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Chapter 12

Evaluation in the Global


Marketplace
Sales Management: A Global
Perspective
Introduction

 Sales managers plan, implement and control


sales activities
 To control, evaluation must occur
 Without evaluation it is difficult to know what has
worked, what has not, and WHY?
 The purpose of evaluation is to improve
salesperson and firm performance
Source of Deviations

 Attributable to incorrectly set goals or weak


performance?
 Evaluation criteria differ depending upon the
goal
 If goal is to reward, then focus on salesperson
activities and results
 If goal is to promote, then focus on factors related
to success as a sales manager
Global Evaluation Guidance
 Evaluation allows management to identify
substandard performance and take corrective
action
 Adjust training, compensation, or strategy
 Assessing personnel in global markets is more
complex
 Global evaluations may include technical ability, cultural
empathy, adaptability, flexibility, diplomacy, and
language ability
 Cultural skills may be more relevant in global markets
Global Market More Complex

 Global system must be accessible, easy to


understand, equitable, and motivating
 Financial metrics may be less revealing since
global firms use transfer pricing and attempts to
maximize total company profit
 Global evaluations are often conducted from a
distance with little accurate information about field
behavior of sales personnel
Evaluating Sales Force
Performance
 Sales Managers can evaluate overall sales
performance by analyzing sales, cost, and
profit data
 No one measure of effectiveness best
 Multiple measures are employed
 Three most common methods are:
 Sales, Cost, and Profit analyses
Sales Analysis

 Gathering, sorting, assessing, and making


decisions based upon sales data
 Must organize data to show market and salesperson
deviations (see Table 12.1)
 Examine how markets are performing in comparison to
one another
 Sales data most readily available
 Sales force goal is to increase customer demand and
reach sales goals
 Must define “sold” and compare in local currency or
units sold
Cost Analysis
 Compares cost to sales generated
 Examine the variance between actual and
budgeted expenses (See Table 12.2)
 Areas where actual costs vary significantly from
budgeted should be set aside for further analysis
 Firms can use to set pricing levels, budgets and
commission rates
 Sales and Cost analysis used most frequently
Profit Analysis

 When sales and costs are combined


profitability can be determined
 Managers can identify unprofitable territory,
unprofitable products, and year-end bonuses
 Profitability easier to compute with information
technology advancements
Analyzing Performance
 Conducting sales, cost, and profitability
analysis is a three-step process:
 Identify the needed information
 Establish procedures
 Analyze results
 CRM systems permit managers to play “what
if” scenarios to see how different inputs
would vary performance
Discussion Questions

 What challenges are encountered when firms


evaluate sales force efforts globally?
 What is the difference between sales force
effectiveness and salesperson performance?
 What are the advantages of assessing sales,
cost, and profitability data when evaluating
sales force performance?
Performance Appraisal

 Performance appraisal is the assessment of


individual sales force members
 Individual appraisal should be conducted regularly
 Annually or every six months
 Some firms do not evaluate at all!
 Without an objective analysis, how can salesperson be
developed or advised by sales manager?
What we know about
appraisal
 Most firms examine both qualitative and quantitative
input and output criteria
 Greater emphasis put on output – e.g., sales revenue
 Input is sought for setting quotas & standards
 Sales objectives receive different weights based upon
activities and territories
 Firms gather multiple sources of information
 Field sales managers conduct most evaluations
 Written evaluations normally conducted in office setting
Appraisals should cover wide
range of areas
 Salesperson responsibilities are diverse
 Necessitates four areas being assessed:
 Activities
 Outcomes
 Profitability
 Personal development
 Each area provides managers with different
insights about performance
Sales Activities

 Important that identical data computed for


all salespersons regardless of who
compiles
 Sales calls per period, required reports
completed, customer complaints, customer
training sessions completed, letters/phone
calls to customers, product demonstrations,
service calls, dealer meetings held
 Can subdivide by existing vs. potential
customers or planned vs. cold calls
Understanding activities
 Different probabilities for each activity
 Planned vs. cold calls
 How salespersons devote their time
 Differences between high and low performers
 All sales effort not the same
 Two sales persons make same effort with different results
 Sales managers need to know effort-result ratio
 For example, batting average or sales/total calls
Outcome Measures
 Activities lead to outcomes, such as:
 Sales revenue generated
 Profits
 Sales per account
 Sales revenue as a percentage of potential
 Number of orders
 Number of new customers
 Sales to new customers
 Outcomes higher when time and quality devoted
to input activities
 Supported by a study in Singapore
Profitability Measures
 Firms now look at profitability measures
 Net profit as a percentage of sales
 Net profit contribution
 Net profit dollars
 Return on investment
 Gross margin
 Salesperson can impact profitability by
 Specific products sold and final price negotiated
Qualitative Measures
 Judgment by the salesperson’s supervisor
 To what the salesperson’s knowledge and
performance compare with an ideal person
 To minimize bias, sales managers should follow a
systematic assessment process
 Includes three steps:
 Objectives
 Techniques
 Items
Bias in Appraisals
 Managers must minimize bias that creep into
evaluation efforts
 Set standards whenever possible
 Based upon behavior or results
 Evaluate from a point of neutrality
 Informal evaluations
 Often subjective in nature
 Results in differing amounts and quality of information
Diagnosing Salesperson
Performance
 Data is collected, organized and interpreted
 Why has one product not met expectations?
 Monitor salesperson performance for a variety of
reasons:
 Counseling, promotion, bonus, termination, or transfer
 Without a systematic evaluation, it is easy to
conclude that sales force did not work hard
enough
Evaluation and Action
 Once evaluation takes place, it is time for action:
 Personal development
 Reallocation of effort
 Modifying the performance setting
 Changes may be needed in sales procedures or
methods
 New products, selling strategies or credit policies changed
 Must submit detailed study to upper management
Discussion Questions

 What is the relationship of activities and


outcome measures?
 What pitfalls are inherent in informal
evaluation systems?
 Explain the evaluation problems caused by
sales manager bias
Chapter Summary
 Evaluation tells us what is working, what is
not, and most importantly, why!
 Analysis helps managers identify potential
problems
 Individual salespersons appraised to identify
effort and performance level
 Evaluation leads to greater success for
salesperson, sales force, and the firm