Routledge 2013

SALES FORCE MANAGEMENT

11TH EDITION

MARK W. JOHNSTON

GREG W. MARSHALL

Routledge 2013

CHAPTER 5

THE STRATEGIC ROLE OF INFORMATION IN SALES

MANAGEMENT

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IT IN PERSPECTIVE

• TOOLS ENABLE RATHER THAN TRANSFORM

• IMPLEMENT SUCCESSFUL BUSINESS PROCESSES

• SUPPORT W/NEW TECHNOLOGY

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MARKET POTENTIAL, SALES POTENTIAL, AND SALES FORECASTING PROCESS

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• DISCUSS DIFFERENCES BETWEEN MARKET POTENTIAL, SALES POTENTIAL, SALES FORECAST, AND SALES QUOTA

• UNDERSTAND METHODS BY WHICH SALES MANAGERS DEVELOP SALES FORECASTS

• OUTLINE PROCESS OF SETTING A SALES QUOTA

• EXPLAIN TYPES OF QUOTAS USED IN SALES MANAGEMENT

• DISCUSS APPROACHES TO DETERMINING SALES FORCE SIZE

• DESCRIBE SALES TERRITORY DESIGN PROCESS

• UNDERSTAND IMPORTANCE OF SALES ANALYSIS

• CONDUCT SALES ANALYSIS

Learning Objectives

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INFORMATION FOR MANAGERS

• SALES FORECASTS

• TERRITORY ESTIMATES

• QUOTAS

• SALES FORCE SIZE

• SALES TERRITORY DESIGN

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MARKET OPPORTUNITY ANALYSIS

• MARKET POTENTIAL – ESTIMATE OF POSSIBLE SALES FOR AN ENTIRE INDUSTRY IN A MARKET DURING A STATED PERIOD UNDER IDEAL CONDITIONS

• SALES POTENTIAL – PORTION OF MARKET POTENTIAL THE FIRM CAN EXPECT TO REASONABLY ACHIEVE

• SALES FORECAST – ESTIMATE OF DOLLAR OR UNIT SALES FOR A SPECIFIED FUTURE PERIOD

• SALES QUOTAS – SALES GOALS ASSIGNED TO A MARKETING UNIT TO MANAGE SALES EFFORTS

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SALES FORECASTING METHODS

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SUBJECTIVE SALES FORECASTING

• USER EXPECTATIONS – RELIES ON BUYERS’ EXPRESSED INTENTION

• SALES FORCE COMPOSITE – SALES FORCE OPINIONS

• JURY OF EXECUTIVE OPINION - KEY EXPERTS’ OPINIONS

• DELPHI TECHNIQUE – PARTICIPANTS PREPARE ESTIMATES WHICH ARE COMPARED ANONYMOUSLY AND ITERATIVELY TO REACH CONSENSUS

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OBJECTIVE SALES FORECASTING

• MARKET TEST – PLACES PRODUCT IN SELECT AREAS

• TIME SERIES ANALYSIS – RELIES ON HISTORICAL DATA TO DEVELOP PREDICTIONS

• STATISTICAL DEMAND ANALYSIS – ATTEMPTS TO DETERMINE THE RELATIONSHIP BETWEEN SALES AND FACTORS THAT INFLUENCE SALES

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OBJECTIVE TIME SERIES ANALYSIS

• MOVING AVERAGE – AVERAGES SALES RESULTS OVER PREVIOUS TIME PERIODS TO FORECAST

• EXPONENTIAL SMOOTHING – TYPE OF MOVING AVERAGE WHERE MOST RECENT YEARS GIVEN MORE WEIGHT

• DECOMPOSITION – APPLIED TO MONTHLY OR QUARTERLY DATA WHERE SEASONAL PATTERN IS EVIDENT

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EXAMPLE: MOVING AVERAGE FORECAST

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EXAMPLE: MOVING AVERAGE ANALYSIS

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EXAMPLE: SEASONAL INDEX

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CHOOSING A FORECASTING METHOD

• NO METHOD REMAINS SUPERIOR UNDER ALL CONDITIONS.

• APPLY MULTIPLE FORECASTING METHODS TO A PROBLEM

• SCENARIO PLANNING PREPARES “WHAT-IF” QUESTIONS AND PRODUCES POSSIBLE OUTCOMES

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EFFECTS OF TERRITORY ESTIMATES

• DESIGN OF SALES TERRITORIES

• PROCEDURES FOR IDENTIFYING POTENTIAL CUSTOMERS

• ESTABLISHMENT OF SALES QUOTAS

• COMPENSATION AND SUBCOMPONENTS

• EVALUATION OF SALESPERSON PERFORMANCE

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PLANNING TOOLS

• NORTH AMERICAN INDUSTRY CLASSIFICATION SYSTEM (NAICS)

• DEVELOPED BY US BUREAU OF THE CENSUS, • ORGANIZES REPORTING OF BUSINESS INFORMATION• EACH US INDUSTRY IS ASSIGNED A TWO-DIGIT

NUMBER

• BUYING POWER INDEX (BPI)• PUBLISHED BY SALES MARKETING MANAGEMENT

MAGAZINE• CONSIDERS INCOME, POPULATION AND RETAIL SALES• MOST USEFUL WITH LOW-PRICED CONVENIENCE

GOODS

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SALES QUOTAS

• GOALS ASSIGNED TO SALESPEOPLE

• APPLY TO SPECIFIC PERIODS

• TOOL FOR PLANNING AND CONTROLLING FIELD SELLING ACTIVITIES AND RESULTS

• BENCHMARK FOR EVALUATING SALES EFFECTIVENESS

• MOTIVATE SALES PEOPLE

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QUOTA PURPOSES

• PROVIDE INCENTIVES FOR SALES REPRESENTATIVES

• PROVIDE MEASURES TO EVALUATE SALESPEOPLE'S’ PERFORMANCE

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PROCESS FOR SETTING QUOTAS

• IDENTIFY TYPES OF QUOTAS TO BE USED

• SELECT LEVEL OF EACH TYPE OF QUOTA

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GOOD QUOTA CHARACTERISTICS

• ATTAINABLE

• EASY TO UNDERSTAND

• COMPLETE

• TIMELY

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SALES PROCESS AND QUOTA ATTAINMENT

Level

Level 1 Ad Hoc No clearly defined process and approximately half of sales staff are not attaining quota. Large variation in performance levels.

Level 2 Tribal Limited process used by certain "tribes" within the company. Still only 50% of staff attaining quota but less variation between best and worst performers.

Level 3 Religion Everyone is using the process but not to its full capability. More salespeople making the quota than not making it.

Level 4 Dynamic World-Class

Fully utilizing people, processes, and technology. Lowvariation in performance levels of salespeople with very few not attaining quota.

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QUOTA TYPES

• SALES VOLUME – EMPHASIZE SALES OR SOME ASPECT OF SALES

• ACTIVITY – FOCUS ON CERTAIN SALES ACTIVITIES

• FINANCIAL – EXAMINE FINANCIAL CRITERIA SUCH AS GROSS MARGIN OR CONTRIBUTION TO OVERHEAD

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SALES VOLUME QUOTAS

• MOST POPULAR

• OFTEN BASED ON PAST SALES

• RELATED DIRECTLY TO MARKET POTENTIAL, THUS CREDIBLE AND EASILY UNDERSTOOD

• MAY BE EXPRESSED IN DOLLARS, PHYSICAL UNITS, OR POINTS

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ACTIVITY QUOTAS

• REFLECT TERRITORIAL CONDITIONS

• REQUIRE A DETAILED ANALYSIS OF WORK REQUIRED FOR EFFECTIVE TERRITORIAL COVERAGE

• CUSTOMERS INFLUENCE ACTIVITY QUOTAS THROUGH:

• ACCOUNT AND ORDER SIZE

• PURCHASING PATTERNS

• SUPPORT REQUIRED FOR SATISFACTION

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COMMON TYPES OF ACTIVITY QUOTAS• Calls on new accounts.

• Letters to potential customers.

• Proposals submitted.

• Field demonstrations arranged.

• Service calls made.

• Equipment installations supervised.

• Displays arranged.

• Dealer sales meetings held.

• Meetings and conventions attended.

• Past-due accounts collected.

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FINANCIAL QUOTAS

• DIRECT SALESPEOPLE TO MORE PROFITABLE PRODUCTS AND CUSTOMERS

• COMMON BASES• GROSS MARGIN

• NET PROFIT

• SELLING EXPENSES

• CALCULATION NOT STRAIGHTFORWARD

• PROFIT PRODUCED AFFECTED BY FACTORS BEYOND A SALESPERSON’S CONTROL

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QUOTA LEVEL CONSIDERATIONS

• TERRITORY AVAILABLE POTENTIAL

• QUOTA’S IMPACT ON MOTIVATION

• LONG-TERM COMPANY OBJECTIVES

• SHORT-TERM PROFITABILITY IMPACT

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SALES FORCE DEPLOYMENT CONSIDERATIONS

• SALES FORCE SIZE OR NUMBER OF TERRITORIES

• DESIGN OF INDIVIDUAL TERRITORIES

• ALLOCATION OF TOTAL SELLING EFFORT TO ACCOUNTS

• SIMULTANEOUS DECISIONS IMPLEMENTED THROUGH SOFTWARE

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DETERMINING SALES FORCE SIZE

• BREAKDOWN METHOD

• WORKLOAD METHOD

• INCREMENTAL METHOD

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BREAKDOWN METHOD

(N)umber of sales personnel

needed

Estimated (P)roductivity of

each salesperson

Forecasted (S)ales volume

=

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WORKLOAD METHOD

Total # salespeople

required # Hours available to each

salesperson

Total # hours required to

service market

=

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WORKLOAD METHOD STEPS

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INCREMENTAL METHOD

• ADD SALESPEOPLE UNTIL INCREMENTAL PROFIT PRODUCED EQUALS INCREMENTAL COST

• DECREASING RETURNS ASSOCIATED WITH ADDITION OF SALESPEOPLE

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EXAMPLE: INCREMENTAL

METHOD

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TERRITORY DESIGN STAGES

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TEN LARGEST US MSAS IN DECREASING ORDER OF SIZE

Rank Area2010

Population (in 000s)

1New York-Northern New Jersey-Long Island, NY-NJ-PA

18,897.1

2 Los Angeles-Long Beach-Santa Ana, CA

12,828.8

3 Chicago-Joliet-Naperville, IL-IN-WI 9,461.1

4 Dallas-Fort Worth-Arlington, TX 6,371.8

5Philadelphia-Camden-Wilmington, PA-NJ-DE-MD 5,965.3

6 Houston-Sugar Land-Baytown, TX 5,946.8

7Washington-Arlington-Alexandria, DC-VA-MD-WV 5,582.2

8 Miami-Fort Lauderdale-Pompano Beach, FL 5,564.6

9 Atlanta-Sandy Springs-Marietta, GA 5,268.9

10 Boston-Cambridge-Quincy, MA-NH 4,552.4

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ACCOUNT PLANNING MATRIX

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SALES ANALYSIS

• GATHERING, CLASSIFYING, COMPARING, STUDYING COMPANY SALES DATA

• HIGHLIGHTS SALES CONCENTRATION IN PRODUCTS, CUSTOMERS, ORDERS, TERRITORIES

• 80:20 PRINCIPLE• DECISIONS

• EVALUATION SYSTEM• SOURCES OF INFORMATION• INFORMATION AGGREGATION TYPE

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DECISIONS WHEN CONDUCTING A SALES ANALYSIS

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EVALUATION SYSTEMS

• DETERMINE HOW ANALYSIS WILL BE CONDUCTED

• SIMPLE

• COMPARATIVE

• BASIS FOR COMPARISON?

• REPORTING AND CONTROL SYSTEM?

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SIMPLE SALES VERSUS COMPARATIVE SALESSales

Representative

2012 Sales($)

2012 Quota($)

Performance Index

Diana Barrington

760.9 700 108.7

John Bendt 793.5 690 115.0

James Dawson

859.2 895 96.0

Gloria Richardson

837.0 775 108.0

Walter Keyes

780.3 765 102.0

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INFORMATION AGGREGATION TYPE• POSSIBLE GROUPINGS

• REGION• PRODUCT• CUSTOMER• MARKET• METHOD OF SALE• ORDER SIZE• FINANCIAL ARRANGEMENT

• CONSIDERATIONS• COMPANY SIZE• PRODUCT DIVERSITY• SALES AREA• NUMBER OF MARKETS/CUSTOMERS• MANAGEMENT LEVEL/TYPE TO RECEIVE

REPORT

• HIERARCHICAL REPORTS MOST EFFECTIVE

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Example of Several Sales Reports