Sales Management Final Exam

Brielle sells beach gear to surf shops and other businesses located near beach resorts and communities. She is talking with the manager of a successful surf shop, Life's a Beach, and the manager has been sending buying signals. Brielle is ready to close the sale. In the past, she's found that the balance-sheet approach has been useful. What might she say to the manager of Life's a Beach if she decides to use that approach to gain commitment?

"I realize that our products take up more shelf space, and that you'll be able to stock fewer products from other suppliers. But our products fly off the shelves quickly, which means greater inventory turnover and more profit for you."

Aria sells high-fashion handbags and purses at an exclusive boutique. Most of the handbags are priced between $3,000 and $5,000, but some of them are priced as high as $12,000. A star of a reality TV show wants to purchase an $8,000 Louis Vuitton bag, but she complains that the price is too high. If Aria decides to use the compensation technique, how might she respond to this price objection?

"It's true, this bag has a premium price. But the ingredients are so high quality that it'll last you forever. Plus, these bags hold their value, so if you ever decided to sell it, you'd get a lot of your money back. Many women in this country would love to own a handbag that once belonged to you!"

Justin is a sales rep for Cookware, Inc., which sells cast-iron cookware to professional and amateur chefs. Each month he receives the following compensation: (1) a foundational salary of $2,500; (2) a 10% commission on his sales for that month; (3) a bonus of $1,000 if his sales exceed $100,000. His sales this month total $82,000. On the 15th of the month, he receives a check for $1,500 as an advance against his monthly commission. What is the amount of Justin's recoverable draw?

$1,500

LaTonya is a sales rep for Business Equipment, Inc., which sells business equipment such as copy machines, fax machines, and scanners. Each month she receives the following compensation: (1) a foundational salary of $2,000; (2) a 5% commission on her sales for that month; (3) a bonus of $2,000 if her team meets its sales quota for the month. Her sales for the month of January total $120,000. On the 15th of the month, she receives a check for $2,500 as an advance against her monthly commission. Assuming that LaTonya's team meets its sales quota, what is LaTonya's total compensation for January?

$10,000

Christianna is the chief accountant at Masdrex Pharmaceuticals, which developed and manufactures ImmunoA, an expensive but effective treatment for cancer. ImmunoA is Masdrex's only product. Each month Masdrex incurs certain costs that do not change, including $12,000,000 for salaries, $800,000 for maintenance of its laboratories, and $116,000 for ongoing office expenses such as insurance and utilities. It costs Masdrex $2 to manufacture each ImmunoA pill, and in October, Masdrex manufactured 400,000 pills. The company's manager has set 100% markup for each pill. In October, Masdrex incurred ________ in fixed costs and ________ in variable costs. Customers pay ________ for each ImmunoA pill.

$12,916,000; $800,000; $4

Theodore works for Floribunda, a biotechnology firm that creates new, hybridized forms of hardy exotic plants that can live in many climate conditions. The company's scientists have developed a new hybrid of the Bird of Paradise plant, a colorful flower that until recently could thrive only in very hot climates. The firm's trademarked Phoenix of Paradise® plant looks just like a Bird of Paradise, but it will grow and thrive all over the United States. However, it is quite expensive; consumers pay $300 for each plant. In April, just as people are starting to plant their summer gardens, Theodore sells 1,000 Phoenix of Paradise plants. His sales manager notes that Floribunda's cost of producing those plants was $100 per plant. What is the gross margin on Theodore's April sales?

$200,000

Maya is a salesperson for Chronex, Inc., which manufactures luxury men's watches. The Chronex Corporation tracks each salesperson's monthly contribution to the company's profit. In December—a very good month due to the holidays—Maya sold 86 watches at a price of $6,500 each. Chronex identifies the costs involved with manufacturing and selling each watch at $3,800. What is the total profit on Maya's December sales?

$232,200

If it cost a company $20 to produce a product, and the desired % return on the item is 25%, what is the markup price?

$25

Freddy works for a local electronics retailer. He receives a base salary of $1,000 per month plus a commission based on sales. His monthly sales quota is $10,000. If he hits that quota, he receives 100% of his specified sales commission of $2,500. If he goes above or below that quota, he receives a proportional increase or decrease in his commission. In March, Freddy sells $13,000 worth of merchandise. What is his total compensation for March?

$4,250

According to the authors, which is the better investment? (Both are good, both are necessary, but which one is slightly more important? -Training frontline salespeople -Training sales managers

-Training sales managers

In a straight-line commission plan, a salesperson who sells 100 percent of his or her quota will be paid what percent commission?

100%

Costs that vary depending on the number of units produced or sold are referred to as fixed costs.

False

If a company were seeking to drive overall revenues, it would be best served utilizing a gross margin commission plan.

False

If a company were struggling with salesperson turnover, it would be better off implementing a commission-based compensation plan.

False

If the firm is implementing a markup pricing strategy, and the cost of the item is $36 and the desired margin is 30%, the salesperson must sell the item at $50.40 in order to generate the desired markup.

False

Lead scoring provides firms a means through which they can numerically rate their best current customers.

False

One of the main criticisms of customer relationship management (CRM) systems is that they are of little value when it comes to helping firms understand and develop their pricing strategies.

False

Revenue is calculated as the number of units sold multiplied by the profit generated per unit.

False

Under no circumstances should a salesperson ever bring up on objection on his or her own (i.e., the salesperson should always wait for the customer to voice the objection).

False

When two or more companies collude to set a product's price, they are engaging in predatory pricing.

False

When utilizing the boomerang objection handling technique, the salesperson is candid in admitting that the objection is valid but also discusses other benefits that offset the objection.

False

With the compensation technique, the salesperson transitions the conversation away from price alone to more fully describe the value being offered through the solution.

False

Sales Objectives

Number of new customers; Customer retention %; Share of Wallet

Sales Activities

Percentage of account plans completed; Number of sales calls made per sale representative; Dollars spent on training sales representatives

________ is the amount of something—money, time, or effort—that a buyer exchanges with a seller to obtain a product.

Price

________ is calculated as revenue minus total costs.

Profit

________ is the study of increasing profit through sales.

Profitology

________ is calculated as the number of units sold multiplied by the price charged to customers.

Revenue

Business Results

Revenue Growth; % of Market Share; Gross Profit; Customer Satisfaction

Which of the above metric categories can actually be controlled?

Sales Activities

. As described in the book, what is the "Curse of Intimacy"?

Salespeople often make the mistake of believing that they have become close friends with long-time customers and tend to believe that the level of trust, information-sharing, and loyalty is higher than it actually

________ pricing involves proactively creating the conditions under which better and more-profitable pricing outcomes are the result.

Strategic

As it pertains to sales management, what is "Share of Wallet"?

The percentage of a particular customer's total product expenditures that they spend with you. For example, if you are selling a particular kind of X-ray machine and a hospital buys $10 million from you out of a total annual purchase of $40 million, your share of wallet is 25%.

define the term "sales pipeline."

The pipeline represents the volume of leads and prospects that eventually are converted into actual sale

Which of the following occurs when organizations cap their sales compensation plans?

There are fewer high-performing salespeople.

From the perspective of the seller, opportunity costs refer to what a seller gives up in time and money in pursuing a particular sale.

True

Gross margin is the net sales revenue minus the cost of goods sold.

True

Managers do not want salespeople spending time on data entry nor do they trust the information that salespeople provide in their reports.

True

Predictive analytics refers to the use of data, statistical algorithms, and machine-learning techniques to identify the likelihood of future outcomes based on historical data.

True

Profit is calculated as revenue minus total costs.

True

The most common sales compensation plan is base salary plus commission.

True

The most fundamental thing a salesperson does it make calls to win opportunities to gain customers within their territories

True

according to the authors, the causal link between Customer Satisfaction and actual purchasing behavior is highly suspect.

True

Markup price =

Unit cost of product + (Desired % return × Unit cost)

Allegra, a sales manager, is looking at five résumés, trying to decide whom she will hire as the newest salesperson on her staff. The new salesperson will manage several complicated and demanding accounts. For this reason, Allegra wants to hire someone who is dedicated to being a consultative problem solver. Which of the following five candidates should she hire?

Zion, who states, "The most important thing I can do as a salesperson is provide and implement solutions to my customer's problems."

Upselling

a strategy in which the salesperson provides customers with the opportunity to purchase related products or services of greater value in place of, or along with, the consumer's initial product or service selection.

When attempting to gain commitment, Mary Elizabeth presents her buyer two legitimate options from which she can choose. Which commitment-gaining technique is Mary Elizabeth utilizing?

alternative choice

When attempting to gain commitment, Teresa lists out all of the positives and negatives associated with the buyer moving forward with the proposed solution. Which commitment-gaining technique is Teresa utilizing?

balance sheet

In terms of sales compensation, a ________ is the fixed amount of money paid to a salesperson by the organization in return for work performed.

base salary

With a ________ compensation structure, salespeople get the security of a steady income along with the economic incentive to achieve their individual sales goals.

base salary plus commission

What is the most direct way through which salespeople can affect gross margin?

by holding price (as opposed to giving price discounts) when negotiating with customers

Customer input that results from the customer playing an active role in the problem-solving process is known as customer

co-creation

In terms of sales compensation, a ________ is a per-unit payout on sales beyond quota.

commission

CRM stands for

customer relationship management

When attempting to gain commitment, Samuel simply asks his buyer if he is comfortable moving forward with the proposed solution. Which commitment-gaining technique is Samuel utilizing?

direct request

In terms of gaining commitment, transitionary signals are cues sent by the customer indicating a shift in thinking from if we should do this to how we should do this.

false

In terms of the long-term job outlook, sales positions are on the decline.

false

Salary-only compensation plans are very common in sales.

false

The base salaries a company pays its administrative employees are an example of a(n) ________ cost.

fixed

FTE

full time equivalent

Greg serves as a sales manager and is attempting to get his salespeople to focus on profitability sales. In order to do this, which type of commission structure should Greg implement?

gross margin commission plan

When questioning the customer, Suzanne asks, "How are these issues affecting your business?" Which type of SPIN selling question is this?

implication question

is it better to coach salespeople individually or as a group

individually

Which of the following is not one of the question types contained in the SPIN selling methodology?

issue questions

Nasir sells software that permits fast, simple reordering of commonly used products. During a long conversation with a prospect, Nasir asks, "Can you speculate on the benefits of a direct-reordering system that allows your customers to order directly from an app rather than having to wait on hold on the phone, or to fill out and mail in complicated paperwork?" Nasir has asked a(n) ________ question.

need-payoff

When questioning the customer, Suzanne asks, "How would your business improve if we were able to help you eliminate these problems?" Which type of SPIN selling question is this?

need-payoff question

In SPIN selling, which of the following questions is designed to help buyers think of possibilities as opposed to problems?

need-payoff questions

"The process we have been using works fine—we do not need to change it" is an example of which type objection?

no-need

Mercury Tires is a China-based manufacturer of automobile and truck tires. Due to lower labor and materials costs in China, Mercury is able to produce an automobile tire for $22, compared to a manufacturing cost in the United States of $38. Mercury decides to use its cost advantage to take over the U.S. market and drive its competitors out of business. It sells its tires in the United States for $52 each, compared to a minimum of $75 charged by each of the U.S. tire manufacturers. Not surprisingly, U.S. consumers flock to Mercury Tires and stop buying U.S.-produced tires, with the result that several U.S. manufacturers go bankrupt. With the competition eliminated, Mercury raises the price of a tire to $88. In which type of unethical pricing has Mercury Tires engaged?

predatory pricing

The Robinson-Patman Act was passed to prevent

price discrimination.

When questioning the customer, Matt asks: "What are some typical customer complaints you hear?" Which type of SPIN selling question is this?

problem question

If a customer states that her current product can address the problem just as well as the one the salesperson is suggesting, what type of objection is the customer voicing?

product

In terms of sales compensation, a ________ is a set amount of money paid to the sales representative (against future commissions) by the company at regular intervals.

recoverable draw

The value of what a seller gives up (in time and money) in pursuing a particular sale is referred to as

seller's opportunity costs.

cross selling

selling additional products or services to an existing customer

When questioning the customer, Devin asks: "How do your customers typically engage with you?" Which type of SPIN selling question is this?

situational question

If a customer states that he or she has concerns over the fact that the selling company manufactures many of its products overseas, what type of objection is the customer voicing?

source

Peng sells value-priced clothing to discount retail stores. The prices are low, but the clothes don't last much longer than a year or two. While trying to gain commitment from the buyer of Fast Fashion, a chain that sells fashionable clothing for teenagers, Peng is surprised to hear the buyer say, "I really am concerned about buying from you. Your clothes are all made in the Philippines, where people work for very little money in sweatshops with dangerous conditions." What type of objection has the buyer raised?

source objection

When attempting to gain commitment, Rachelle tells the story of another customer who agreed to something similar and has benefited from the decision. Which commitment-gaining technique is Rachelle utilizing?

success story

If a customer states that he has too many other problems to address to focus on the one being discussed by the salesperson, what type of objection is the customer voicing?

time

A sales quota represents the minimum desired sales level for a salesperson or sales team for a specified period.

true

In a sales organization, the vice president of sales should contribute to the overall growth and strategy of the sales organization and the company as a whole.

true

In sales, the compensation mix captures how much of overall compensation is fixed versus how much is incentive-based.

true

Trial close questions refer to questions that are designed to assess whether the customer has comments or concerns about what has previously been discussed.

true

the first activity in territory management is to prioritize your customers in terms of revenue and profit potential

true

Sales commissions are an example of a(n) ________ cost.

variable