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Sales Management: Shaping Future Sales Leaders

Setting Goals and


Managing the Sales
Force’s Performance
Chapter 11

11-1
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.
Learning Objectives
 Describe how sales managers use goals to guide
and control the efforts of their sales forces
 Summarize the elements of an effective goal
 Distinguish when different outcomes and
behavioral sales goals should be used
 Identify different resources available to capture
information used for making effective decisions
on goals
 Apply goal-setting theory in order to improve
managerial and motivational practices
11-2
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.
What’s Involved with Goal Setting?

Monitoring Salespeople

Market Conditions

Competitor Reactions

Following Up

Instituting Corrective Actions

11-3
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.
Why Set Sales Goals (Quotas)?
 Sales goal (quota): performance standard by
which salespeople are measured
 Sales goals are useful for several reasons
 Synchronize direction and efforts of sales force
with plans developed
by top managers
 Benchmark performance
 Achievement of goals
can be motivating and
is usually tied to
compensation

11-4
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.
Using Goals to Guide and Manage
Performance of a Sales Force
 Achievable goals can help motivate the sales force
Motivate  Goals serve as benchmarks to help gauge how reps
Sales Force are doing

 Goals help direct efforts toward certain sales


Focus Selling activities
Efforts  Example: growing markets

 Ensure the effort put into selling products earns


good return
Assess ROI  When sales are short of expectations, may need to
revise marketing mix variables
 Comparing results helps determine what factors
Compare cause sales to be lower or higher in one area than
Results another
 Example: competition, customer demographics, etc.
11-5
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.
Global Sales Management:
Goals Are Goals, Right? Not Quite.
 Most people agree on the big picture, but their
E lle s m e re Is la n d S e v e r n a y a Z e m ly a
A rc tic O c e a n A rc tic O c e a n F ra n z Jo se f L a n d
A r Nc etwi cS i b Oe r i a cn Ies l aa n nd s
G r e e n la n d ( D e n .) S v a lb a rd ( N o r.)
B a n k s Islan d J a n M a y e n ( N o r.) N o v a y a Z e m ly a W ra n g e l Isla n d
V ic to r ia I s la n d B a ff in Isla n d

implementation of sales management practices


F a r o e I s . ( D e n .) N o rw a y
U .S .A .
Ic e la n d F in la n d
U n ite d K in g d o m Sw eden E s to n ia R u s s ia 60°
C anada D en.
L a tv ia
L ith u a n ia A le u tia n Is la n d s (U S A )

reflects nuances unique to their home cultures


I re la n d N e th . B e la r u s
G e r m a n y P o lan d
B e l.
Is la n d o f N e w f o u n d la n d C zech. U k ra in e K u ril I s la n d s
S lo v a k .
A u s. H u n g. M o ld o v a K a z a k h s ta n
F ra n c e S w itz . S lo v . M o n g o lia
C r o . Y u g Ro .o m a n i a
B o s. U z b e k is ta n
N o rth A tla n tic O c e a n I ta ly M a c . B u lg a r ia
G e o rg ia
K y rg y z s ta n
U n ite d S ta te s o f A m e ric a P o rtu g a l
S p a in A lb a n ia
G re e c e T u rk ey
A r m e n ia A z e r b a ija n
T u r k m e n is ta n T a jik is ta n
N . K orea

S . K o rea Japan
N o rth P a c ific O c e a n C y p . L e b . S y r ia N o rth P a c ific O c e a n
T u n is ia A fg h a n is ta n
C h in a

 Some researchers believe that globalization is


M o ro c c o Isra e l Ira q Ira n
C a n a r y Is la n d s ( S p .) Jo rda n
K u w a it P a k is ta n N epal
A lg e r ia L ib y a B hu.
T h e B ah am as E gypt
W e s te r n S a h a r a ( M o r.) Q a ta r
M e x ic o Cuba B ang. T a iw a n
H a w a iia n Is la n d s D o m in ic a n R e p u b lic Saudi A rU a . bA i .a E . In d ia M y an m ar (B u rm a)

causing sales management practices to converge


O m an L aos
U . S.A . Jam .
M a u rita n ia M a li
B e liz e H a iti P u e rto R ic o (U S )
N ig e r E r itre a
H o n d u ra s
D o m in ic a Senegal Sudan Yem en T h a ila n d P h ilip p in e s
G u a te m a la
T h e G a m b ia B u rk in a F a so
C had V ie tn a m
E l S a lv a d o r N ica ra g u a B a rb a d o s
G u in e a -B is s a u G u in e a B e n in D jib o u ti A n d a m a n I s l a n d s ( I n d iCa a) m b o d i a
T r in id a d a n d T o b a g o M a rs h a ll I s la n d s
C o s ta R ic a C ô te D ’Iv o ire N ig e ria S ri L an k a F e d e r a te d S ta te s o f M ic ro n e s ia
V e n e z u e la G uyana S ie rra L e o n e E th io p ia
Panam a S u r in a m e C .A . R . B run ei G u am (U S A )
M a ld iv e s
F r e n c h G u ia n a ( F r.) L ib e ria C a m e ro o n
G hana Togo S o m a lia M a la y s ia
C o lo m b ia E q . G u in e a U ganda
S in g a p o re
G abon R w anda K enya K irib a ti

 There is still variation


G a la p a g o s I s la n d s (E c u a d o r) E cuador S a o T o m e & P r in c ip e In d o n e s ia
Z a ire B u ru n d i P a p u a N ew G u in e a
S o lo m o n Isla n d s
C ongo T a n z a n ia S e y c h e lle s
M a la w i
P e ru
B ra z il A n g o la
Z a m b ia M o z a m b iq u e

 Short-term goals in US
B o liv ia M a d ag asc ar
N a m ib ia Z im b a b w e F iji
F r e n c h P o ly n e s ia ( F r.) N e w C a le d o n ia
B o tsw a n a
P a ra g u a y M a u ritiu s In d ia n O c e a n
S w a z ila n d
A u s tra lia
S o u t h A f r i Lc ae s o t h o

 Long-term goals in Japan


S o u th P a c if ic O c e a n C h ile A rg e n tin a
U ru g u a y
S o u th A tla n tic O c e a n
T a sm a n ia
N e w Z e a la n d

 “God willing” in Middle East


F a lk la n d Is la n d s (I s la s M a lv in a s ) ( a d m . b y U K , c la im e d b y A rg e n tin a )

Î le s C r o z e t (F ra n c e )

S o u th G e o rg ia (a d m . b y U K , c la im e d b y A rg e n tin a )

Sources: Cravens, David W., Nigel F. Piercy, and George S. Low (2006). “Globalization of the Sales Organization: Management
Control and Its Consequences,” Organizational Dynamics (35)3:
A n t a r c t i291–303;
ca T. Garrison (2001). International Business Culture. 3rd ed.
Cambridgeshire, England: ELM Publications; and Honeycutt, Earl D., John B. Ford, and Antonis C. Simintiras (2003). Sales
Management: Global Perspective. London: Routledge.
11-6
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.
Different Types of Goals or Quotas

Input-Based Goals Output-Based Goals


(Activity-Based Quotas) (Outcome-Based Goals)

 Relate to the observable selling  Selling results a rep is expected to


efforts a salesperson must make achieve
 Number of sales calls  Number of orders received
 Number of presentations  Revenue generated
 Number of proposals  Sales volumes
 Number of new clients  Profits
contacted
 Ensure the reps are performing
core selling activities

11-7
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.
Using a Combination of Goals
 Sales volume traditionally most frequent measure
 Advantage: easily counted and analyzed
 Advantage: reps understand these goals
 Disadvantage: sole metric may not accurately provide
complete picture
 Input + output goals
 Ensure certain customer
service activities are
performed
 And certain amount
of profitable sales are made

11-8
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.
Pipeline Analysis
 Pipeline analysis: how well rep maintains stream
of customers at different stages in sales process
 Broken into the list
of the top 5
measurements in
recent years

11-9
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.
Typical Input and Output Goals

11-10
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.
Where Should Your Salespeople Find
Their Leads?

Source: CSO Insights


11-11
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.
Metrics Related to Customer Service
 <15% include customer retention and satisfaction
metrics in their goals
 Customer satisfaction can be difficult to measure
 Sometimes easier to count number of customer
complaints than gauge the service customers are
getting
 More accurate but time-consuming approach is to
develop customer satisfaction measure consisting of a
number of metrics
 Example: student advising

11-12
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.
Discussion Question
 Customer service receives a lot of lip service and
press, but when it comes down to using it as a
sales goal, it presents some problems
 Develop a possible customer service goal that
could be used in a B2B setting

11-13
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.
Expense Quotas
 Keep the costs associated with rep’s sales in
line with what the firm thinks the rep should
spend in order to be successful
 Often calculated as % of sales

11-14
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.
Assigning Weights to Goals

11-15
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.
Choosing the Right Metrics and Time
Period to Track
 Too many measures makes it more difficult to
focus on the “critical few” metrics
 More than 7-9 metrics becomes difficult to manage
 Most sales organizations establish their sales
goals on a yearly basis
 Break down yearly figure into quarters and sometimes
monthly units
 Short or rapid sales cycles, such as in-bound call
centers or retail establishments, might use weekly or
hourly units

11-16
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.
Self-Assessment Library
 Go to http://www.prenhall.com/sal/
 Access code came with your book
 Click the following
 Assessments
I. What About Me?
D. Decision-Making Insights
5. What’s My Decision-Making Style?

11-17
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.
What About Almost Meeting a Goal?
 All-or-nothing approach
vs.
 Reward for reaching part of a goal
 90% threshold goal
 100% actual goal
 110% stretch goal

11-18
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.
Should Salespeople Be Involved in
Setting Their Own Goals?
 >60% solicit input from
sales force about goals set
for them
 Helps improve rep morale
because managers better
understand obstacles
 Disadvantage: reps have
incentive to lowball goals

11-19
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.
When Is a Sale a Sale?
 Count the sale when the
product is either shipped or
paid for
 Difficult with long sales
cycle
 Compromise: offer partial
credit (30%) when order is
placed, remainder (70%)
when order ships
 Must clearly communicate
this info to reps
11-20
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.
Reasons for Not Reaching Sales Goals
 Flawed sales projections  New competitors and
based on limited marketing competing products entering
research marketplace
 Changes in marketing mix  Environmental factors affect
variables resulting in inferior customer demand and cause
products or services customers to postpone or
 Increase in cost of supplies cancel their purchases
passed on to buyers via  Change in laws and
higher product prices regulations preventing or
 Promotional campaigns don’t restricting use of products and
services or making them more
produce projected results
expensive
 Delays or other problems with
 Changes in the way firms do
distribution of products
business, for example, as a
result of new technology
11-21
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.
False Reporting of Activities
 Recently 2 inside salespeople had erroneously
reported the number of leads that they had counted
as part of their goals; their manipulation of these
reports cost the company over $100,000 in lost
opportunity costs
 Their sales manager found their reporting
inaccuracies
 If you were the sales manager what would you do?
 In this case, they were fired on the spot. Do you
think this was too harsh?
For more details see, “The Right Path,” Gwen Moran, Selling Power, Nov./Dec. (2008), 28/9, 30-33.
11-22
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.
Do Goals Ever Get Changed or
Altered?
 Most companies adjust goals yearly
 Also common to adjust during the year
 Shouldn’t adjust too many times through year
 Confusion
 Reps feel cheated

11-23
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.
The Process of Setting Good Goals
 SMART format for establishing goals

S pecific
Measurable
A chievable, yet challenging
R ealistic
T ime-based

11-24
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.
The Process of Setting Good Goals
 Difficult goals lead to higher levels of
performance
 Reps will put forth more effort when their goals are
somewhat difficult vs. too easy or too difficult
 Specific, difficult goals lead to higher levels of
effort than general ones
 Specific, difficult goals–for example, calling on 8 clients
a day–will lead to higher levels of performance

11-25
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.
Ethics in Sales Management: When Do
Difficult Goals Become Too Difficult?
 Setting quotas so high that the average rep
thinks it’s unobtainable can result in unethical
behavior
 Example: dot-com ad sales, “just get the job done,” led
to rep lying to customers
 Example: Sears Automotive Centers, reps overcharged
for repairs and recommended unnecessary repairs
 Damages reputations, sometimes causes
businesses to close

Sources: Strout, Erin (2002). “To Tell the Truth,” Sales & Marketing Management (154)7: 40–47; and
Mitchell, Carol Vallone, Patricia M. Schaeffer, and Katherine A. Nelson (2005). “Rewarding Ethical
Behavior,” workspan magazine (July), Vol. 48, No. 7.
11-26
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.
Goal-Setting Impacts Performance
 Goals provide focus and direction
Direct  Direct attention and efforts toward goal-relevant
Efforts behaviors and away from less relevant behaviors

 Goals are energizing


Energize  Higher goals produce more effort than lower goals
Reps  Knowing what’s expected gives reps a target

 Harder goals will prolong effort


Affect  Tight deadlines lead to meeting completion dates,
Persistence which helps work get accomplished

Increase  Goals affect problem-solving skills


Problem-  People will seek new ways to accomplish difficult
Solving goals
11-27
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.
Practical Guidelines for Setting Goals
1 Set goals that are easy for sales representatives to understand,
difficult to achieve, and have exact deadlines for completion

2 Important tasks not included as a goal may get ignored; if it’s


important, then set a goal for its accomplishment

3 Having too many goals can create stress, keep the number of goals
to a reasonable number; clarify importance for prioritization

4 Get reps to commit to their goals by explaining how they have been
set

11-28
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.
Practical Guidelines for Setting Goals
5 Clearly indicate how the sales performance will be measured and
rewarded

6 Provide feedback as frequently as possible; encourage reps to use


alternative approaches to sell if initial approaches don’t work

7 Make sure people know you have confidence in their ability to


achieve their goals

8 Failing to achieve a goal should not be viewed as failure, it should be


considered progress on the road to success

11-29
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.
Role Play: Oval Track Promotions
 OTP publishes magazine about NASCAR and other
auto races
 Offers 6 geographic versions of magazine
 Each geographic area has own sales force
 OTP has 7 years of growth, want next year to be
better
 Research indicates more will spend $$ on auto racing
 Sales goals set by managers, agreed to give reps
resources and expense accounts commensurate
with goals

11-30
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.
Role Play (continued): Assignment
 Divide into pairs
 1 person is sales rep KR
 1 person is KR’s sales manager
 Your district has the least interest in racing
 Selling promotions here is harder than elsewhere

 KR hired by previous mgr, works hard, driven by


compensation, routinely meets goals, has abrasive personality
 Clients generally pleased, struggles with winning new clients

 KR email, feels taken advantage of, goals are unrealistic


 Conduct a goal-setting meeting with KR
 Discuss the new goal from your character’s perspective
 Explain why or why not you think it’s fair

11-31
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.
Sales Manager’s Workshop
 Your boss wants to incorporate more input from
sales mgrs and reps before establishing goals
 Rep territories vary by number of opportunities
 You’ve always voiced concern about increasing goals
by straight % across the board
 Examine performance of your reps over last 24
months
 Develop series of threshold, actual and stretch
goals recommended for each rep for each
product line
11-32
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.
Caselet 11.1: All in a Day’s Work
 “Helpful Hannah” sales manager
 Hannah accidentally learns from a large client that
rep Ella is using webcams to do half her sales calls
instead of biweekly visits
 Client isn’t sure she likes this system
 Ella is doing her part environmentally, believes video visits
are as effective as face-to-face, claims sales to prove it
 Syd Vance needs to increase new accounts,
improve “adequate” customer service ratings
 Syd says he’s been very busy and really working hard
 Syd would like Hannah’s help in establishing new goals to
improve performance
11-33
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.
Caselet 11.1 (continued):
Questions
1. If you were Hannah, how would you handle
your meeting with Ella?
2. If you were Hannah, how would you approach
your session with Syd?
3. What specific goals would you suggest for Ella
and Syd to improve their performance?

11-34
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.
Caselet 11.2: Sandwiched In
 Devin taking care of grandparents, children of his
own (sandwich generation)
 Devin’s not meeting his goal this quarter
 Loyal customer could buy enough if he presses
them to place large order
 Seeking your advice
 Could use the money, worried that he could upset client
and lose account
 Question: if you were Devin’s sales manager,
what would you recommend?
11-35
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.