• Prospecting
• Preapproach
• Approach
 THE SALES
MANAGEMENT PROCESS
Sales force management
Recruitment and selection
 Methods of Determining Sales Force Size
• 1. Equalized Workload Method: For this method, the workload means the calls the
salesmen have to make. The method depends on total workload (i.e., calls). Here,
salesmen’s duties, functions, or activities are said as ‘calls.’ A call may include a number
functions like pre-approach, approach, and sales presentation, abjection handling, and
closing sales.
Equalized workload method involves following steps:
i. Classification of Customers: Customers are classified into several groups on the basis of
their average annual consumption.
ii. Deciding Desirable Call Frequency: Number of calls for each of the groups of customers is
determined.
iii. Calculating Total Workload: To calculate total workload, different customer groups are
multiplied by corresponding call frequency.
iv. Determining Average Number of Calls: Average number of calls a salesman can make in
year is determined.
v. Determining Sales Force Size:Sales force size (number of salesmen) is determined by
dividing total workload (calls) by average number of calls a salesman can make in a year.
• 2. Incremental Productivity Method:
In this method, additional (incremental) cost of salesman is compared to additional (incremental) sales revenue.
Thus, additional contribution of additional salesman is calculated. First of all, a company can appoint any number of
salesmen (normally minimum number). Then, it will continue adding more salesmen as long as the additional sales
revenues are greater than additional selling costs. This method is not much useful as it requires a lot of calculations
and it is based on the notion that increase in sales revenue is due to additional salesmen, which is always not true.
• 3. Experts’ Opinion Methods:
Here, experts are asked to suggest the right number of salesmen a firm requires. Experts may be internal such as
general managers, marketing manager, sales managers, senior salesmen, marketing research officer, etc., or external
like marketing consultants, advertising agencies, and marketing research firms. The experts are provided with
needed details about company’s objectives, market share, profitability, financial condition, competition, and other
relevant aspects. On the basis of their experience and research, they suggest specific number of salesmen a
company should appoint. This is not scientific methods as their opinions depend on their perception. There is
possibility of bias. Company must follow experts’ opinion carefully considering its own situations.
• 4. Affordable Methods:
In real sense, this is not a method. The number of salesmen depends on a company’s financial capacity to spend.
Obviously, a company with sound financial position appoints more salesmen and vice versa. Its actual needs are not
taken into account. The fact is, a company’s financial position depends on sales and profits; sales and profits depend
on selling efforts. Ironically, a company with poor financial position needs more salesmen, instead of less, to
increase sales and profits!
• 5. Arbitrary Fixation Method:
Here, sales force size is determined arbitrarily or randomly. A sales manager doesn’t relate sales efforts to any other
aspects, neither takes opinion of experts. He can determine any number of salesmen that seems appropriate
according to his views. His experience, assumptions, and calculation play important role.
IMPORTANCE OF A GOOD SELECTION PROGRAM
• Improves sales force performance
• Promotes cost savings
• Eases other managerial tasks
• Sales managers are no better than their sales forces

PROBLEMS OF POOR SELECTION

• Inadequate sales coverage / lack of customer follow-up
• Increased training costs
• More supervisory problems
• Higher turnover
• Suboptimal performance
SCOPE OF SALESFORCE STAFFING
• Determine the number and type of people needed
• Recruit a number of applicants
• Process the recruits and select the most qualified

DETERMINING NUMBER OF PEOPLE NEEDED

• What should sales managers consider?
• Turnover rate
• Sales forecasts
• Proposed changes in products, markets, and market
coverage
Recruitment and Selection Process
Step 1 Step 2 Step 3
Planning for Recruitment: Locating Selection:
Recruitment & Selection Prospective Candidates Evaluation and Hiring

• Screening Resumes
and Applications
• Job Analysis
• Initial Interview
• Job Qualifications
• Intensive Interview
• Job Description
• Internal Sources • Testing
• Recruitment &
• External Sources • Assessment Centers
Selection Objec.
• Background Invest.
• Recruitment &
• Physical Exam
Selection Strategy
• Selection Decision
and Job Offer
Recruitment: Locating Prospective Candidates
Internal Sources
• Employee referral programs
• Internships

External Sources
• Advertisements
• Private employment agencies
• Colleges and universities
• Job fairs
• Professional societies
• Computer rosters
 The importance of selection
•Salesperson selection is a key to ultimate selling success. A good salesperson can have a
substantial effect on sales turnover.
•Employing a salesperson is very costly, e.g. travel expense, mobile, transportation,
training. No company will want to incur all these costs in order to employ a poor
performer.
•Other important determinants of success, such as training motivation are heavily
dependent on intrinsic qualities of the recruit. E.g. motivation from the company and the
motivation inborn from salesperson are equally important to achieve higher sales
 Selecting Sales and Marketing Personnel

• To select personnel for international marketing positions

effectively, management must choose individuals who have the
following traits:

1. Maturity 4. Flexibility

2. Emotional Stability 5. Cultural Empathy

3. Breadth of Knowledge 6. Energetic and

7. Enjoy Travel
Sales Training as a Crucial Investment
• Most organizations see a link between sales training and salesperson
productivity (training pays off)

• U.S. companies spend approximately $8.7 billion annually on training

• The need for sales training is continual

• Sales managers play a crucial role in the training process

Managing the Sales Training Process
Assess Sales Training Needs

Set Training Objectives

Evaluate Training Alternatives

Design Sales Training Program

Perform Sales Training

Conduct Follow-Up and Evaluation

Assess Training Needs
• Determine desired skill set and levels of performance
• Assess salesperson’s actual skill set and levels of performance
• Analyze gap between desired and actual to determine training needs

Assess Training Needs: Methods

• Sales Force Audit
• Performance Testing
• Observation
• Salesforce Survey
• Customer Survey
• Job analysis
Typical Sales Training Needs
• Sales Techniques:
Salespeople have an ongoing need to learn “how to sell”

• Product Knowledge:
Salespeople must know their product benefits, applications, competitive strengths, and
limitations
• Customer Knowledge:
Salespeople should know their customer needs, buying motives, buying procedures, and
personalities.
• Competitive Knowledge:
Salespeople must know competitive offerings in terms of strengths and weaknesses.
• Time and Territory Management: Salespeople should learn to maximum work efficiency.
Common Mistakes: Sales Training Addresses
• Ineffective listening and questioning
• Failure to build rapport and trust
• Poor job of prospecting for new accounts
• Lack of preplanning of sales calls
• Reluctance to make cold calls (without an appointment)
• Lack of sales strategies for different accounts
• Failure to match call frequency with account potential
• Spending too much time with old customers
• Over-controlling the sales call
• Failure to respond to customers’ needs with benefits
• Giving benefits before clarifying customers’ needs
• Ineffective handling of negative attitudes
• Failure to effectively confirm the sale
Training Objectives
• Increase sales or profits
• Create positive attitudes and improve salesforce morale
• Assist in sales force socialization
• Reduce role conflict and ambiguity
• Introduce new products, markets, and promotional programs
• Develop salespeople for future management positions
• Ensure awareness of ethical and legal responsibilities
• Teach administrative procedures
• Ensure competence in the use of sales and sales support tools
• Minimize sales force turnover rate
• Prepare new salespeople for assignment to a sales territory
• Improve teamwork & cooperative efforts
Evaluate Training Alternatives
• Selecting Sales Trainers
• Internal
• External

• Selecting Sales Training Locations

• Decentralized (e.g., district or regional offices)
• Centralized (e.g., corporate headquarter)
Evaluate Training Alternatives
• Selecting Sales Training Methods
• Classroom/Conference Training
• On-the-job Training (OJT)
• Mentoring
• Job rotation
• Behavioral Simulations
• Absorption Training
• Internet
• Computer-Based (e.g., CD-ROM)
• Kerb-Side Conferences: These conferences aim at a random
appraisal of the performance of a sales-man, and is usually done
on a monthly basis, taking a day’s work into consideration.
Design the Sales Training Program
• Finalize the Training Program
• Schedule Training Sessions
• Make Necessary Travel Arrangements
• Make Necessary Accommodation Arrangements

As the training is being conducted, the sales manager’s primary responsibility is

to monitor progress of the trainees and to ensure adequate presentation of the
training topics.
It is always difficult to measure the effectiveness of sales training. Nevertheless,
a reasonable attempt must be made to assess whether current training
expenditures are worthwhile and whether future modification is warranted.
Compensating the Sales Force
• Compensation in the global market is an extremely important managerial
area
• This is because the compensation plan:
• Helps attract potential salespersons
• Impacts a salesperson’s motivation
• Is a determinant of status and value
• Determines lifestyle and purchasing power
• Compensation package is complex and affected by multiple forces:
• A balance between company policies and country-specific elements
• Total compensation package includes financial
• Salary, commission, bonus, stock options, benefits
• and non-financial incentives
• Awards, recognition, vacation, and promotion
Compensation Plans
• Hard to compare compensation plans because of their differences
• Lower salary, but higher deferred components
• Cannot simply transfer a compensation plan from one culture to another
• What works in one culture will not work in another!
• Compensation should motivate sales force to accomplish goals set by management
• Compensation may be changed to meet firm goals

Three Types of Compensation Plans

• Straight Salary
• Straight Commission
• Combination Plan
Straight Salary
• Salesperson paid a set amount of money based upon hours or days worked
• Often adopted when salesperson must devote significant amounts of time to other duties
• Market research, customer service, administration
• Simple to administer by sales manager
• But, no direct link between performance and reward!
• More commonly used in Europe and may be difficult to change by global sales managers

Straight Commission
• Adopted by performance-oriented firms that pay salesperson for their
achievements
• Each person is paid a percentage of their total sales
• Easy to evaluate performance
• Plans encompass an element of insecurity
• Not believed acceptable in some cultures, like EU
• Some evidence of acceptance in Japan
• Can lead salesperson to shirk duties or pressure customers to buy
Combination Pay Plan
• The combination plan is the most popular
• Employed by more than 80% of US firms
• May appear in many forms:
• Salary, commission, individual and group bonuses
• Basic security bestowed by set salary
• Motivation introduced by commission/bonus
• Combination plans more time consuming for sales managers to
oversee
Sales Contests
• Sales contests are short-term incentive programs implemented to
motivate salespersons to achieve specific goals or activities
• For sales contests to be successful:
• Objectives must be specific and clearly defined
• Contest theme must be exciting and clearly communicated
• Each salespersons must believe they can win
• Awards must be attractive to participants
• Contest must be promoted and managed properly
Types of Rewards
• Sales contests can offer many types of reward in the form of:
• Cash, prizes, or travel
• Perceived value very important as it must be of sufficient value to motivate
additional effort
• Promotion of contest important
• Launched as a special event with handouts
• Large scorecards to communicate progress
• Newsletter articles or interim prizes can keep motivation up
Non-Financial Incentives

• Human needs require approaches other than compensation to

remain satisfied
• Ability to grow
• Recognition programs
• Salesperson of the year, President’s Club
• Opportunity to travel
• Educational assistance
 Motivating the Sales Force

What is motivation?

Motivation is the inner force that guides behaviour and is concerned with the causation of
specific actions.

Motivation is a three-dimensional construct consisting of the following:

Intensity or the magnitude of mental activity and physical effort expended towards a
certain action;

Persistence or the extension of the mental activity and physical effort over time; and

Direction or the choice of specific actions in specific circumstances.

Understanding motivation

Motivation should be understood at two levels:

What motivates salespeople How salespeople choose their action

(the reasons behind the intensity (the direction or decision to engage in
and persistence of mental and specific actions in specific
physical effort expended) circumstances)
 Motivational theories addressing the issue:
“what” motivates salespeople

Maslows Need Hierarchy Theory

Self-actualisation
needs

Esteem needs

Belongingness needs

Security needs

Physiological needs

Physiological needs (e.g., basic salary); security needs (e.g., pension plan); belongingness
needs (e.g., friends in work group); esteem needs (e.g., job title); self actualisation needs
(e.g., challenging job).
Herzberg’s Two Factor Theory

Motivation factors (e.g., achievement, recognition, responsibility)

Hygiene factors (e.g., supervision, pay, job security, working
conditions)

The theory argues that:

The motivation factors or motivators are the primary causes of

motivation and address the question “why work harder”;

The hygiene factors are necessary conditions to achieve a state of

neutrality and address the question “why work here”.
ERG Theory

Existence (E) Relatedness (R) and Growth (G) needs are structured in a hierarchical order.
The theory postulates that:

a) The lower the level of satisfaction in a need the more it will be desired;
b) The higher the satisfaction in a lower level need, the greater the desire to satisfy a
higher level need; and
c) The lower the satisfaction in a higher level need the greater the desire for satisfying
lower level needs.
Equity Theory

Equity (inequity) is defined as the belief that one is treated fairly (unfairly) in relation to others.

A salesperson’s choice of effort to be expended is a result of a comparison between his output-input ratio and the output-input
ratios of others.

Output of A (e.g., pay, recognition) Output of B (e.g., pay, recognition)

Input of A (e.g., effort, loyalty) Input of A (e.g., effort, loyalty)

A salesperson who perceives to be inequitably treated can change his input, output, alter the perceptions of self and/or others,
change comparisons or leave the situation.
Expectancy Theory

Motivation is a function of a salesperson’s anticipation that a particular behaviour will lead to outcomes that s/he values.

Motivation = function of (Expectancy x Instrumentality x Valence)

Expectancy is the salesperson’s perception that a certain amount of effort will lead to successful performance (e.g., Can I do
it?)
Instrumentality refers to salesperson’s perception of the probability that performance will lead to certain outcomes or
rewards (e.g., What do I get for doing it?)
Valence is the perceived attractiveness or unattractiveness of an outcome or reward (e.g., How much do I value the reward?)
 Motivating the Global Sales Force

Salespeople are motivated by different needs.

Need for status (e.g., need for recognition and promotion)

Need for control (e.g., need to be in control and influence others)

Need for respect (e.g., need to be seen as experts who can give advice)

Need for routine (e.g., need to follow a routine that must not be interrupted)

Need for accomplishment (e.g., need more money and challenges)

Need for stimulation (e.g., need to seek outside stimulation and challenges)

Need for honesty (e.g.,need to believe in the rightness of their practices)

(Smyth and Murphy, 1969)

Cultural Issues in Cross Cultural Selling
• Cultural Generalization
• Corporate (Organizational) Culture
• Relationship marketing
• Cross cultural negotiations
• Expatriates
• Cross-Cultural Training, motivating and compensating
Evaluating Sales force performance & Controlling Sales
activities
Evaluation implies a process of systematically uncovering deviations between goals and
accomplishments.
Evaluation system should do three essential things for the sale manager and sales-people:
• Provide feedback to each salesperson on individual job performance.
• Help salespeople modify or change their behavior toward effective work habits.
• Provide information to sales managers on which to base decisions on promotion, transfer
and salespeople.
Four steps that control the sales force activities are
1.Esatablishing Performance Standards.
2.Recording Performances
3.Evaluating Performance Standards
4.Taking Action
Standards of Performance
• Setting standards of performance requires consideration of the nature of the
Selling job.
• Setting performance Standards for a new business sales personnel requires
different measures .
• Setting sales performance standards requires considerable market knowledge.
• Performance Standards are designed to measure the performance of activities
that the company considers most important.
• For e.g. Evaluating the job performance of a computer sales person requires
standards that measure not only skill in new business selling but even more
basically ,effectiveness as a management consultant & skill as a system analyst.
• Sales Management puts together a combination of sales performance standards
to fit the company’s needs, its marketing situation, its selling strategy & its sales
organization
Quantitative Performance Standards
• Sales Quotas
• Selling expense ratio
• Territorial net profit or gross margin ratio
• Territorial market share
• Sales coverage effectiveness index
• Call frequency ratio
• Calls per day
• Order call ratio
• Average cost per call
• Average order size
• Non-selling activities
Qualitative performance criteria
• Job Factors • Personal Factors
Product knowledge Punctuality
Customers’ knowledge General Attitude
Competitor’s knowledge Dress and Appearance
Handling sales presentations Co-operation
Customer satisfaction Adaptability
Time management Reliability
Communication skills
Decision-making ability
Initiative
Recording Actual Performance
• Sales management next task is to measure actual performance. There are
few basic sources of performance information:
• Field sales reports, Sales & expense records & reports of various sorts.
• The fundamental purpose of field sales reports is to provide control
information.
• Field sales report provides Sales Management with a basis for discussion
with sales personnel.
• Sales reports assist in determining how to secure more & larger orders.
• A good field sales reporting system assists sales personnel in their self
improvement programs.
Types of sales force Reports
• 1.Progress or call report:
• 2.Expense Report
• 3.Sales work plan
• 4.New business or potential new business report
• 5.Lost sales report.
• 6.Report of complaint.