MKT 363: Exam #2

Decomposition

- Advantage: more accurate - Disadvantage: takes more time and effort - Breakdown previous sales data into logical groups (market or product) anything that can influence sales - list factors affecting forecast

survey of buyer intentions

- Ask customers what they think about the year - Positive or pessimistic? - Asking buyers what they plan to buy next year? --Ask thoughts about future years during sales call --How's business? How are things going for you? --Do you think this is short term or long term? - Not very accurate, no accountability to what they say, just their thoughts of what may happen

Moving averages

- Average the pervious yrs X number of years to determine the current year's forecast - Positive: Not complicated or time intensive - Negative: based on past years, not based on evidence for the future, can be inaccurate- doesn't take into account for anomalies

Territory design

- Can be based on geography, industry, specific accounts, etc. - Proper coverage has a significant impact on profitability, market share, motivation, and compensation - too large: miss ops., not meeting w/ customers enough - too small: wasted bandwidth for salesperson, meeting to often 1. Define planning units, divide total market area into planning units (ex. States, counties, etc.) 2. Analyze the opportunity for each planning unit (typically market potential) 3. Form initial territories - Set number of territories based on previous steps in Deployment process - Consider territory size, ability to efficiently cover, similarities between units, etc. - Create multiple options, pick the best one - Question: How would you estimate opportunity? 4. Test design - Estimate workload per territory. Is it roughly even? --How many customers --How many times do you need to meet with the customer? --How many sales people do you need? 5. Other considerations -Reporting ease (what if you split states?) - Account distribution (are there major accounts with offices in multiple territories?) 6. Finalize territory design - Adjust to achieve roughly equal workload for each salesperson 7. Assign salespeople to territories - Question: How would you estimate workload? --If workload is even, the sales amount doesn't matter

Should you hire?

- Do you need to backfill or can you absorb the loss (if replacing someone)? - Can you achieve a positive ROI on a sustained basis if you add someone (if increasing headcount)? - Have you considered alternatives? --Partners --Other channels (VARs, distributors, etc.) --Contract employees or consultants --Delay -Are there structural changes you want to make? Hiring is a great catalyst!

internal sources

- Employees in other roles in the company - great for talent development and motivation - Employee referral program

Why are sales forecasts important? Why bother if they're always wrong?

- Get it close, of value to the business, have a goal of what the company can sell - Biggest reason sales managers are fired: for missing sales forecasts - It influences company investment plans and budget - It is critical for determining compensation plans - It impacts salesforce size and deployment - It is an early warning system for potential issues (good or bad- too many/too few salespeople)

salesforce composite method

- Higher accuracy, puts accountability on the salesperson --Going on account-by-account basis -Salesperson should leverage buyer/expert opinion -Forecast from all the employees - Will generally get a more conservative number because sales people will want to meet their numbers - How to fix this?: comes down to manager skill- get to know your employees and their tendencies --Have discussions and make stretch goals for more conservative employees --Or rework and discuss if problems come up and lower goals for more optimistic employees

Sanity check

- How does this compare to the current size? If larger, is management willing to make the investment? Does the investment align with corporate strategic goals? - How confident are you in your assumptions? Are they overly conservative or aggressive? - Does the strategy support the expected revenue goals? - Does the strategy support the revenue goals? - opportunities x win rate x av. sale

Descriptions

- Includes job specific data --Job title --Supervisor --Responsibilities & tasks -Includes company data --Products, industry and customers --Why they should work for you --Benefits, culture, etc. - May want to create an application form rather than instructing candidates to send cover letter/resume --Creates barrier: Make the candidate sit down and apply, put in the time instead of sending a CL and Resume --Helps weed out candidates that aren't qualified or don't want to put in the effort

Organizational considerations

- Level of specialization required - Desired span of control; - Level of empowerment (centralization)

external sources

- Print ads (including trade publications) - Online: Company website, Social network sites, Job sites (Monster, Craig's List) - Employment agencies (recruiters) - Colleges & Universities - Career fairs - Professional organizations

Reconcile (forecasting)

- Should do both tops-down and bottoms-up - The last step is to compare the bottoms-up and tops-down forecasts. - Any differences need to be reconciled --Is one too aggressive? --Is one too conservative? --Were the assumptions off?

Qualifications

- Skills -- Sales experience, negotiating skills, etc. - Knowledge --Education, industry knowledge, professional certifications, etc. - Personal traits --Self-motivated, organized, etc. -Willingness/ability to perform the requirements of the job --Travel, relocate, lift heavy equipment, work in the rain and mud, etc.

Specialization

- Take into account strengths and weaknesses - by geography: non specialized approach - By role: telesales, inside/outside, etc. - AD: more efficient, customers satisfied, do better, higher quality discussions - DIS: harder for new salespeople to specialized, won't understand other products sold, need large organization to specialize in each product -Rule: smaller companies are less specialized, multiple products covered by the same person

Span of Control

- The number of individual employees reporting to a manager - Direct reports - Could be dictated by the organization

Analysis

- Understanding the tasks and responsibilities of the job - What will the new person do in the job? - Examples: --Just open accounts or maintain and service? --Conduct customer training? --Collections? --Phone prospecting and field visits or just field visits?

Multiple types of forecasts

- all assume a specific geography and specific time period 1. Market potential 2. Market forecast 3. Sales potential 4. Sales forecast

Salesforce Deployment

- allocation of selling effort: how many accounts x calls per account = total calls to cover accounts - salesforce size: calls required / sales call per person = salespeople needed - territory design: territories needed to provide opportunity for success

Tops-down

- moving averages - decomposition

Determine allocation strategy

- single factor model - portfolio model

Factors to consider before beginning organizational design

- specialization - centralization - span of control

Bottoms-up

- survey of buyer intentions (bad) - jury of executive opinion (bad) - salesforce composite method (good)

Sales forecasting methods

- tops-down: macro factors - bottoms-up: micro factors, customer by customer basis

interviewing

-Manage time - don't let the candidate manage it for you -Ask specific questions, not vague or hypothetical -Ask for examples and probe for details Listen carefully and ask clarifying questions -Good questions focus on the candidate sharing results achieved, telling how they did something in the past -Can use creative questions to see how they handle stress and how they approach problems. Ex. Dice question -Understand their motivation for leaving and how strong their desire is to join you (and what drives that desire) -Running away from a role or genuinely excited about the job -Ask questions to see how much research they did on you and your company before the interview -Always know a little bit about the company -What you do, competitors, products, target market, differentiators -Give the candidate an exercise to do Ex. "Talk me through the steps you would go through to plan a sales trip." -Put the candidate in a situation you face every day Ex. "Our competitors publish inaccurate data on their spec sheets making them look better than us. How can you effectively sell against them?"

Strategy

-Timeline -Method & budget for advertising -Budget for candidate --Salary, commission target (determine market/company rates) --Signing bonus and/or stock options --Relocation or other allowances -Who will be involved at what stages (resume reviews, phone screens, interviews, etc.) -Pre-interview candidate exercises --Give a series of questions that will be asked during the interview ---Can show accountability and how serious they are about the job ---Can be more confident and prepared to show themselves as a candidate ---Can't put as much time and effort into their responses if they don't know what will be asked -Approval to hire

Single factor model

1. Classify all accounts or account groups based on a single factor (ex. Market potential, geographic proximity, etc.) 2. Prioritize accounts 3. Allocate sales efforts according to priority

building commission plans

1. Determine salary/commission split 2. Determine achievement thresholds 3. Determine accelerator plans 4. Manipulate to support business strategy

Organizational Structures

1. Geographic 2. Product 3. Market 4. Functional 5. Strategic Account

Portfolio model

1. Rank accounts or account groups based on Account Opportunity and Competitive Position 2. Determine selling effort strategies for each quadrant 3. Allocate selling effort based on strategy

Steps to Determine structure, size and selling deployment strategy

1. gather data 2. organizational considerations 3. determine desired org structure 4. determine allocation strategy 5. run calculations 6. sanity check 7. iterate and optimize 8. territory design

Hiring process

1. planning & preparation - should you hire? - analysis - qualifications - descriptions - strategy 2. recruiting - internal sources - external sources 3. selection - screening resumes - phone screens - interviews - post-interview activity - decision and offer

Phone screens

10-15 minute phone call to qualify a finalist Call/email ahead to schedule time During call Outline process (this is a short call to determine who we want to bring in for interviews) Ask questions to gauge fit in key skill/experience areas Briefly explain the role Ask deal-breaker questions (willing to travel/relocate, salary expectations) Weed candidates out if they have too high of an expectation If they expect lower, still offer the average pay in the industry- fair pay for the job Schedule interview (if you want to move forward) or let them know you'll get back to them by a specific date with your decision and next steps

straight commission

100% tied to your performance Pros: Income linked to results, strong incentive to produce, lower costs if sales are low Cons: Limited company loyalty (loyal to the paycheck), limited control of non-selling activity (taking time to meet with a customer loses them money) Good for: Insurance, door to door sales, independent reps (ex. Real estate, doterra, avon), manufacturer reps Good when: The salesforce is large and doesn't really work directly for you (you aren't managing them on a daily basis).

What motivates your team?

Although there are many commonalities, motivators are unique by individual Basically stereotyping on certain factors, like age, and testing if the motivators will work for a specific employee Motivators can change intensity over time. Typical examples: - 20's: Meaningful work, professional growth, ability to succeed, frequent feedback - 20's - 30's: Freedom, time with family/friends (balance), money - 40's: Money, title, seniority, advancement - 50's: Title, respect, schedule flexibility, infrequent feedback - 60+: Personal satisfaction - doing something you love or doing good Typical motivators - Money, title, promotion, recognition What else??? - Time off, co-workers, schedule flexibility, meaningful work, benefits, meaningful gestures, other classes/training

Manipulate to support business strategy

Are there particular objectives you need to incent? One option - use quota credit multipliers Example: Sales of services get double counted. A $100K sale counts as $200K credit toward quota Why? Could be to incent people to sell a new product Helps offset revenue and profit differences Push harder things to sell because the profit is greater to the company even if the commission isn't. Will incentivize them to sell the lower commission product with the multiplier because the quota will be greater

Legal Considerations

As a hiring manager or interviewer you must be aware of potential legal issues Questions should be job-related, not personal (hobbies, family, etc.) Avoid potential trouble-topics Age, national origin, height/weight, marital status, age of children, occupation of spouse, military service, sexual orientation, religion, race

Commission Plan Factors

Base Rate Splits Payout event

Sales potential

Best possible level of company sales

Market potential

Best possible level of industry sales

Iterate and optimize

Could you achieve the same results at a lower cost with different assumptions? -Can you manage with a higher span of control? 1 less manager = 1 more salesperson -Can you improve your sales efficiency? Can you improve your sales efficiency? - take revenue / size of sales org = $ per salesperson per yr What if you add Inside Sales? - reach per day x days/wk x wks/yr = # of calls - desired calls / # of calls inside can do = # of inside reps notes New Design Sales Director -Field Sales (6) -Inside manager --Inside sales (4) --Inside ops (2)

finally (offer)

Counter their proposal Accept or decline and move on Tell them you'll have to get back to them

Screening resumes

Determine key characteristics ahead of time - Ex: Career progress, frequency of job changes, critical skills/experience Goal is to reduce applicant pool to top 5-10 candidates Use tools to help you efficiently sort through applications - Sample Screening tool

Determine achievement thresholds

Do you want a linear or non-linear model Linear example: For each % of quota reached, you get that % of your commission Non-linear: 80-90% = 10% 90-95% = 25% 95-99% = 50% 100% = 100%

other interview considerations

Do you want to meet with the spouse/significant other? Maybe if the job has long hours, lots of outings Can alleviate stress on the spouse if they are unsure, gives them an opportunity to ask questions and create a relationship with them Could happen with higher-level sales or field sales Do you want to conduct interviews over a meal? Allows them to be more relaxed Do you want to administer a personality profile or any other assessment? Do you want the candidate to do an exercise prior to the interview?

pre-negotiation

Do your research, know what competitive ranges are Work with your manager and HR to agree on boundaries Plan the conversation Identify your backup plan if the candidate declines

Sales forecast

Expected level of company sales given a specific selling strategy If you have no historic data, forecasting is especially difficult. In those cases, you have to make assumptions and estimate a forecast based on those assumptions

Market forecast

Expected level of industry sales

Decision and offer

Extending an Offer Pre-negotiation Negotiation Finally Think Creatively! Sell your company when you can't pay the same in the industry Be creative- signing bonus, eligible for raises at the end of the year Make intangibles off-set the salary

Personal growth opportunities

Facilitating activities of personal rather than professional interest

Determine desired org structure

Functional, product, market, strategic account, geographic, hybrid

Gather data

Gather relevant business data - What and how many markets do you serve? - How large is each market? - How many products or product lines do you have? - Are your products simple or complex? - How important is after-sale engagement? Gather relevant sales data - How many calls can a salesperson make per year? - What's your average sales price? - What's your opportunity win rate?

factors affecting forecast (decomposition)

General factors - Then look at each individual item under influences and see how they will affect sales - General economic condition - Political stability - Market growth rate Company factors -Increased/decreased coverage - Market share - New products Competitive factors - New competitive products - Competitor expansion

extending an offer

Get signed offer letter ready to send Discuss negotiating strategy/tolerances with your supervisor Salary, commission, bonus, time off, etc. Call the candidate and convince them to join! Give candidate some time to consider the offer - typically 1-3 days Once the offer has been accepted, notify other candidates

negotiation

Go through the full offer If significantly lower than what you and the candidate discussed early on: Explain how you determine salaries Offer reasons why you think this is fair and he/she should see it as a favorable offer Ask the candidate what their initial thoughts are (listen to tone, not just words) If candidate counters Ask what has changed since you previously discussed salary expectations

Why is good hiring important?

Good selection - Helps you, your team, and your company achieve goals - When your team performs well, you look good Bad selection - $75-200K lost investment - Lost time (opportunity cost, your time dealing with the situation) - Morale and supervisory issues - Customer and reputation damage Hiring is your responsibility - not HR's and not your supervisor's

Individual vs. group interviewers

Group: Multiple interviewees- can't really be yourself, try to position yourself as better than the other candidates and come up with answers based off of theirs, not really answering as yourself

What is the consequence of forecasting too high or too low?

High: company doesn't achieve revenue goals, leads to overspending and potential layoffs Low: company over-pays sales people (lowering profit), under invests in growth (allows competitors to pass them)

Interviews

How many candidates will you bring in? Interview by phone/video or in person? Composition of interview team (peers, internal customers/partners, next level manager, etc.) Including manager: is a group effort, everyone contributes Agreeing on candidate: Good if it works out, if its a bad choice they can't come back and say I told you so Bad if you disagree and think a different candidate is best, if you chose a different candidate and it doesn't work, they can say I told you so NOT all hires work out

Run calculations

How many sales calls this year? - # accts. x calls per yr - interested accts. x additional visits. - add total calls + interested calls tp get calls this yr How many people does that require? - visits per day x week x wks per yr = calls per salesperson/yr How many people in the sales department? - total calls/calls per salesperson per yr = ppl required - notes Org. Charts Sales director -Field manager (3) --Field sales (8) (8) (8) -Sales ops (3) -Field sales (4) OR Sales Director -Field manager (3) --Field sales (10) (9) (9) -Sales Ops (3)

Determine salary/commission split

Increase or decrease variable components of total compensation (ex. 80/20 vs. 60/40) More pressure to earn commission, there is more pressure put on the customer to buy by the salesperson Use a higher variable portion when you want to put higher emphasis on achievement and when salesperson skill is a significant factor to get a sale (convince customer and beat competition)

Post-interview activity

Interview Team wrap-up Are there any candidates that should be removed from consideration? Is there a clear preference? Are there particular concerns about a candidate that should be investigated further? If the first choice doesn't accept, should you extend an offer to the second choice? Background checks (drug, credit, criminal) Do not close process with other candidates until the preferred candidate has accepted the offer Reference Checks

sense of accomplishment

Intrinsic reward but can be facilitated by management How?

straight salary

Just paying someone a set salary per year Pros: Easy to administer/budget, better customer satisfaction, balance efforts between selling and non-selling activity Administrative work: sales report Cons: Limited incentive to improve performance, high fixed cost regardless of sales Good for: Sales operations, Professional services (for performing, not selling the services), Marketing Good when: The individual has limited ability to directly influence sales

Interview Preparation

Meet with interview team Discuss goals for the position Discuss criteria for selection Assign areas of responsibility Provide an assessment template

reference checks

Most are positive references- check if references are credible, have different perspective on the candidates strengths/weaknesses, how you can best manage the individual, etc.

recognition

Must be genuine and meaningful, must be for something truly significant (not just doing your job) How can you recognize someone?: awards, plaques, trophies

Hybrid Org Structure

National sales manager *Commercial accounts --Major accounts ---+Field sales ----_Western sales ----_Eastern sales ---+Telemarketing sales --Regular accounts *Government accounts --Office equipment --Office supplies

On-target earnings

OTE equals a salesperson's base salary plus the commission they would earn if they reached 100% of his/her quota Ex. If a salesperson had a base salary of $40K and potential commission of $10K, their OTE would be $50K OTE listed along with the salary/commission percentage split Using the previous example, the OTE is $50K structured as a 80/20 split. (80% of OTE is base salary, 20% is variable commission)

jury of executive opinion

Pick and choose who you ask for an opinion

performance bonus

Pros: Easy way to push behavior in a certain direction Cons: Incremental cost to cover the bonus, can create negative long-term behavior Good for: Individuals or teams Good when: You need to specifically direct activity or behavior over a short period of time

promotion

Provides recognition, greater responsibility, new challenges, potentially higher salary, opportunity for future growth

motivation

Reward people for doing the right thing Overall motivation is typically determined by examining these factors: - extrinsic, intrinsic, demotivators The strongest factor can often override (mute) the other two factors Want to have intrinsic or extrinsic to be the top two, having demotivators at the top affects morale, work ethic, etc. Ex: Extrinsic outweighs demotivators Demotivators outweigh intrinsic motivation, etc.

salary + commission

Set salary and % of pay that comes from commission Pros: Flexibility to drive desired behavior Cons: Can allow medium performers to stay longer than they should Good for: Most direct sales teams Good when: The role has a significant abi

Rewards

The purpose of rewards is to drive motivation and satisfaction An optimal reward system... Balances the needs of an individual, a company, and customers Provides an acceptable ratio of cost and salesforce output Encourages specific activity consistent with overall strategy Attracts and retains talent Rewards performance based on measurable criteria that is objective and easy to understand

penalties

Use VERY rarely to send message Pros: Sends a very strong and clear message Cons: Adversarial, strong negative impact to morale Good for: Corrective action situations - when someone has violated policy and profited from it Good when: You need to immediately address an issue but don't want to go as far as termination

Determine accelerator plans

What happens if a salesperson goes above 100% of quota? Examples Flat rate: 5% of revenue for everything above 100% Accelerating rate: 5% of revenue for anything between 100-110% 8% of revenue for anything between 110-125% 10% of revenue for anything over 125%

demotivators

activities or circumstances that reduce an employee's overall motivation Conflict with coworkers, boredom, lack of growth opportunities / inadequate compensation, frustration with management, conflict in values

intrinsic motivation

activity that is inherently rewarding Job satisfaction, liking co-workers, making a difference in the world

Centralization

at what level decisions get made/things get done - where is hiring done? training? - is it done in an individual group or as a whole company? - typically dictated by company you work for

Splits

how do you handle sales by multiple people? Also team sales Ex. product used in multiple locations, sales in portland works with customer, and then HQ also gets involved but they are in wisconsin, so split sale

Rate

how is it calculated? Constant - straight line: linear plan, reach 50% of quota (what you are expected to sell), earn 50% of commission, etc. Progressive - pays more at higher achievement: earn more commission the closer you get to reaching 100% of the quota, reach 90%, get 85%, 100 get 100 Regressive - pays less at higher achievement: pay less at higher achievement, earn more commission early on Used when initial sale is incredibly difficult and repeat sales are almost a given

Types of salesforce rewards

non-financial - promotion - sense of accomplishment - personal growth opportunities - recognition financial - straight salary - straight commission - salary + commission - performance bonus - penalties

extrinsic motivation

reward/recognition provided by others Verbal, monetary, physical award

Sales Forecasts

should specify the product/business level, geographic area, and time period it covers Sales forecasts are always wrong - Should go on the lower side most times, be more conservative

Base

what do you pay/calculate on? (ex. Revenue or profit) Mainly revenue: different product lines have different profitability levels, just worry about revenue brought in

Payout event

when is the commission earned (ex. Booking vs. shipping vs. paid When is the salesperson paid- at order, shipping, or payment Payout is typically at shipping: product is recognized at shipping, so payment is also

Product

• Based on product lines or groups of products AD • Salespeople become experts in product attributes and applications DIS • Higher cost • Geographic, customer duplication • Company vs. customer focus ex. office equipment & office supplies Kraft: dressings, meats, sauces, etc. - either whole line or group of prod.

Functional

• By role in the company (field, account manager, outside, etc.) AD • Efficiency in performing selling activities DIS • Geographic, customer duplication • Need for coordination • Lack of accountability ex. field & telemarking sales

Market

• By the types of customers you are selling to AD • Salespeople develop better understanding of unique customer needs DIS • Higher cost • Geographic duplication ex. commercial & government accounts

Geographic

• Generalist model • Not going to specialize AD • Lower cost (time, travel) • No geographic duplication • Limited customer duplication • Fewer management levels • Flexibility DIS • Limited specialization • Salespeople less knowledgeable about customers, competitors ex. western & eastern sales fast food chain

Strategic Account

• Salespeople with specific accounts they are in charge of • Typically high-dollar • High-value, need special attention AD • Higher account retention • Higher account penetration DIS • Higher cost • Geographic duplication - multiple people serving the same market ex. major & regular accounts