Controlling the sales force
Transcript of Controlling the sales force
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Controlling the Sales Controlling the Sales Force Force Mr. Amit GargMr. Amit Garg
Assistant Professor,Assistant Professor,Deptt. of Management Studies,Deptt. of Management Studies,
Malout Institute of Management & Information Malout Institute of Management & Information Technology, Malout - 152107Technology, Malout - 152107
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Sales Budget Sales Budget
• BudgetBudget – formal written statement of management’s plans for a formal written statement of management’s plans for a
specified future time period, expressed in financial specified future time period, expressed in financial terms.terms.
a) a) provide historical data on revenues, costs, and expenses,provide historical data on revenues, costs, and expenses,b) b) express management’s plans in financial terms, andexpress management’s plans in financial terms, andc) c) prepare periodic budget reports.prepare periodic budget reports.
• The The sales budgetsales budget is prepared by multiplying the expected is prepared by multiplying the expected unit sales volume for each product by its anticipated unit unit sales volume for each product by its anticipated unit selling price.selling price.
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• The first budget prepared. The first budget prepared. • Each of the other budgets depends on the sales budget.Each of the other budgets depends on the sales budget.• It is derived from the sales forecast. It represents It is derived from the sales forecast. It represents
management’s best estimate of sales revenue for the budget management’s best estimate of sales revenue for the budget period. period.
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The sales budget displays the projected sales in units and the projected sales return
The sales budget displays the projected sales in units and the projected sales return
1st 2nd 3rd 4th YearSales in Units 15,000 5,000 10,000 20,000 50,000Unit sales price X $12 X $12 X $12 X $12 X $12Total sales revenue $180,000 $60,000 $120,000 $240,000 $600,000
Seasonal Pattern in SalesSeasonal Pattern in Sales
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Sales Quotas Sales Quotas
• WHAT IS A QUOTA:
• A quota refers to an expected performance objective.• Quotas are tactical in nature and thus derived from the sales
force’s strategic objectives.
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WHY ARE QUOTAS IMPORTANT?
– Quotas provide performance targets.– Quotas provide standards.– Quotas provide control.– Quotas provide change of direction.– Quotas are motivational.
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TYPES OF QUOTAS• Sales volume quotas:
• Sales volume quotas includes dollar or product unit objectives for a specific period of time.
• Break down total sales volume.
• Product lines– Individual established and new products.– Geographic areas based on how the sales organization is
designed, which would include:• Sales division.• Sales regions.• Sales districts.• Individual sales territories
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• Profit quotas:The two types of profit quotas:
– Gross margin quota determined by subtracting cost of goods sold from sales volume.
– Net profit quota determined by subtracting cost of goods sold and salespeople’s direct selling expense from sales volume.
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• Expense quotas: Expense quotas are aimed at controlling costs of sales units.
Often expenses are related to sales volume or to the compensation plan.
• Activity quotas:
Activity quotas set objectives for job-related duties useful toward reaching salespeople’s performance targets.
• Customer satisfaction refers to feelings about any differences between what is expected and actual experiences with the purchase.
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METHODS FOR SETTING SALES QUOTAS
– Quotas based on forecasts and potentials.– Quotas based on forecasts only.– Quotas based on past experience.– Quotas based on executive judgments.– Quotas salespeople set.– Quotas related to compensation.
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SELLING BY OBJECTIVES SETS FUTURE TARGETS
• Two basic steps to implementing sales strategies:– Step 1: Organize the jobs.– Step 2: Define annual objectives in
important areas.
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THE FOUR MAJOR AREAS TO ESTABLISH OBJECTIVES WITH EACH SALESPERSON
Step 1: Organizing the Job
Step 2: Defining Annual Objectives
SALESMANAGEMENT
Salesperson
Account Management Call Management Self-ManagementTerritorial Management
1. Regular2. Problem Solving3. Innovative
• Portfolio of Accounts• Potentials• Coverage• Records• Order Size• Penetration• Reports• Customer Satisfaction
• Preparation• Selling Technique• Training• Communication• Buyer Behavior• Impact• Handling Resistance
• Appearance• Manner• Communication Skills• Abilities• Attitudes• Selling Abilities
• Limits• Potential Business• Size• Customer Base• Prospects• Leads• Market Share• Growth• Trade Relations• Dealer Relations
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Sales TerritoriesSales Territories
• The sales territory is “where the action is!”• Segment of the market for which a salesperson is responsible.
Territory assignments may be exclusive, meaning no other salesperson can sell in that territory, or nonexclusive. Territories may be defined in terms of geographic or market segments, product or product lines, size of customer or by specific customers or prospects. The best territories with the greatest revenue potential are usually assigned to the best salespeople. The individual talents or characteristics of the salespeople can also be used to determine territory assignments. It takes a different skill set to make sales to large corporations than to small retailers.
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• Geographic territory assignments should be made so as to minimize the travel expenses incurred by any one salesperson. When creating geographic territories, the density of the prospect base will determine the size of the territory.
• A sales territory is composed of a group of customers or a geographic area assigned to a salesperson.
• Development of sales territories is usually the responsibility of the sales manager overseeing the larger sales units within the organization.
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WHY ESTABLISH SALES TERRITORIES?
– To obtain thorough coverage of the market.– To establish a salesperson’s responsibility.– To evaluate performance.– To improve customer relations.– To reduce sales expense.– To allow better matching of salesperson to customer.– To benefit salespeople and the company.
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FACTORS TO CONSIDER WHEN DESIGNING SALES TERRITORIES
• Sales force objectives may be based on factors such as contribution to profits, return on assets, sales/cost ratios, market share, or customer satisfaction.
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S e l e c t B a s i c C o n t r o l U n i t
A n a l y z e W o r k l o a d
D e t e r m i n e B a s i c T e r r i t o r i e s
A s s i g n t o T e r r i t o r i e s
C u s t o m e r C o n t a c t P l a n
E v a l u a t e , R e v i s e i f N e e d e d
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SELECT BASIC CONTROL UNITS
– States– Counties– Cities and zip-code areas– Metropolitan statistical areas– Trading areas– Major accounts– A combination of two or more factors
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ANALYZE SALESPEOPLE’S WORKLOADS
• Workload is the quantity of work expected from sales personnel. Three of the main influences on workload involve the nature of the job, intensity of market coverage, and type of products sold.
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Intensity of Market Coverage
– Distribution methods:– Intensive distribution– Selective distribution– Exclusive distribution
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DETERMINE BASIC TERRITORIES
• The breakdown approach uses factors such as sales, population, or number of customers.
Forecasted SalesAverage Sales per SalespersonSales Force Size =
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SIX STEPS TO CONSIDER WHEN DETERMINING A FIRM’S BASIC
TERRITORIES
1. Forecast sales and determine sales 1. Forecast sales and determine sales potentials.potentials.
4. Tentatively establish territories.4. Tentatively establish territories.
2. Determine the sales volume needed2. Determine the sales volume needed for each territory.for each territory.
5. Determine the number of accounts5. Determine the number of accounts for each territory.for each territory.
3. Determine the number of territories.3. Determine the number of territories. 6. Finalize the territories, and draw the6. Finalize the territories, and draw the boundary lines.boundary lines.
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Equalized Workload
• This method uses the number, location, and size of customers and prospects to determine the frequency of sales calls and amount of time a call takes by using such data as:– Time required for each sales call.– Frequency of sales calls per given customer.– Time intervals between sales calls.– Travel time around territories.– Non selling time.
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ASSIGN TO TERRITORIES
• Some salespeople can handle large territories and the travel associated with them; some can’t. Some territories require experienced salespeople; some are best for new people. Some people want to live in metropolitan areas; others prefer territories with smaller cities.
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CUSTOMER CONTACT PLAN
• The customer contact plan involves scheduling sales calls and routing a salesperson’s movement around the territory.
• Scheduling refers to establishing a fixed time when the salesperson will be at a customer’s place of business.
• In theory, strict formal route designs enable the salesperson to:
– Improve territorial coverage. – Minimize wasted time. – Establish communication between management and the
sales force in terms of the location and activities of individual salespeople.
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Using the Telephone for Territorial Coverage
– Sales generating• Selling regular orders to smaller accounts.• Selling specials, such as offering price discounts on an
individual product.• Developing leads and qualifying prospects.
– Order processing• Ordering through the warehouse.• Gathering credit information.• Checking if shipments have been made.
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– Customer service• Handling complaints.• Answering questions.
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EVALUATION AND REVISION OF SALES TERRITORIES
• Territorial control is the establishment of standards of performance for the individual territory in the form of qualitative and quantitative quotas or goals.
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OPEN SALES TERRITORIES
• Open sales territories are those left vacant until new salespeople are assigned to them. Vacant territories experience the following:– Lost sales due to the vacancy.– Lost sales due to the time needed for the new salesperson to
build sales productivity.
• Sales leakage refers to the lost sales due to both the vacancy and the time required for the new salesperson to produce at average.
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Sales controlSales control
Sales ControlSales Control
Cost Aspects
PerformanceExpenses
Sales-function Administration
Behavioral Aspects
Sales EffortAllocation of Selling-Time
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Measures to Assess Measures to Assess Sales PerformanceSales Performance
Gross ProfitSales Revenue
Sales CallFrequency
Penetration of Accounts in
Sales Territory
Selling and Sales Administration
Expenses
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GOALS OF SALES CONTROLGOALS OF SALES CONTROL
• Optimize number of salesOptimize number of sales• Maximize profitMaximize profit• Control revenueControl revenue
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SALES CONTROL TECHNIQUESSALES CONTROL TECHNIQUES
• Establishing standardsEstablishing standards• Establishing proceduresEstablishing procedures• TrainingTraining• Setting examplesSetting examples• Observing and correcting employee actionsObserving and correcting employee actions• Requiring records and reportsRequiring records and reports• Disciplining employeesDisciplining employees• Preparing and following budgetsPreparing and following budgets
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SALES CONTROL PROCESSSALES CONTROL PROCESS
• Establish standards and standard procedures for operation.• Train all individuals to follow established standards and standard
procedures.• Monitor performance and compare actual performances with
established standards.• Take appropriate action to correct deviations from standards.
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Cost AnalysisCost Analysis
• SALES/COST ANALYSIS BY TERRITORY: SALES/COST ANALYSIS BY TERRITORY: • Sales are scanned territory wise. Sales are scanned territory wise. • Quota allocation is based on each territory's potential.Quota allocation is based on each territory's potential.• ANALYSIS BY SALES REPRESENTATIVE:ANALYSIS BY SALES REPRESENTATIVE:• Quota is fixed as per the sales representative.Quota is fixed as per the sales representative.• ANALYSIS BY PRODUCT LINE: ANALYSIS BY PRODUCT LINE: • Quota is fixed as per the product line.Quota is fixed as per the product line.• ANALYSIS BY CUSTOMER: ANALYSIS BY CUSTOMER: • Eg doctors, hospitals, chemists etc.Eg doctors, hospitals, chemists etc.
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• MARKETING COST ANALYSIS:MARKETING COST ANALYSIS:• It involves a detailed examination of the costs and its impact on It involves a detailed examination of the costs and its impact on
sales volume.sales volume.
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