McGraw-Hill/Irwin Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. 1.1 - Examples from Bank & Insurance Company Dr Arthur Lin *Associate.
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1.1
McGraw-Hill/Irwin
Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved.
-Examples from Bank & Insurance Company
Dr Arthur Lin*Associate professor of National Taipei University*Chairman of Taiwan Life Asset Management Co.*Ph.D of Université de Paris I
Sales Management of Financial Industry
1.2
McGraw-Hill/Irwin
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1.2McGraw-Hill/Irwin
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Evaluation & control of sales force
performance
The external environment
The organizational environment
Marketing activities
Performance
Salesperson’s view of job
requirements, role perceptions
Sales planning
Account management
policies
Sales force organization
Deployment
Supervision
Selection, training, and motivating the
sales forcePersonal
characteristics
SALES MANAGEMENT
ACTIVITIES
DETERMINANTS OF THE
SALESPERSON”S PERFORMANCE OUTCOMES CONTROL
MARKETING STRATEGY
THE ENVIRONMENT
Feedback
An Overview of Sales Management
1.3
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1. Selling functionPlan selling activitiesSearch out leadsCall potential accountsIdentify decision makersPrepare sales presentationOvercome objectionsIntroduce new productsCall new accounts
2. Working with othersWrite up ordersExpedite ordersHandle back ordersHandle shipping problemsFind lost orders
3. Servicing the productLearn about the productTest equipmentSupervise installationTrain customersSupervise installationTrain customersSupervise repairsPerform maintenance
4. Managing InformationProvide technical informationReceive feedbackProvide feedbackCheck with superiors
Selling Job Factors
1.4
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5. Servicing the AccountStock shelvesSet up displaysTake inventory for clientHandle local advertising
6. Attending conferences andmeetingsAttend sales conferencesAttend regional sales meetingsWork at client conferencesSet up product exhibitionsAttend periodic training sessions
7. Training and recruitingRecruit new sales repsTrain new salespeopleTravel with trainees
8. EntertainingEntertain clients with golf and so forthTake clients to dinnerTake clients out for drinkTake clients out to lunchThrow parties for clients
Selling Job Factors
1.5
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2.5
9. TravelingTravel out of townSpend nights on the roadTravel in town
10. Distribution Establish good relations with distributors Sell to distributors Handle credit Collect past due accounts
from the Journal of Marketing Research, William C. Moncrief,IIIAug. 1986
Selling Job Factors
1.6
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2.6
Average cost of a sales call can be up to $400
This rising cost demands a search for new ways to improve sales force efficiency
Service Calls5%
Prospecting14%
With Customers – 15%
Waiting/Traveling32%
AdministrativeTasks – 34%
from Fenemore Group,Sales & Marketing Mgmt. 3/98
Time Use by Salespeople
1.7
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Servicing the Account
Closing the Sale
Presenting the Sales Message
Qualifying the Prospect
Opening the Relationship
Prospecting for Customers
1
2
3
4
5
6
Stages in the Selling Process
1.8
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Different types of salespeople use alternative selling approaches such as . . .
• Stimulus-Response Approach
• Mental-States Approach
• Need-Satisfaction Approach
• Problem-Solution Approach
Stimulus-Response
Mental-States
Need-Satisfaction
Problem-Solution
Alternative Selling Approaches
1.9
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Stage I – ExplorationDetermine value, build trust, set expectations, monitor
Stage II – ExpansionGenerate repeat sales, full-line selling, cross-selling
Stage III – CommitmentBuild loyalty, become a preferred supplier, engage in
TQM – a discipline that focuses on eliminating errors and defects in all aspects of products and process
Stages in Relationship Development
1.10
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Compatible lines
Compatible territories
Compatible customers
Credibility of the rep
Capabilities
Credits
Six C’s of Finding the Right Rep
1.11
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Six building blocks:
1. Start with a strategy
2. Appoint an expansion team
3. Leverage existing strengths
4. Go to the press
5. Avoid compensation snafus
6. Provide support
Sales managers assigned to create a new sales force can employ “best practices”
A New Sales Force
1.12
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Access economic environment
Estimate marker and/or sales potential
Develop sales forecast
Compare forecast with objectives
In agreement?
Establish sales quotas
Redesign the marketing program
No
Yes
Market Potential, Sales Potential, and Sales Forecasting
1.13
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SUBJECTIVEOBJECTIVE
Market test – place product in select areas
Time series analysis – relies on historical data to develop predictions for the future
Statistical demand analysis – attempts to make a comparison to determine the relationship between sales and factors that influence sales
Objective Methods of Sales Forecasting
1.14
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Salespeople are among the most productive assets of a company, and they are also among the most expensive!
How can an optimal sales force be established?
Breakdown method:
Number of salespersonnel needed =
Sales Volume
Productivity
Determining Sales Force Size
1.15
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Classify customers into categories
Determine frequency and length of calls
Calculate work load to cover entire market
Determine time available per salesperson
Apportion salesperson’s time by task performed
Calculate the number of salespeople needed
Workload Method Model
1.16
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Select basic control unit
Estimate market potential in each control unit
Combine control units in tentative territories
Perform work load analysis
Adjust tentative territories as needed
Assign salespeople to territories
Stages in Territory Design
1.17
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5.17
Account Planning Matrix
Account offers good opportunity since it has high potential and sales organization has differential advantage in serving it. Commit high level of sales resources to take advantage of the opportunity.
Account may offer good opportunity if sales organization can overcome its competitive disadvantage and strengthen its position. Either direct a high level of sales resources to improve position and take advantage of the opportunity to shift resources to other accounts.
Account offers stable opportunity since sales organization has differential advantage in serving it. Allocate moderate levels of sales resources to maintain current advantage.
Account offers little opportunity. Devote minimal level of sales resources to the account or consider abandoning the account altogether.
Account Attractiveness
High
Low
Sales Organization Competitive Strength
LowHigh
SOURCE: Adapted from Raymond La Forge and David W. Cravens, “Steps in Selling Effort Deployment,” Industrial Marketing Management, II (1982), pp. 183-94; Renato Fiocca, “Account Portfolio Analysis for Strategy Development,” Industrial Marketing Management, II (1982), pp. 53-62; and Raymond W. La Forge, David W. Cravens, and Clifford E. Young, “Improving Salesforce Productivity,” Business Horizons, 28 (September-October 1985), pp. 50-51.
1.18
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Understanding Performance
Personal, organizational and environmental variables
Personal, organizational and environmental variables
Role PerceptionsRole Perceptions
AptitudeAptitude
Skill LevelSkill Level
Motivation LevelMotivation Level
PerformancePerformance RewardsRewards SatisfactionSatisfaction
InternalExternal
IntrinsicExtrinsic
1.19
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Two broad types of rewards:
Extrinsic – rewards controlled and bestowed by people other than the salesperson
Intrinsic – rewards that salespeople primarily attain for themselves or within themselves
Rewards
1.20
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Role Expectations – Does the role partner expect me to engage in that activity?
Role Ambiguity – Do I know what the role partner expects with regard to that activity?
Role Conflict – Is there a disagreement between two of these role partners over performance of that activity?
Role Inaccuracy - Are the salesperson’s perceptions of the demands being placed upon him or her correct?
Sales Perceptions of the Job
CompanyCompany
Sales ManagersSales Managers
CustomersCustomers
FamilyFamilySalespersonSalesperson
1.21
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Psychological Determinants of Motivation
Level of effort expended
Level of effort expended
Job activity taskJob activity task
Level of performance on some performance dimension
Level of performance on some performance dimension
Increased attainment of rewards
Increased attainment of rewards
MotivationMotivation
Valence for Performance
Instrumentality multiplied by valence
Valence for Performance
Instrumentality multiplied by valence
Valence for Rewards
Perceived desire for receiving more reward
Valence for Rewards
Perceived desire for receiving more reward
Instrumentality
Perceived link between improved performance and increased reward
Instrumentality
Perceived link between improved performance and increased reward
Expectancy
Perceived link between increased effort and improved performance
Expectancy
Perceived link between increased effort and improved performance
1.22
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Frustration; disenchantmen
t
Sales Career Path
Promoted to management
Promoted to management
Exploratory stage; new recruits
Exploratory stage; new recruits
Establishment stage
Establishment stage
Maintenance stage
Maintenance stage
Disengagement stage
Disengagement stage
Drop-outs; terminations
Drop-outs; terminations
1.23
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Variable affecting performance Management actions
Aptitude
Personal characteristics
Skill levels
Role perceptions
Motivation
Organizational and environmental factors
Recruitment/selection policies
Recruitment/selection policies
Training and supervision
Training and supervision
Compensation/ reward systems
Sales force organization
Variables That Cause Differences in Performance
1.24
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10.24
Meg Kerr and Bill Burzynski, “Missing the Target: Sales Training in America,” Training and Development Journal, (July 1988), p. 68.
SOURCE:
(percent of all characteristics cited; multiple responses were possible)
Sales RecordSales Record
Committed to quality and customer service, aggressiveness, persistent, self-confident
48%
Sales, problem-solving, communication, time management 25%
Product, industry, market
Meets objectives
Completes paperwork, political acumen
13%
11%
4%
OtherOther
KnowledgeKnowledge
SkillsSkills
AttitudeAttitude
Characteristics of a Successful Salesperson
1.25
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10.25
25%
Characteristics of Success*
Program Content: New Hires
Program Content: 1-3 Years Seniority
13%
48%
56%
43%
1%
65%
35%
0%
*See Exhibit 1 for additional characteristics.
Meg Kerr and Bill Burzynski, “Missing the Target: Sales Training in America,” Training and Development Journal, (July 1988), p. 69.
SOURCE:
KnowledgeKnowledge
SkillsSkills
AttitudeAttitude
Program Content Versus Characteristics of Success
1.26
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Method % of firms offering
0 25 50 75 100
On-the-job 84.3Individual Instruction 69.8
In-house classes 60.8External seminars 71
Home assignments 17.7
Other 6.7
Methods Used in Sales Training
1.27
McGraw-Hill/Irwin
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Components and Objectives of Financial Compensation Plans
11.27
Sales ContestsSales Contests
Incentive Payments
Incentive Payments
CommissionsCommissions
BenefitsBenefits
SalarySalary
•Stimulate additional effort targeted at specific short-term objectives
•Direct effort toward strategic objectives•Provide additional rewards for top performers•Encourage sales success
•Motivate a high level of selling effort•Encourage sales success
•Satisfy salespeople’s security needs•Match competitive offers
•Motivate effort on non-selling activities•Adjust for differences in territory potential•Reward experience and competence
1.28
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Performance-Based
Compensation
Performance-Based
Compensation
Special
Compensation
Special
Compensation
Sales
Compensation
Sales
Compensation
Total Compensation
Advanced Sales Compensation Seminar, The Alexander Group, Inc., Scottsdale, AZ, 1988.
SOURCE: 11.28
Fixed
Compensation
Fixed
Compensation
Intrinsic RewardsIntrinsic Rewards
Focused EffortsFocused Efforts
Outstanding PayOutstanding Pay
At Risk payAt Risk pay
Retention/Nonsales Pay
Retention/Nonsales Pay
Security NeedsSecurity Needs
ContestsContests
Overtarget Incentive Pay
Overtarget Incentive Pay
Target Incentive Pay
Target Incentive Pay
RecognitionRecognition
BenefitsBenefits
SalarySalary
1.29
McGraw-Hill/Irwin
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Commissions, salary, and incentives constitute the essential building blocks of most financial compensation plans for sales forces.
Most firms provide benefit packages and then use one of these three sales force compensation methods.
• Straight salary
• Straight commission
• A combination of base salary plus incentive in the form of commissions, bonuses or both
Types of Compensation Plans
1.30
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Straight SalaryStraight Salary
Straight
Commission
Straight
Commission
Characteristics of Compensation Methods for Sales Personnel
Advanced Sales Compensation Seminar, The Alexander Group, Inc., Scottsdale, AZ, 1988.
SOURCE: 11.30
CombinationCombination
Frequency of Use
12%
5%
85%
Especially Useful
When compensating new salespersons; when firm moves into new sales territories that require develop-mental work; when salespersons need to perform many nonselling activities
When highly aggressive selling is required; when nonselling tasks are minimized; when company cannot closely control sales force activities
When sales territories have relatively similar sales potentials; when firm wishes to provide incentive but still control sales force activities
Advantages
Provides salesperson with maximum amount of security; gives sales manager large amount of control over salespersons; easy to administer; yields more predictable selling expenses
Provides maximum amount of incentive; by increasing commission rate, sales managers can encourage salespersons to sell certain items; selling expenses relate directly to sales resources
Provides certain level of financial security; provides some incentive; selling expenses fluctuate with sales revenue; sales manager has some control over sales-person’s nonselling activities
Disadvantages
Provides no incentive; necessitates closer supervision of salespersons’ activities; during sales declines, selling expenses remain at same level
Salespersons have little financial security; sales manager has minimum control over sales force; may cause salespeople to provide inadequate service to smaller accounts; selling costs less predictable
Selling expenses less predictable; may be difficult to administer
1.31
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•General sales representative•Specialty sales representatives•Technical support
•Sales representatives
Team PerformanceTeam Performance Individual PerformanceIndividual Performance
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Examples of Linked Team Incentive Plans• Linked plans are plans in which incentive payout for both components, including the
individual component, depends on achievement of team objectives, sales representatives may receive either a payout based on both individual and team achievement, or no bonus at all. Other members may receive only the team performance bonus.
• The common “team” bonus is the initial, and most lucrative, component for sales representatives
• Common components link team members to a shared destiny with a unifying objective.
Team Volume Bonus Team Volume Bonus
XX
Percent of Goal
>120%11010090
<90
Percent of Target Incentive
150%10075500
XXPercent of Goal
>140%12010080
<80
Percent of Target Incentive
75%5025100
Components
Team Member Eligibility
Payout Mechanics (Sales Reps)
1.32
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•Sales representatives•Order fulfillment•Collections•Technical support
•Sales representatives
Team PerformanceTeam Performance Individual PerformanceIndividual Performance
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Examples of Unlinked Team Incentive Plans• Unlinked plans are plans with additive components; sales representatives may earn either
bonus or both. Achievement of team objectives is not required to earn the individual bonus.
• The common “team” bonus is the initial, and most lucrative, component for sales representatives.
• Common components link team members to a shared destiny with a unifying objective.
Total Account Volume Bonus New Contract Bonus
++
Percent of Goal
>120%11010090
<90
Percent of Target Incentive
150%9060300
++Percent of Goal
>140%12010080
<80
Percent of Target Incentive
100%5040200
Components
Team Member Eligibility
Payout Mechanics (Sales Reps)
1.33
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Differences in Perspective Between Full Cost and Contribution Margin Approaches to Marketing Cost Analysis
12.33
Adapted from Patrick M. Dunne and Harry I. Wolk, “Marketing Cost Analysis: A Modularized Contribution Approach,” Journal of Marketing, 41 (July 1977), p. 84.
SOURCE:
Full Cost Approach
Less:
Equal:
Less:
Equal:
SalesCost of goods sold
Gross margin
Operating expenses (including the segment’s allocatedshare of company administration and general expense)
Net income
Contribution Margin Approach
Less:Less:
Equal:
Less:
Equal:
SalesVariable manufacturing costsOther variable costs directly traceable to the segment Contribution margin
Fixed costs directly traceable to productsFixed costs directly traceable to the market segment
Segment net income
1.34
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Activity-based costing (ABC) allocates costs to activities.
ABC identifies fixed cost components for supporting product production and sales and associates them with the products sold.
The underlying concept– activity drives costs. Thus, costs once assumed to be fixed in the short-run can be associated with operating units such as a sales office.
ABC Accounting
1.35
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12.35McGraw-Hill/Irwin
Selling-direct costs:
Selling-indirect costs:
Advertising:
Personal calls by salesperson and supervisors on accounts and prospects; Sales salaries, incentive compensation, travel, and other expenses
Selling time devoted to each product, as shown by special sales call reports or other special studies
Number of sales calls times average time per call, as shown by special sales call reports or other special studies
Direct
Equal charge for each salesperson
1.
2.Field supervision, field sales office expense, sales administration expenses, sales personnel training, sales management. Market research, new product development, sales statistics, tabulating services, sales accounting
In proportion to direct selling time, or time records by projects
In proportion to direct selling time, or time records by project
Media costs such as TV, radio, billboards, newspaper, magazine, etc. Advertising production costs; advertising department salaries
Direct; or analysis of space and time by media; other costs in proportion to media costs
Equal charge to each account; or number of ultimate consumers and prospects in each account’s trading area
Direct; or analysis of source records
3.
Territories To Product Groups To Account Size Classes To Sales
Bases of AllocationFunctional Cost Group
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1.36
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12.36McGraw-Hill/Irwin
Functional Cost Group
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Territories To Product Groups To Account Size Classes To Sales
Bases of Allocation
Sales promotion:
Transportation:
4.Consumer promotions such as coupons, patches, etc. Trade promotions such as price allowances, point-of-purchase displays, cooperative advertising, etc.
Direct; or analysis of source records
Direct; or analysis of source records
Direct; or analysis of source records
5.Railroad, truck, barge, etc., payments to carriers for delivery of finished goods from plants to warehouses and from warehouses to customers. Traffic department costs
Applicable rate times tonnages
Analysis of sampling of bills of lading
Applicable rates time tonnages
1.37
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Territories To Product Groups To Account Size Classes To Sales
Bases of Allocation
Storage and shipping:
Order processing:
Storage of finished goods shipping inventories in warehouses. Rent (or equivalent costs). Public warehouse charges, fire insurance and taxes on finished goods inventories, etc. Physical handling, assembling, and loading out of rail cars, trucks, barges for shipping finished products from warehouses and mills to customers. Labor, equipment, space and material costs
Number of order lines Number of order lines Number of order lines
6.
Checking and processing of orders from customers to mills for prices, weights and carload accumulation, shipping dates, coordination with production planning, transmittal to mills, etc. Pricing department. Preparation of customer invoices. Freight accounting. Credit and collection. Handling cash receipts. Provision for bad debts. Salary supplies, space and equipment costs (teletypes, flexowriters, etc.)
In proportion to direct selling time, or time records by projects
In proportion to direct selling time, or time records by project
Equal charge for each salesperson
7.
Functional Cost Group
1.38
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ROAM
Contribution as a percentage of sales
Asset Turnover
Net Contribution
Sales
Sales
Assets
Assets
Assets
Assets
Assets
X
Divided by...
Divided by...
+
+
+
Return on Assets Managed
1.39
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Personal, organizational, and environmental variables
Role perceptions
Aptitude
Skill Level
Motivational level
Behavior/ performance
Relevant selling activities
Type of sales job
Effectiveness
Organization’s goals and objectives
Sales Behavior, Performance and Effectiveness
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