Chapter 13

Determining Size of Sales Force (3 Methods)

1. Breakdown method 2. Workload method 3. Marginal economic method

6 Steps of the Workload Method

1. Classify all the firm's customers into categories. 2. Determine the frequency with which each type of account should be called upon and the necessary length of each call. 3. Calculate the workload necessary to cover the entire market. 4. Determine the time available for each salesperson. 5. Allocate the salesperson's time by task. 6. Calculate the number of salespeople needed.

3 Major Decisions Concerning Sales Territories

1. Deciding how many salespeople to have. 2. Designing the territories. 3. Allocating selling effort to the accounts.

Output Measures when Evaluating Sales Force

1. Orders - number and size obtained. 2. Accounts - number of active, new, lost, prospective, and overdue.

The 3 Types of Sales Organization Structures

1. Product/product structure 2. Market/market structure 3. Product/market structure

Input Measures when Evaluating Sales Force

1. Sales calls 2. Time efficiency (how many calls per day the salesperson makes) 3. Expenses 4. Time spent on non-selling activities

Steps for Designing Sales Territories

1. Select the control unit. 2. Estimate the market potential in each basic geographic unit. 3. Form tentative territories. 4. Calculate the workload for each of the tentative territories. 5. Adjust the tentative territories. 6. Assign salespeople to territories. Computer analysis is common today.

Steps in the Direct Marketing Process

1. Set an objective 2. Determine the target market 3. Choose the medium/media 4. Obtain a list 5. Analyze the list 6. Develop the offer 7. Test the offer 8. Analyze the results

Important Aspects of Direct Mail

1. The copy - longer copy is better because it gives you the opportunity to inform and persuade. 2. Layout/design - typeface, colors, graphic elements, personalized addressing, and other visual elements need to be carefully considered.

3 Keys to Successful Telemarketing

1. The list 2. The offer 3. Integrity

Sales Territory

A group of present and potential customers assigned to a salesperson, often designed on a geographic basis.

Customers

Changes in tastes, buying behavior, and their own competitive conditions can have an impact.

Industry Environment

Changes in technology, social changes, economic shifts, regulation, and politics can have an impact.

Direct Mail

Cheaper than telemarketing, and less intrusive.

Bonuses

Direct effort toward strategic objectives. Provide additional rewards for top performers. Encourage sales success.

Commission

Form of compensation based directly on a sale or some other activity.

Salary

Form of compensation in which a basic amount of money is paid to a worker on a regular basis.

Creative Selling

Involves developing new customers and maintaining old ones by investing a considerable amount of time in understanding buyers' needs and wants.

Combination Plans

Most compensation schemes combine salary and additional financial incentives. Provide some incentive and a base, secure level of income while still rewarding the best performers.

Commission Objectives

Motivate a high level of selling effort. Encourage sales success.

Salary Objectives

Motivate effort on non-selling activities. Adjust for differences in territory personnel. Reward experience and competence.

Internal/Individual Factors When Determining Sales Force Performance

Motivation Aptitude Skill level Job satisfaction Role perceptions Personal factors

Aptitude/Skill Level

Natural ability to sell; empathy and persuasiveness. Acquired skill.

Profit Based Quotas

Normally stated in terms of profit margins (gross or net). Steer salespeople toward the products and services that are the most profitable to the company rather than those that are higher priced or easiest to sell. More difficult for the salesperson to know where they stand in relation to the quota than when sales volume based quotas are used.

Qualitative Measures when Evaluating Sales Force

Sales - how well the person is doing with different kinds of accounts and whole product line. Job knowledge - understanding their role in the company, company policies & products. Management of the sales territory - time management, completes call reports, etc. Customer and company relations - good relationships with customers & internal personnel. Personal characteristics.

Sales Contests

Sales force competitions to achieve a short-term goal.

Measurable Response

The estimation of the effects of a marketing program such as direct marketing.

Market/Market Sales Organization Structure

The marketing organization is aligned by market segment, as is the sales force. Sales force sells the entire product line to customers in the segment. Example is MCI Communications (now a part of Verizon) which sells all telecommunications services to the customers.

Virtual Selling

The reengineering of sales in the 1990s, especially the impact of sales force automation and the salesperson's educated use of technological tools in working with prospective customers in a highly efficient way.

Response Selling

The salesperson is basically an order taker; the customer initiates the sale and gives the order to the salesperson.

Competitors

Tracking this is important for successful selling; involves more than prices, also involves changes in strategies, financial conditions, product line, and other factors.

Multilevel Marketing

Basically direct sales, and use network marketing distribution systems. Examples include Mary Kay, Tupperware, and Avon. People recruit others, who recruit others, etc. Part of the commission on each sale is transmitted through the system so that the person at the top of the pyramid can receive substantial income by managing the network.

Key Account Managers

Become very familiar with customers' operations and problems. Are in a good position to satisfy customers' needs by helping them develop a strategy for the product in question.

External Factors When Determining Sales Force Performance

Customers Competitors Industry environment

Personal Attributes

Gender, attractiveness, education level, etc.

Straight Commission

Gives incentives to sell because there is a direct relationship between income and performance; also rewards the best performers. Easy to manage because payments are tied directly to visible performance. Gives management little control over what the sales force does. Can be difficult to implement when a national accounts program overlaps with a local sales force; are complicated in multichannel systems.

Sales Volume Based Quotas

Most common. Based on total sales volume or on individual product or product line sales, in dollars or units sold. Easy to understand, but may give extra incentives to sell higher priced items, which may not necessarily produce the most profits.

Job Satisfaction

Higher levels have been found to be positively correlated with salesperson performance. Related to intrinsic and extrinsic motivation.

Telemarketing

Highest response rate of any other direct marketing method, but very expensive.

Motivation

How much effort is devoted to the job and how he or she responds to different kinds of incentives.

Trade Selling

Includes order taking, but also entails responsibilities such as making sure the stock is adequately displayed on shelves, setting up displays, providing demonstrations, and other activities sometimes called merchandising.

Direct E-Mail

Inexpensive and flexible. Downside is filtering software.

Direct Marketing

Interactive marketing system that uses one or more advertising media to affect a measurable response and/or transaction at any location.

Marginal Economic Method

Method used to determine the size of the sales force based on the microeconomic concept that a resource should be allocated up to the point at which the marginal revenue obtained from an additional unit of the resource equals the marginal cost.

Workload Method

Method used to determine the size of the sales force that is based on the ability to calculate the total amount of work necessary to serve the entire market. 6 steps.

Breakdown Method

Method used to determine the size of the sales force that is based on the forecasted sales level divided by an assumed average sales per salesperson. n = s/p

Incentive Payments

Monetary awards for special performance.

Combination Quotas

More and more companies are basing their quotas on combinations of metrics. Some activities include: # of customers called on # of demonstrations made # of new accounts established

Why Virtual Selling Has Occurred

Personal selling job has become more complex and it is getting more difficult to make a sale. Customers are more knowledgable but also need guidance and advice. Corporations are becoming more flat, fewer middle managers providing product information. Intensifying global competition. Demand for productivity improvements from all parts of the organization.

Activities Performed By Salespeople

Planning the sales call. Traveling to the customer site and making the call. Filling out the call report. Post-call analysis. Communicating with the customer.

Jobs of the Salesperson

Rewarded on ability to sell or to close orders from customers. Key is maintaining and enhancing customer satisfaction with the selling firm and are often rewarded at least partially on that basis.

Components of Potential Compensation

Salary Commissions Bonuses Sales contests Benefits

National Account Personnel

Responsible for developing new accounts and maintaining existing ones. Important for long-term relationship building.

Technical Selling

Salesperson also acts as a technical consultant to the purchaser. In order to be successful, the salesperson must have strong technical training.

Missionary Selling

Salesperson attempts to influence the decision maker rather than the user or purchasing agent. Helps the buyer promote the product to internal or external customers.

Role Perception

Salesperson's understanding of superior's expectations and the kind of selling that is necessary to be successful.

Benefits

Satisfy salespeople's security needs. Match competitive offers.

Product/Product Sales Organization Structure

Sells a product or product line to all markets and often coexists with a product-focused organization. Disadvantage is that a customer may be called on by several sales people from the same company. Example is Hewlett-Packard Medical Products Group

Product/Market Sales Organization Structure

The company has a product management structure but the sales force sells all products marketed by a division to a single market.

Problems with the Marginal Economic Method

Sounds appealing, but difficult to implement compared to the other two methods because it is difficult to know what the "marginal" salesperson can generate in sales. The marginal sales volume will decrease as additional salespeople are added because the remaining customers are more difficult than those who are already buying your product or service.

Sales Quotas

Specific sales goals that salespeople are required to meet.

Sales Contests Objectives

Stimulate additional effort targeted at specific short-term objectives.

Direct Marketing Methods

Telemarketing Direct mail Direct e-mail

Straight Salary

Useful when management is more interested in long-term goals rather than simply selling as much volume as possible. Makes sense when products and services have long selling cycles (Boeing, construction projects). Challenge is to tie salary increases to performance.