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Selling

Stages in the personal selling process

Slide 20-23
THE PERSONAL SELLING PROCESS:
BUILDING RELATIONSHIPS

• Preapproach

• Approach

Slide 20-25
THE PERSONAL SELLING PROCESS:
BUILDING RELATIONSHIPS

• Presentation
 Stimulus-Response Format
• Stimulus-Response Presentation

• Suggestive Selling

 Formula Selling Format


• Formula Selling Presentation

• Canned Selling Presentation


Slide 20-27
THE PERSONAL SELLING PROCESS:
BUILDING RELATIONSHIPS

• Presentation
 Need-Satisfaction Format
• Need-Satisfaction Presentation

• Adaptive Selling

• Consultative Selling

Slide 20-28
THE PERSONAL SELLING PROCESS:
BUILDING RELATIONSHIPS

• Presentation
 Handling Objections
• Acknowledge and Convert the Objection
• Postpone
• Agree and Neutralize
• Accept the Objection
• Denial
• Ignore the Objection
Slide 20-30
Techniques for handling objections

Slide 20-31
THE PERSONAL SELLING PROCESS:
BUILDING RELATIONSHIPS

• Close
 Trial Close
 Assumptive Close
 Urgency Close
 Final Close

• Follow-Up

Slide 20-32
THE SALES MANAGEMENT PROCESS

• Sales Plan Formulation: Setting Direction


 Sales Plan
 Setting Objectives

Slide 20-37
7-1
The Consultative Selling—
Customer Relationship Model
Customer
Customer
strategic Performance
Performance
strategic
needs Goals
Goals
needs
••Costs
Costs
Mutual
Mutual Long-term
Long-term ••Productivity
beneficial
beneficial Productivity
relationships
relationships
agreements
agreements
••Sales
Sales
Salesperson’s
Salesperson’s
creative ••Profits
Profits
creative
solutions
solutions
7-2
Steps in the Preapproach:
Planning the Sale

Determine
Determine Develop
Develop Develop
Develop Develop
Develop
sales
salescall
call customer
customer customer
customer sales
sales
objective
objective profile
profile benefits
benefits presentation
presentation
7-3A
Information Used in Profile and
Planning
Customer Profile and Planning Sheet
1. Name:
Address:
2. Type of business:
Name of buyer:
3. People who influence buying decision or aid in using or selling our product:

4. Buying hours and best time to see buyer:


5. Receptionist’s name:
6. Buyer’s profile:
7. Buyer’s personality style:
8. Sales call objectives:
9. What are customer’s important buying needs:
7-3B
Information Used in Profile and
Planning
10. Sales presentation:
a. Sales approach:
b. Features, advantages, benefits:
c. Method of demonstrating FAB:
d. How to relate benefits to customer’s needs:
e. Trial close to use:
f. Anticipated objections:
g. Trial close to use:
h. How to close this customer:
i. Hard or soft close:
11. Sales made—product use/promotional plan agreed on:

12. Post sales call comments (reason did/did not buy; what to do on next call;
follow-up promised):
7-6A Major Phases in a Presentation:
A Sequence of Events to Complete in
Developing a Sales Presentation
Rapport-building
1.1.Approach
Approach Uncover needs
Attention, interest, transition

Features
2.2.Fully
Fullydiscuss
discuss Advantages
your
yourproduct
product Benefits

How to resell (for reseller)


3.3.Present
Presentyour
your How to use (for consumers and
marketing
marketingplan
plan industrial user)
7-6B Major Phases in a Presentation:
A Sequence of Events to Complete in
Developing a Sales Presentation
4. Explain your
What’s in it for your customers?
business proposition

Recommend what to buy in order


5. Suggested to fill their needs uncovered in
purchase order the presentation

6. Close Ask for the business!

Do not give up!


7. Exit Act as a professional
Leave the door open
7-7
The Prospect’s Five Mental Steps
in Buying

Attention
Attention Interest
Interest Desire
Desire Conviction
Conviction Purchase
Purchase
7-8A
The Selling Process and Examples
of Prospect’s Thoughts and Questions
Steps in the Prospect’s Potential
Selling Process Prospect’s Verbal and Mental
Mental Steps Questions
1. Prospecting
Salesperson locates
and qualifies prospects

2. Preapproach
Salesperson
determines sales call
objective, develops cus-
tomer profile, customer
benefit program, and
selling strategies.
Customer’s needs
are determined.
7-8B
The Selling Process and Examples
of Prospect’s Thoughts and Questions
Steps in the Prospect’s Potential
Selling Process Prospect’s Verbal and Mental
Mental Steps Questions
3. Approach Attention due to arousal of Should I see salesperson?
Salesperson obtains potential need or problem. Should I continue to listen,
interview, meets Interest due to recognized interact, devote
prospect, and begins need or problem and the much time to a
individualized sales desire to fulfill the need or salesperson?
presentation. solve the problem. What’s in it for me?
Needs are further
uncovered.
7-8C
The Selling Process and Examples
of Prospect’s Thoughts and Questions
Steps in the Prospect’s Potential
Selling Process Prospect’s Verbal and Mental
Mental Steps Questions
4. Presentation Interest in information that Is the salesperson prepared?
Salesperson relates provides knowledge and Are my needs understood?
product benefits to influences perceptions and Is the seller interested in my
needs, using attitude. needs?
demonstration, Desire begins to develop Should I continue to listen
dramatizations, based on information eval- and interact?
visuals, and uation of product features, So what? (to statements
proof statements. advantages, and benefits. about features)
This is due to forming posi- Prove it! (to statements
tive attitudes that product about advantages)
may fulfill need or solve Are the benefits of this
problem. Positive attitudes product the best to
brought about by fulfill my
knowledge obtained needs?
from presentation.
7-8D
The Selling Process and Examples
of Prospect’s Thoughts and Questions
Steps in the Prospect’s Potential
Selling Process Prospect’s Verbal and Mental
Mental Steps Questions
5. Trial close Desire continues based on
Salesperson asks information evaluation.
prospect’s opinion
on benefits during
and after
presentation.
Desire continues based on Do I understand the
6. Objections information evaluation. salesperson’s marketing
Salesperson plan and business
uncovers proposition?
objections. I need more information to
make a decision.
Can you meet my
conditions?
7-8E
The Selling Process and Examples
of Prospect’s Thoughts and Questions
Steps in the Prospect’s Potential
Selling Process Prospect’s Verbal and Mental
Mental Steps Questions
7. Meet Objections
Salesperson Desire begins to be Let me see the reaction when
satisfactorily answers transformed into belief. I give the salesperson a
objections. Conviction established due to hard time.
belief the product and I have a minor/major
salesperson can solve needs objection to what
or problems better than you are saying.
competitive products. Is something nonverbal
Appears ready to buy. being communicated?
Did I get a reasonable
answer to my objection?
7-8F
The Selling Process and Examples
of Prospect’s Thoughts and Questions
Steps in the Prospect’s Potential
Selling Process Prospect’s Verbal and Mental
Mental Steps Questions
8. Trial Close Conviction becomes Can I believe and trust this
Salesperson uses stronger. person?
another trial close to Should I reveal my real
see if objections have concerns?
been overcome; or if
presentation went
smoothly before the
close, to determine
if the prospect is ready
to buy.
7-8G
The Selling Process and Examples
of Prospect’s Thoughts and Questions
Steps in the Prospect’s Potential
Selling Process Prospect’s Verbal and Mental
Mental Steps Questions
9. Close Action (purchase) occurs I am asked to make a buying
Salesperson has based on positive beliefs decision now.
determined that the product will fulfill If I buy and I am
prospect is ready needs or solve problems. dissatisfied, what can
to buy and now I do?
asks for the order. Will I receive after-the-sale
service as
promised?
What are my expectations
toward this
purchase?
Why don’t you ask me to
buy?
Ask one more time and I’ll
buy.
7-8H
The Selling Process and Examples
of Prospect’s Thoughts and Questions
Steps in the Prospect’s Potential
Selling Process Prospect’s Verbal and Mental
Mental Steps Questions
10. Follow-Up Satisfaction—Dissatisfaction Did the product meet my
Salesperson provides expectations?
customer service after Am I experiencing
the sale.
dissonance?
How is the service
associated with this
product?
Should I buy again from this
salesperson?
Sales planning & Forecasting

Estimating the top line


Sales Forecasting
Introduction

• Sales forecasting is a difficult area of


management. Most managers believe they
are good at forecasting. However,
forecasts made usually turn out to be
wrong! Marketers argue about whether
sales forecasting is a science or an art.
The short answer is that it is a bit of both.
• Why estimate market potential?
– Entry/exit decisions
– Resource allocations
– Location decisions
– Set sales objectives & evaluate performance
– Set forecast (% of potential)
Estimating potential for new
product
• Relative advantage over current product
• Compatibility with current system / norms
• Risk (monetary, social and psychological)
• Rate of adoption of comparable products
Estimating potential for mature
product
• Past experience
• Recent trends
– Competition
– Customers
– Environment
Information sources
• Secondary data
• Past sales data
• Primary data
Forecasting: specific product &
target
• Why forecast sales?
– Compare proposed changes to current results
– Help set budgets
– Provide basis for monitoring results
– Aid in production planning
Considerations in forecasting
• Customer behavior (past & future)
• Competitors’ behavior (past & future)
• Environmental trends
• Product strategies
Range of forecasted results
• Each combination provides one scenario
• Each scenario has range of possible
results
– Limit to three
– expected, better and worse than expected
Types of forecasting
• There are two major types of forecasting, which can be
broadly described as macro and micro:

• Macro forecasting is concerned with forecasting


markets in total. This is about determining the existing
level of Market Demand and considering what will
happen to market demand in the future.

• Micro forecasting is concerned with detailed unit sales


forecasts. This is about determining a product’s market
share in a particular industry and considering what will
happen to that market share in the future.
The selection of which type of forecasting to use
depends on several factors as under:

• (1) The degree of accuracy required – if the


decisions that are to be made on the basis of the
sales forecast have high risks attached to them,
then it stands to reason that the forecast should
be prepared as accurately as possible. However,
this involves more cost

• (2) The availability of data and information -


in some markets there is a wealth of available
sales information (e.g. clothing retail, food
retailing, holidays); in others it is hard to find
reliable, up-to-date information
The selection of which type of forecasting to use
depends on several factors as under:

• (3) The time horizon that the sales forecast is


intended to cover. For example, are we
forecasting next weeks’ sales, or are we trying to
forecast what will happen to the overall size of
the market in the next five years?

• (4) The position of the products in its life


cycle. For example, for products at the
“introductory” stage of the product life cycle, less
sales data and information may be available
than for products at the “maturity” stage when
time series can be a useful forecasting method.
Methods of forecasting
• Judgment based
• Sales extrapolation
• Customer based
• Model based
Judgment-based forecasting:
qualitative
• Jury of expert opinion (most common)
– Delphi method
• Naïve extrapolation / opinion (2nd most
common)
• Sales force composite (3rd most common)
Sales extrapolation: quantitative

• Assumes future will follow on past


– Appropriate for mature, static industry
• Moving average (most common quantitative method)
– Average of three period sales over time
– Average of change in three period sales over time
• Exponential smoothing
– Alternative method to smooth data
• Regression analysis (next most common in U.S.)
– Forecast sales = a intercept + b slope (time)
Customer-based forecasting
methods
• Does not assume future will follow on past
– Appropriate for dynamic markets / new
products
• Market testing
• Market surveys
• Can be fed into forecasting model
Model-based forecasting
methods
• Regression with other factors
– Sales = a intercept + b (advertising) + c
(price)
– Develop model on half of past data
– Test model on other half of data
Forecasting products with new
features
• Show basic product
– Ask what they would pay
– This price may be arbitrary
• Add feature: e.g., a videogame expansion card
– Ask what they would pay
– Follow-up prices are coherent
• Add another feature: e.g., a “Friendstar” device
– Ask what they would pay
• Add another feature: e.g., a hard drive
– Ask what they would pay
• Add another feature: e.g., a Microsoft office
– Ask what they would pay
Creating the Sales Forecast for a
Product
The First stage in creating the sales forecast is to
estimate Market Demand.

Definition:
Market Demand for a product is the total
volume that would be bought by a defined
customer group, in a defined geographical
area, in a defined time period, in a given
marketing environment. This is sometimes
referred to as the Market Demand Curve.
Stage two in the forecast is to
estimate Company Demand
• Company demand is the company’s share of market
demand.

• This can be expressed as a formula:


• Company Demand = Market Demand v/s Company’s
Market Share
• A company’s share of market demand depends on how
its products, services, prices, brands and so on are
perceived relative to the competitors. All other things
being equal, the company’s market share will depend on
the size and effectiveness of its marketing spending
relative to competitors.
Step Three is then to develop the
Sales Forecast
• The Sales Forecast is the expected level of company sales based on a
chosen marketing plan and an assumed marketing environment.

• Note that the Sales Forecast is not necessarily the same as a “sales
target” or a “sales budget”.

• A sales target (or goal) is set for the sales force as a way of defining
and encouraging sales effort. Sales targets are often set some way
higher than estimated sales to “stretch” the efforts of the sales force.

• A sales budget is a more conservative estimate of the expected


volume of sales. It is primarily used for making current purchasing,
production and cash-flow decisions. Sales budgets need to take into
account the risks involved in sales forecasting. They are, therefore,
generally set lower than the sales forecast.
Obtaining information on
existing market demand
• As a starting point for estimating market demand,
a company needs to know the actual industry
sales taking place in the market. This involves
identifying its competitors and estimating their
sales.

• An industry trade association will often collect and


publish (sometime only to members) total industry
sales, although rarely listing individual company
sales separately. By using this information, each
company can evaluate its performance against the
whole market.
Obtaining information on
existing market demand
• This is an important piece of analysis. Say, for example,
that Company A has sales that are rising at 10% per year.
However, it finds out that overall industry sales are rising
by 15% per year. This must mean that Company A is losing
market share – its relative standing in the industry.

• Another way to estimate sales is to buy reports from a


marketing research firm such as AC Neilsen, Mintel etc.
These are usually good sources of information for
consumer markets – where retail sales can be tracked in
great detail at the point of sale. Such sources are less
useful in industrial markets which usually rely on
distributors.
Estimating Future Demand
• So far we have identified how a company can determine the current
position:
• Current Company Demand = Current Market Demand x Current
Market Share
• How can future market demand and company demand be forecast?

• Very few products or services land themselves to easy forecasting .


These tend to involve a product whose absolute level or trend of
sales is fairly constant and where competition is either non-existent
(e.g. monopolies such as public utilities) or stable . In most markets,
total demand and company demand are not stable – which makes
good sales forecasting a critical success factor.
A common method of preparing a
sales forecast has three stages
(1) Prepare a macroeconomic forecast – what will
happen to overall economic activity in the
relevant economies in which a product is to be
sold.
(2) Prepare an industry sales forecast – what will
happen to overall sales in an industry based on
the issues that influence the macroeconomic
forecast.
(3) Prepare a company sales forecast – based on
what management expect to happen to the
company’s market share.
Sales forecasts can be based on
three types of information:
(1) What customers say about their intentions to continue
buying products in the industry
(2) What customers are actually doing in the market.
(3) What customers have done in the past in the market.

There are many market research businesses that


undertake surveys of customer intentions – and sell this
information to businesses that need the data for sales
forecasting purposes. The value of a customer intention
survey increases when there are a relatively small number
of customers, the cost of reaching them is small, and they
have clear intentions. An alternative way of measuring
customer intentions is to sample the opinions of the sales
force or to consult industry experts
Time Series Analysis
• Many businesses prepare their sales forecast on the basis
of past sales.
• Time series analysis involves breaking past sales down
into four components:

• (1) The trend: are sales growing, “flat-lining” or in decline?

• (2) Seasonal or cyclical factors. Sales are affected by


swings in general economic activity (e.g. increases in the
disposable income of consumers may lead to increase in
sales for products in a particular industry). Seasonal and
cyclical factors occur in a regular pattern;
Time Series Analysis
• (3) Erratic events; these include strikes, fashion fads, war
scares and other disturbances to the market which need to
be isolated from past sales data in order to be able to
identify the more normal pattern of sales

• (4) Responses: the results of particular measures that have


been taken to increase sales (e.g. a major new advertising
campaign).
Using time series analysis to prepare
an effective sales forecast requires
Mgt. to:
Smooth out the erratic factors (e.g. by
using a moving average)

Adjust for seasonal variation

Identify and estimate the effect of specific


marketing responses
SALES FORECAST VERSUS PLAN

• THE SALES FORECAST IS A PROJECTION INTO


THE FUTURE OF EXPECTED SALES, GIVEN A
STATED SET OF ENVIRONMENTAL CONDITIONS.
• THE SALES PLAN IS A SET OF SPECIFIED
MANAGERIAL ACTIONS TO BE UNDERTAKEN TO
MEET OR EXCEED
THE SALES FORECAST.
SALES FORECASTING TERMS

• THE SALES FORECASTING LEVEL IS THE FOCAL


POINT IN THE CORPORATE HIERARCHY WHERE
THE FORECAST IN NEEDED
• THE SALES FORECASTING TIME HORIZON IS THE
TIME FRAME FOR THE PLAN
• THE SALES FORECASTING TIME INTERVAL
COINCIDES WITH HOW OFTEN THE PLAN IN
UPDATED
• THE SALES FORECASTING FORM IS THE MEASURE
IN WHICH THE FORECAST NEEDS TO BE
EXPRESSED (DOLLARS, UNITS, CUBE ETC.
Conclusions
• Forecasting is necessary, but difficult
• All methods have plusses and minuses
– All are based on prior experience
– Will generally miss the turning points
• Best to come up with different scenarios
– Have expected, best and worst forecasts for
each
• Be prepared!
Sales territory management
Territory Management

Managing Personal
Generating
Existing Time
New Accounts
Accounts Management
Mergers and
Acquisitions
10% Acquiring
Introducing 15% New
33%
New Customers
Products
42%

Increasing
Business with What’s the
Existing Customers
Best Way to Grow?
Territory Management
Key to Productivity
Sales Concentration
% Total Sales
100

80
60

40

20

0
Top Top Top Top
10% 20% 50%
Source: SMM, Jan. 02, p. 40
Personal Selling
Developing a list of Prospects
1. Direct Inquiry
• Advertising
• Direct Mail
• Trade publications
• Trade shows

2. Directories/Internet -- Thomas Register

3. Referrals

4. Cold canvassing
Personal Selling
Qualifying Prospects
1. Needs for your products/services

2. Authority to make purchase

3. Credit rating & ability to pay

4. Rating scale applied to characteristics


by each salesperson
Territory
Management
Key to Productivity
Salesperson Cost per Call
Direct Selling Expense
Cost per Call =
Total Calls per Year

Total Calls per Year =


(Net Selling Days) x ( Avg. Calls per day)
Territory Management
Key to Productivity

Breakeven Sales Volume

(Cost per Call) x (Number of Calls to Close)


Sales Expenses as a % of Sales
Territory Management
Key to Productivity

Customer Break-even Analysis


What are appropriate strategies for each account?
• Greater account penetration
A • Sell expanded product mix
• Consolidate orders

B
• Service by phone
• Concede to competition

C • Protect from competition


Territory Management
Key to Productivity
Account Analysis and Time Allocation
• Single Factor Model: ABC Account Classification
• Portfolio Models
• Account Opportunity
• Competitive Position
• Decision Models
• Sales Funnel - complex selling; not straight rebuy
• Unqualified Opportunity
• Qualified Opportunity
• Best Few Opportunities

What are weaknesses of each???


Territory Management
Key to Productivity
Time Allocation: Problem 2

Why not allocate calls strictly based on % of sales?

What additional information should you consider


in allocating time?
A Portfolio Model
Competitive Position
Strong Weak
Core Growth
Account Opportunity

Core Growth
Accounts
Accounts Accounts
Accounts
High Accounts
Accountsare
arevery Accounts
very Accountsare
are
attractive.
attractive. Potentially attractive.
Potentially attractive.
Invest heavily in
Invest heavily in May Maywant
wanttotoinvest
invest
Selling resources
Selling resources. . in heavily
in heavily

Drag
Drag Problem
Problem
Low Accounts
Accounts Accounts
Accounts
Accounts Accounts
Accountsare
arevery
Accountsare
are very
moderately attractive. unattractive.
unattractive.
moderately attractive.
Invest to maintain Minimal investment
Invest to maintain Minimal investment
current
currentposition.
position. of
ofselling resources. .
sellingresources
Competitive
Competitive Position
Position
Strong
O
P Segment 1- Core Accounts
P Attractiveness: Accounts are very attractive
O because they offer high opportunity and sales
R organization has strong competitive position.
T Selling Effort Strategy: Accounts should
U High receive a heavy investment of sales resources to
N take advantage of opportunity and
I maintain/improve competitive position.
T
Y
Competitive
Competitive Position
Position
Weak
O
P Segment 2 – Growth Accounts
P Attractiveness: Accounts are potentially
O attractive due to high opportunity, buy sales
organization currently has weak competitive
R
position.
T High
Selling Effort Strategy: Additional analysis
U should be performed to identify account where sales
N organization’s competitive position can be
I strengthened. These accounts should receive heavy
investment of sales resources, while other accounts
T receive minimal investment.
Y
Competitive
Competitive Position
Position
Strong
O
P Segment 3 – Drag Accounts
P Attractiveness: Accounts are moderately
O attractive due to sales organization’s strong
competitive position. However, future
R
opportunity is limited.
T Low
U Selling Effort Strategy: Accounts should
receive a sales resource investment sufficient to
N maintain current competitive position.
I
T
Y
Competitive
Competitive Position
Position
Weak
O
P Segment 4 – Problem Accounts
P Attractiveness: Accounts are very
O unattractive: they offer low opportunity and
sales organization has weak competitive
R
position.
T Low
U Selling Effort Strategy: Accounts should receive
minimal investments of sales resources. Less costly
N forms of marketing (for example, telephone sales
I calls, direct mail) should replace personal selling
T efforts on a selective basis, or the account coverage
should be eliminated entirely.
Y
Territory Management
Key to Productivity
Portfolio Analysis: Problem 3
Where do allocation problems seem to occur?
Why might this happen?

• Salesperson allocating on basis of current competitive


position, not on basis of account opportunity
• Too much time on low opportunity accounts
• Best Target: high opportunity, weak competitive cell
• High opportunity, strong comp may be vulnerable
to comp.
Territory Management
Key to Productivity

Portfolio Analysis: Problem 3


Possible more productive effort allocation strategy:

Assuming number of Accounts in each cell roughly equal:


High/Strong 36 Calls per year
High/Weak 24 Calls per year
Low/Strong 10 Calls per year
Low/Weak 4 Calls per year
Is the assumption realistic?
The Sales Funnel

24 19 17
Unqualified 20 16 14
15 23
13 21 22 18

12 11 50%
9 closure
10 probability
Qualified
7 5 75%
closure
8 6 probability

3 4 90%
Best few closure
1 2 probability
Territory Management
Key to Productivity
Prospecting Model -- Selling Priorities
Sales Funnel
FIRST Close your “Best Few”
sales objectives

SECOND Prospect for “Unqualified”


objectives

THIRD Work the “Qualified” objectives


Service
Calls
13% Selling
29% Face-to-Face
16%
Administrative
Tasks
25%
17%

Selling over
the phone
Waiting and
Travel

How Salespeople
Spend Their Time
Territory Management
Key to Productivity
Salespeople’s Time Wasters
1. Telephone interruptions
2. Drop-in visitors
3. Lack of self-discipline
4. Crises
5. Meetings
6. Lack of objectives, priorities & deadlines
7. Indecision and Procrastination
8. Attempting too much at once
9. Leaving tasks unfinished
10. Unclear communication
Personal Time Management

Importance
High Low

High Time
Time
Emergencies
Emergencies Wasters
Wasters
Urgency

Low Personal
Personal Recreation
Recreation
Growth
Growth

Source: Stephen Covey


Territory Management
Key to Productivity
Sales Management Guidelines for
Involvement in Territory Management
1. Be aware of your management style which
with you and your salespeople is
most comfortable and productive.

2. Consider experience & maturity of your


sales force in deciding management style

3. Cold calling & prospecting are special cases ---


give extra attention when these are part of sales job
Territory Management
Key to Productivity
Paths for Productivity Improvement
% Rating
Rank Important*
1 New Technology 69%
2 Incentives for Strategic Accounts 69%
3 Incentives for Strategic Products 68%
4 Improve Motivation Programs 57%
5 Increase Incentives on Volume 56%
6 Use Alternative:Telemarketing 45%
*Based on 10000 salespeople from 192 companies
Source: Sales & Marketing Management, Jan. 02, p. 41
Traditional Model Internet Model

100,000 100,000
Catalog Drops Website Visits

10,000 Calls 5,000 Calls

2,000 Orders 500 E-Orders 1,750 Orders


Reasons Companies Develop
and Use Sales Territories
• To obtain thorough coverage of the market.
• To establish each salesperson's responsibilities.
• To evaluate performance.
• To improve customer relations.
• To reduce sales expense.
• To allow better matching of salesperson to customer’s needs.
• To benefit both salespeople and the company.
Elements of Time and Territory
Management for the Salesperson
Salesperson’s
Salesperson’s Set
Setaccount
account
territory’s
territory’s Account
Accountanalysis
analysis objectives
objectivesand
and
sales
salesquota
quota sales
salesquotas
quotas

Territory-time
Territory-time
allocation
allocation

Territory
Territoryand
and Scheduling
Schedulingand
and Customer
Customersales
sales
customer
customer routing
routing planning
planning
evaluation
evaluation
Location of Accounts
and Sequence of Calls

4. Ling Television 3. Zip


66 Grocery
270
6. 5.
Jones Hardware
Texas
35
Instruments
40
8.
62 Trailor Mfg.
7. 40 Home
Ace Equipment 1, 9.

Oklahoma City

62

35
62
2.
Distribution
Center
Weekly Route Report

Today’s Date: For week beginning


December 16 December 26
Date City Location
December 26 (Monday) Dallas Home
December 27 (Tuesday) Dallas Home
December 28 (Wednesday) Waco Holiday Inn/South
December 29 (Thursday) Fort Worth Home
December 30 (Friday) Dallas Home
Three Basic Routing Patterns

Straight-Line Pattern

First call
c

c c c
Work back
Three Basic Routing Patterns

Cloverleaf Pattern c c

c c

c c
c c c c
c c
Base
c c c c
c c
c c
Each leaf out and
c c back the same day
c c
Three Basic Routing Patterns

Major-City Pattern

2 3
1 1 = Downtown

4 5
A Partial Map of Your Sales
Territory
L E F H M

K N

B O R J

C
Your
favorite
restaurant
D P I

G A
Start
Sales quota
LEARNING OBJECTIVES
Objectives and quotas are fundamental parts of a company, because
they provide the sales force with direction and goals. Selling by
objectives (SBO) is a system that unites the sales force. This
chapter should help you understand:
 The relationship between sales objectives and quotas.
 Why quotas are important.
 The various types of quotas.
 The methods for setting quotas.
 Criteria needed for a good quota plan.
 Major areas for establishing objectives.
 How organizations set objectives.
 The selling by objectives process.
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.
WHY ARE QUOTAS
IMPORTANT?

• Quotas provide performance targets.


• Quotas provide standards.
• Quotas provide control.
• Quotas provide change of direction.
• Quotas are motivational.
TYPES OF QUOTAS

• Sales volume quotas.


Sales volume quotas includes dollar or
product unit objectives for a specific period
of time.
TYPES OF QUOTAS

• Sales volume quotas.


• 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.
TYPES OF QUOTAS

• Sales volume quotas.


• Break down total sales volume.
• 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.
TYPES OF QUOTAS

• Sales volume quotas.


• Break down total sales volume.
• Profit quotas.
• Expense quotas.
Expense quotas are aimed at controlling costs of
sales units. Often expenses are related to sales
volume or to the compensation plan.
TYPES OF QUOTAS

• Sales volume quotas.


• Break down total sales volume.
• Profit quotas.
• Expense quotas.
• 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.
TYPES OF QUOTAS

• Sales volume quotas.


• Breakdown total sales volume.
• Profit quotas.
• Expense quotas.
• Activity quotas.
• Quota combinations.
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.
TABLE 7.4 LEVELS OF ORGANIZATIONAL SALES PLANNING

LEVEL PURPOSE: WHAT IS WHO (USUALLY) IS


PLANNED INVOLVED
1. Marketing •Organizational goals Upper management and
(increase in market share sales and marketing
or penetration, increase in executives
customers, increase in
sales dollars and units
sold)

2. Regional plan •Priorities (which regions, Regional and district sales


markets, and products to managers (which input
emphasize) from sales reps)
3. District plan •Dollar allotment (for District managers and
promotion, advertising, sales representatives
new employees, sales
incentives, and so on)
4. Territorial plan •Goals for number of new Sales representatives
customers and for
increased business with
old customers in each
region and territory
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.
FIGURE 7.2 THE FOUR MAJOR AREAS TO ESTABLISH OBJECTIVES
WITH EACH SALESPERSON
SALES
MANAGEMENT
Step 1: Organizing the Job

Salesperson

Territorial Management Account Management Call Management Self-Management

• Limits • Portfolio of • Preparation • Appearance


• Potential Business Accounts • Selling Technique • Manner
• Size • Potentials • Training • Communication
• Customer Base • Coverage • Communication Skills
• Prospects • Records • Buyer Behavior • Abilities
• Leads • Order Size • Impact • Attitudes
• Market Share • Penetration • Handling Resistance • Selling Abilities
• Growth • Reports
• Trade Relations • Customer
• Dealer Relations Satisfaction

Step 2: Defining Annual Objectives

1. Regular
2. Problem Solving
3. Innovative
SELLING BY OBJECTIVES SETS
FUTURE TARGETS

• Treating the territory as a business.


• Managing each account.
Tactical plan for managing accounts:

1. Build the stars.


2. Harvest the cash cows.
3. Fix the problems.
4. Divest the dogs.
SELLING BY OBJECTIVES SETS
FUTURE TARGETS

• Treating the territory as a business.


• Managing each account.
• Managing each call.
Questions about the content of calls:

• Is the sales rep properly armed with


information, leads, and materials before the
call occurs?
• Is the sales rep applying the major principles
of selling technique during the presentation?
Or is the sales rep inventing his or her own
and perhaps making every mistake every
salesperson in history has made?
• Has the salesperson planned some coherent
attack for the sales presentation, and is it
working well?
Questions about the content of calls: continued

• Does the sales rep have enough training in


communication, in meeting sales resistance,
in understanding buyer behavior, in
improving call impact, in gaining greater
account penetration, in follow-through
methods to do the job?
• Does the sales rep have enough knowledge
of the product and its applications, service
and system backup, and technical problems
to handle the toughest calling situation?
SELLING BY OBJECTIVES SETS
FUTURE TARGETS

• Treating the territory as a business.


• Managing each account.
• Managing each call.
• Managing oneself.
Self-management in selling includes the following:

• Since selling involves making contact with


strangers, dress, style, demeanor, and personal
decorum are part of the salesperson’s tool kit.
• Communication skills, memory, logical speaking
habits, and writing competence are vested in the
person.
• Attitudes and outlook toward the job, the product,
the company, and the customers all have an
important bearing in the results to be achieved.
• The knowledge of selling techniques, what the
various kinds are and how and when to use them,
are personally vested in the sales rep and can be
produced and polished by training.
BASIC LEVELS OF
INDIVIDUAL OBJECTIVES

1. Regular, ongoing, and recurring objectives.


2. Problem-solving objectives.
3. Innovative or creative objectives.

The highest level of excellence is reserved for


people who are attaining all three.
THE PROCEDURES FOR
SETTING OBJECTIVES AND
QUOTAS WITH SALESPEOPLE
• Prepare the way.
• Schedule conferences with each salesperson.
• Prepare a written summary of goals agreed
upon.
• Optional group meeting to share objectives.
FIGURE 7.3 SELLING BY OBJECTIVES FORM

N
a m e
F o r Y e a r
L i s t Y o u r R e s p o n s i b i l i t y A r e a

R e s u l t s E x p e c t e d

O u t p u t P e s s i m i Rs t e i ca l i s tO i c p t i m i Rs t ei c s u l t s

1 $. V o l u m e / m o n t h
2 $. E x p e n s e / m o n t h
3 G. r o s s m a r g i n / m o n t h
4 .
5 .
6 .
7 .
8 .
9 .
1 0 .
1 1 .
1 2 .
O t h e r

I n s t r u c t i o n : L i s t t h e r e g u l a r , o n g o i n g , r e c
s i b i l i t i e s o f y o u r j o b n e x t y e a r t o m a n a g e
A GOOD OBJECTIVE AND
QUOTA PLAN IS SMART

Specific
Measurable
Attainable
Realistic
Time specific
A simple three-way test to judge how well quotas
and objectives are written:

Test 1: Does this quota state exactly


what the intended result is?
Test 2: Does this quota specify when
the intended result is to be
accomplished?
Test 3: Can the intended result be
measured?
SELLING-BY-OBJECTIVES
MANAGEMENT

Selling by objectives (SBO) is the process


elaborated on earlier whereby the manager and
salesperson jointly identify common goals, define
major areas of responsibility, and agree on the
results expected.
FIGURE 7.4 SETTING OBJECTIVES AND QUOTAS IS A TWO-WAY
PROCESS BETWEEN MANAGER AND SALESPERSON

M u t u a l l y S e t
M e a s u r e
O b j e c t i v e s a n d
P e r f o r m a n
Q u o t a s

E v a l u a t e
P e r f o r m a n

P u b l i c i z e
P e r f o r m a n cR e e w a r d
R e s u l t s o r P e n a l t y
THE SALES TERRITORY IS
WHERE QUOTAS ARE MADE

The sales territory is “where the action is!”


THE BOTTOM LINE
Quotas are important to a company because they establish the
“end state” sought, and they change according to external and
internal forces.
Many different types of quotas exist.
Methods for setting quotas may vary.
Setting a sales quota can be an involved process.
Selling by objectives (SBO) is a common concept and is widely
used by sales organizations.
Sales force -recruitment
LEARNING OBJECTIVES
A successful sales force is determined by who is hired; this is the
end result of sales human resource management. This chapter
should help you understand:

 What sales human resource management is and what its key


relationships are.
 The importance of planning for sales personnel needs.
 What people planning and employment planning are.
 What recruitment means and why it is so important.
 The recruiting process: what it is, who does it, and where
recruits are sought.
WHAT IS SALES
HUMAN RESOURCE
MANAGEMENT?
Sales human resource management (SHRM)
refers to activities undertaken to attract, develop,
and maintain effective sales force personnel
within an organization.
S a l e s
H u m a n R e s o u r c e M a n a g e m e n

P e o p l e P l a n n i n g E m p l o y m e n t P l a n n i n

H o w M a nT y y p e Ro f e c r u i t mS e e l ne ct t Si o o n c i a l i z a t i o
t o H i r e ? P e o p l e ?
D e t e r m F i in r es t G r a d u B a te i go iT nn r a i n A i n s g s i g
H o w M I n a t ne ry v i e w W o r kE n d Ts e r r i t
t o H i r e

T i m e L i n e
What’s a salesperson worth?

A salesperson’s worth depends on what the


salesperson costs to the company and on the
profits from the products he or she sells.
Goal: Hire above-average performers.

Selecting someone who will become an above-


average performer improves the overall
performance of the sales group.
A successful hire is someone who performs
above average.
WHO DOES THE PLANNING?

• National sales manager.


• Field sales managers.
• Top management.
S a l e s F o r c e
O b j e c t i v e s
Q u i t s ,
C u r r e n t H i r i n g , T e r m i n a t i o n s ,
S t r a t e g i c P e o p l e
S a l e s F+ o P r cr oe m o -t i Po nr o s m, o t =i o F n o s r, e c a s t s
P l a n s
P e r s o n n T e rl a n s f e rTs r Ia nn s f e r s O u t ,
o r R e t i r e m e n t
T e r r i t o r i a l
D e s i g n
DETERMINING THE TYPE OF
PERSON FOR THE JOB
A job analysis refers to the formal study of jobs
to define specific roles or activities to be
performed in sales promotions.
The three steps in the job analysis are to:
1. Examine the total sales force and each job, and
determine how each job relates to other jobs.
2. Select the jobs to be analyzed.
3. Collect the necessary information through
observation of what people actually do in the jobs,
interviews of people in the jobs, and
questionnaires completed by job holders.
JOB DESCRIPTIONS AND
SPECIFICATIONS FOR
SUCCESSFUL PEOPLE

Job specifications convert job descriptions into


the qualifications.
WHAT ARE JOB SPECIFICATIONS FOR
SUCCESFUL SALESPEOPLE?

• Intelligence
• Education
• Personality
• Experience
• Appearance
CHARACTERISTICS OF SUCCESSFUL SALESPEOPLE

1. High energy level 8. Good physical appearance

2. High self-confidence 9. Likable


3. Need for material things 10. Self-disciplined
4. Hardworking 11. Intelligent
5. Requires little supervision 12. Achievement oriented
6. High perseverance 13. Good communication skills

7. Competitive
PROFILING THE SUCCESSFUL
CANDIDATE
Success in a company may include the following:
• Intelligence
• Prospecting ability
• Ability to create a follow-up system
• Ability to influence people’s decisions and
opinions
• Ability to cultivate long-term client
relationships
• Ability to negotiate contracts and prices
PROFILING THE SUCCESSFUL
CANDIDATE continued

• Ability to determine prospects’/customers’


needs (hot buttons).
• Computer skills.
• Selling ability.
• Conceptual ability.
RECRUITMENT’S PURPOSE

Recruitment is the set of activities and processes


used to legally obtain a sufficient number of
individuals in such a manner that the recruits’ and
the sales force’s best interests are taken into
consideration.
MAJOR INFLUENCES AND COMPONENTS OF SALES RECRUITMENT

I n t e r n a l
S o u r c e s

S a l e s
Q u a l i f i eE d v a l u a t e
H u m a n A p p l i c a n t
R e s o u r c e R
e c r u i t m e n t A p p l i c a R n et c r u i t m S e nl e t c t i o
P o o l
P o o l R e s u l t s
P l a n n i n g

E x t e r n a l
S o u r c e s
LEGAL INFLUENCES

Equal Employment Opportunity Commission


(EEOC) is the principal governmental agency
responsible for monitoring discriminatory
practices.
RECRUITMENT OF
SALESPEOPLE
To be an effective recruiter, a sales
manager must have the answer to several
questions, including:
• How many people do I need to recruit?
• Who does the recruiting?
• Where do I find recruits?
• How can I develop a qualified pool of
applicants?
• How can recruiting programs be evaluated?
RATIO AND DAYS FROM SALES JOB ANNOUNCEMENT TO REPORTING TO
WORK

R e c r u i t m e n t P y r a Rm a i dt i o D a y s

2 R e p o r t t o W 2o : r 2 k 2 1
3 O f f e r / H i r e3s: 2 1 4
3 0 I n t e r v i e w 1 / 0 O: 1 f f e 2 r 1
1 2 0 L e a d s / I n4 :t 1e r v i3 e 0 w
SOURCES OF RECRUITS –
WHERE ARE THEY FOUND?
INTERNAL SOURCES
Internal recruitment sources come from inside the
company:
• Current Employees.
• Promotions.
• Transfers.
EXTERNAL SOURCES
• Walk-ins. • The Internet.
• Employment agencies. • Internships.
• Radio and television. • Colleges and
universities.
• Newspaper advertisements. • Competitors.

• Telephone-in
advertisements.
REALISTIC JOB PREVIEWS HELP BOTH
COMPANY AND RECRUITS
A “realistic job preview” means that a person is
given pertinent information about the job without
distortion or exaggeration.
Companies can expect these results from
realistic previews:
• Newly hired salespeople have a higher
rate of job survival than those hired
using traditional previews.
• Salespeople hired indicate higher
satisfaction.
• Managers can set the job expectations of
new salespeople at realistic levels.
• Realistic previews do not reduce the flow
of highly capable applicants.
THE QUALIFIED
APPLICANT POOL
The organization should find out:

• How candidates obtain information


regarding job availability.

• What attracts people to the job.

• What the likes and dislikes are about the job.

• Why the person took the job.


THE BOTTOM LINE
Sales human resource management (SHRM) is comprised of two
elements: people planning and employment planning.
Developing a successful sales team requires the planning of
personnel needs and analyzing the sales jobs to achieve more
efficient use of human resources.
Job analysis is the definition of specific roles or activities to be
performed.
The goal of managing sales human resources is to hire above-
average performers.
In order to hire the right person for the job, there must be a
recruitment strategy.
Sales force -training
Sales force training
• Product
• Organizational culture
• Reporting pattern
• Understanding territory management
• Team management
• Management of the channel
• Handling objections
• Merchandising
• MIS
• Interpersonal relationships
Sales force - Motivation
What is Motivation??

• Drive to initiate an action.

• The intensity of effort in an action

• The persistence of effort over time.


Why
Whythetheconcern
concern What
Whatarearethe
the
for
forsales
salesforce
force different
differenttheories
theories
motivation?
motivation? of
ofmotivation?
motivation?

Motivation
MotivationTools
Tools

Self-
Self- Quotas
Quotas Incentive
Incentive Recognition
Recognition
management
management programs
programs programs
programs
Reasons for Motivating Salespeople
• Frequent rejection
• Physical separation from company
support
• Direct influence on quality of sales
presentation
• Indirect influence on performance
Steps to Greater
Personal Motivation

1. Define what you want.


2. Inform a special person of your goals.
3. Do something.
4. Don’t let failure deter you.
5. Break down problems into pieces.
6. Set deadlines.
7. Turn work into play.
8. Associate with people who motivate you.
Sales Force Needs Company Actions to Fill Needs

Status Change title from “salesperson” to


“area manager.”
Buy salespeople more luxurious cars
to drive.

Control Allow salespeople to help plan sales


quotas and sequences of calls.

Respect Invite salespeople to gatherings of


top executives.
Put pictures of top salespeople in
company ads and newsletters.

Assign each salesperson a core of


Routine loyal customers that are called on
regularly.

Sales Force Needs and Ways to Fill Them


Sales Force Needs Company Actions to Fill Needs

Accomplishment Set reasonable goals for the


number of calls and sales.

Stimulation Run short-term sales contests.


Schedule sales meetings in
exotic locations.

Honesty Deliver promptly all rewards


and benefits promised.

Sales Force Needs and Ways to Fill Them


MASLOW’S HIERARCHY OF NEEDS

Intense job challenge, full potential, full


Self-Actualization expression, creative expansion.

Achievement, respect, recognition, responsi-


Self-Esteem bility, prestige, independence, attention,
importance, appreciation.
Belonging, acceptance, love, affection, family
Love-Belonging
and group acceptance, friendships.

Security, stability, dependency, protection,


Safety-Security
need for structure, order, law, tenure, pension,
insurance.

Physiological Hunger, thirst, reproduction, shelter, clothing,


air, rest.

Motivation and Personality, Abraham Maslow, 1970


AN EXERCISE TO DETERMINE YOUR
MOTIVATIONAL NEEDS

To perform the exercise, read through the following statements…check those


which are most important in motivating you to do your best work.
Select the ten most important statements.

629 Job security


847 Being trusted to do my job the way I think it should be done.
333 Participating in work group conversations.
311 Having adequate shelter to protect from the elements.
836 Having a job which allows me time with my family.
151 Having an opportunity for personal growth.
937 Socializing with my friends.
743 Being considered for an advancement opportunity.
431 Working with other people.
AN EXERCISE TO DETERMINE YOUR
MOTIVATIONAL NEEDS
Select the ten most important statements. (Cont’d.)
819 Having children.
458 Doing something meaningful with my life.
757 Being in a position to contribute new ideas.
828 Having an associate that looks out for my interests.
735 Including other people in what I do.
949 Being selected for an exclusive award.
234 Being involved with work associates in social and recreational
activities.
616 Being sexually satisfied.
146 Having a responsible person tell me when I’ve done a
good job.
539 Having an active part in work related social activities.
341 Knowing that other people respect me and my work.
132 Acceptance as a work group member
Determining Your
Motivational Needs
Second Number to left of statement indicates the
category; how many in each:
Number Category
1 Physiological
2 Safety - Security
3 Love - Belonging
4 Self Esteem
5 Self Actualization
YOUR SCORE

To determine results: the statements are


divided into five categories intended to
represent the five levels in Maslow’s
Hierarchy of Needs. The second digit in each
statement number indicates the category.
These categories are: 1-Physiological, 2-
Safety-Security, 3-Love-Belonging,
4-Self-Esteem, 5-Self-Actualization.
Maslow’s Hierarchy –
U.S. Salespeople’s Responses

Number Percent

847 86%
341 74%
757 54%
431 51%
828 37%
458 37%
743 34%
INDIVIDUAL NEEDS

Maslow’s Related
Hierarchy Sales Force
of Needs Motivators
Self- Challenging tasks
actualization calling for creativity

Esteem Recognition programs

Belonging President’s Club $1 mil.

Safety & security Job security & fringes

Physiological Cash wages & bonuses


Chinese Culture Hierarchy of Needs

Self-
actualization
in service to
society

Safety

Physiological

Affiliation (belonging)
What Makes Great Salespeople?
The Competitor

This person not only wants to win, but derives


satisfaction from beating specific rivals -- another
company or even colleagues. They tend to verbalize
what they are going to do, and then do it.

The Ego-driven

They are not interested in beating specific


opponents, they just want to win. They like to be
considered experts, but are prone to feeling slighted,
change jobs frequently, and often take things too
personally.
What Makes Great Salespeople?

The Achiever

This type of person is almost completely self-


motivated. They usually set high goals and as soon as
they hit one goal, they move the bar higher. They like
accomplishment, regardless of who receives the credit.

The Service-oriented

Their strengths lie in building and cultivating


relationships. Winning is not everything to this person,
but they do respond to feelings of gratitude and
friendship from other people.
Role Perceptions
• Sales is a boundary spanning position –
you must be responsive to expectations
of multiple people.
Sales
Company Customers Family
Manager

Salesperson’s Role Perceptions


• Expectations: What do others expect me to do?
• Ambiguity: How sure am I about what others expect?
• Accuracy: Is what I think what they really expect?
• Conflict: Does meeting expectations of one person
mean not meeting the expectations of
another?
Role Perceptions

• Typical Sales Job Activities


• Where is their potential for the
following:
–Ambiguity
–Lack of Accuracy
–Conflict
Typical Sales Job Activities

Job Dimension Activities

SELLING FUNCTION Plan Activities Prepare Presentations


Develop leads Make Presentations
Prospecting Overcome Objections
Identify Decision- Introduce New Products
Makers

WORKING WITH ORDERS Write orders


Find last orders
Expedite orders Handle shipping
Handle back problems
orders

PRODUCT SERVICING Learn about Train customers


product
Test equipment Supervise repairs
Supervise Perform maintenance
installation

MANAGING INFORMATION Receive feedback Provide technical


Provide feedback information

Source: Adapted from William C. Moncrief, “Selling Activity and Sales Position Taxonomies
for Industrial Sales Force,” Journal of Marketing Research, August, 1996), pp. 266-67.
Typical Sales Job Activities
Job Dimension Activities

SERVICING THE ACCOUNT Stock shelves Count inventory


Set up displays Promote local
advertising

ATTENDING CONFERENCES Sales Product exhibitions


conferences Training sessions
Client conferences

TRAINING/RECRUITING Recruit new reps Train new reps


Travel with trainees

ENTERTAINING Parties Dinner


Drinks Lunch

TRAVELING Out-of-Town In-Town

DISTRIBUTION Sell through Train


Establish Credit processing
relationships

Source: Adapted from William C. Moncrief, “Selling Activity and Sales Position
Taxonomies for Industrial Sales Force,” Journal of Marketing Research,
August, 1996), pp. 266-67.
Motivation
Career Stages
• Does everyone go through these stages?
• What can be done to address the concerns of
management at each stage?
• How can sales managers address the
management concerns at each stage?
Career
Stages

Exploration Establishment Maintenance Disengagement


Career Concerns Finding an Successfully Holding on to Completing
appropriate establishing what has been one’s
occupational a career in a achieved; career.
field. certain reassessing career,
occupation. with possible
redirection.

Motivational Learning the Using skills to Developing Establishing a


Job Related skills required produce results. broader view of stronger self-
to do Adjusting to work and identity
the job well. working with organization. outside
Becoming a greater Maintaining a high of work.
contributing autonomy. performance Maintaining an
member of level. acceptable
an organization. performance
level.

Career Stage Characteristics


Career Stages

Exploration Establishment Maintenance Disengagement

Personal Establishing a Producing superior Maintaining Acceptance of


Challenges good initial results on the motivation, career
professional job in order to though accom-
self-concept. be promoted. possible rewards plishments.
have changed.
Facing concerns
about aging.

Psychological Support Achievement Reduced Detachment

Needs Peer Acceptance Esteem competitiveness from the


Challenging Autonomy Security organization
position Competition Helping younger and organi-
colleagues zational ife.

Career Stage Characteristics


Career Stage Research Findings
Job Satisfaction and Career Concerns
200 Salespeople -- Large Industrial
Organization:
– all are least satisfied with promotion & pay
– pay satisfaction is only dimension on which
exploration sales people are more satisfied than
establishment or maintenance salespeople
– maintenance salespeople are less satisfied with
supervision than are establishment salespeople
Career Stage Research
Findings
Career Concerns and Age
200 Salespeople -- Large Industrial
Organization:
– Note proportion of people in each stage
– Note overlap in ages of people in each stage
– Disengagement as well as maintenance occurs quite
early for some people --

Is this a management concern?


Relationship Between Career
Concerns and Age

Age Range
Proportion of 20 30 40 50 60 65
Career Concerns Sales Force

Exploration 14%

Establishment 29%

Maintenance 42%

Disengagement 15%
60%
Sales 55%
volume
quota Bar 2
32% Large firms’
14% Sales >$40M
Profit- Bar 1
based Small firms’
quotas 28%
Sales < $40M
14%

Activity 0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
quota

Use of the Various Types of Quotas


Quotas & Reasons
for Use
1. Help motivate salespeople
2. Direct where to put effort
3. Provide standards for evaluation.
a. Sales volume in dollar or point system
• Points allow for different weights for different important
products independent of price.
• Points not affected by inflation.
• Sales quota may be developed for:
– Total territory sales, and/or
– Individual product or product group.
Quotas & Reasons
for Use
2. Profit-based quotas are rarely
based on bottom line profits
– Difficult to account for indirect expenses
– Profits are usually configured as gross margins minus
some load factor
3. Activity-based quotas are based on activities
directly related to sales volume
– More directly under control of the salesperson
– Biggest problem is falsification of call reports
– Issue of quantity vs. quality of activity?
Incentive Programs
• What is difference from regular
compensation such as commission?
• Key decisions
– Goals -- Rules
– Timing -- Awards
– Participants -- Publicity
– Theme -- Cost

• What is difference between


Incentive and Recognition programs
Types of Incentive Awards
Used by 168 Firms

Percentage of
Type of Award Firms Using

Cash 59
Selected Merchandise 46
Merchandise Catalog 25
Travel 22
Giving Status to
Salespeople

1. Compensation -- exceed first-line managers


2. Job Title -- no cost but considerable payback
3. Company Car Upgrade -- salespeople spend
much time in car - reminds them of their value.
4. Car Phone -- justified on a purely business basis
5. Field Sales Council -- meet president for 1/2 day open-
ended discussion on field marketing conditions - report
back to field meetings the results
6.Outside Secretarial Support -- or more exclusive central.
7. Published Success Stories -- high form of recognition
8. Task Force Assignments -- e.g., review of all paperwork.
Sales force – compensation ,
appraisal
Appraisal
• SMART objectives
• On the job
• Time period for review
– Weekly
– Monthly
– Quarterly
– Annual
Appraisal
• One to one
• Team appraisal
• Results of appraisal
– Promotions
– Competency development
– Compensation review
– New territory
Compensation

• 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
In Global Market
• 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
Ethical Compensation Issues
• Major dilemma – hire the best salesperson for
the lowest possible salary. Other dilemmas
include:
– Pay at, below or above market salaries?
– Setting a cap on total pay?
– Assigning lucrative sales territories?
– Team vs. individual incentives?
– Frequency of paying commission?
– Pay discrimination?
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
Sales Contest Elements
• Contest Objectives
– To increase total and product sales most common
– Sales force must be given sufficient time
– All contest information and rules must be clear
• Theme
– Contests receive a theme to create excitement
• Chance of winning
– Compete against self, others, or as a team?
• In U.S. salesperson has about a 40% chance of winning
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
Sales Contest Concerns
• A number of concerns have been raised
about sales contests
– When not properly designed contests take a lot
of managerial time to administer
– Improper contests can actually de-motivate
– Do sales contests generate additional sales?
– Should sales force be paid twice for doing job?
– If contests are for short-term, then why have a
“never-ending” sales contest?
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
Sales Expense Plans
• Linked to salary in some ways
– Globally, firm may pay salesperson’s
expenses to live overseas that include family
– Expatriate expenses are significant
• Expense plans include
– Unlimited
– Per diem
– Limited expense plan
Unlimited Expense Plan
• All legitimate expenses are reimbursed
• Plan has a number of advantages
– Communicates trust to the sales force
– Sales manager can focus on more important issues
– Salesperson cannot complain that resources not
available to make sale
• Sales force must be given guidance and
expenses must still be monitored to insure
sound judgment
– Reimbursed expenses vary by country – e.g.
entertainment and alcohol
Per Diem Expense Plan
• The salesperson is given a set amount of
money for each day s/he is in the field
– For example, US$250 per day
• Budget can be set by multiplying rate times total
days sales force expected to travel
• Single rate unlikely to work in all locales due to
varying costs
• Sales manager must adjust per diem rates
regularly as prices expand or contract
Limited Expense Plan
• The firm sets a maximum daily amount paid
for each category of expense
– That is, US$125 for lodging, $50 for meals, $30
for auto rental, and $20 for miscellaneous
• Limits firm’s upper travel expense limit
• Must be updated and will vary by location
• When actual costs exceed plan, salesperson may try to
save in some areas to meet expenses in other
• Salesperson’s attention may be diverted from client

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