Selling

Stages in the personal selling process

Slide 20-23

THE PERSONAL SELLING PROCESS: BUILDING RELATIONSHIPS
• Preapproach • Approach

Slide 20-25

THE PERSONAL SELLING PROCESS: BUILDING RELATIONSHIPS
• Presentation

 Stimulus-Response Format
• Stimulus-Response Presentation • Suggestive Selling

 Formula Selling Format
• Formula Selling Presentation • Canned Selling Presentation
Slide 20-27

THE PERSONAL SELLING PROCESS: BUILDING RELATIONSHIPS
• Presentation

 Need-Satisfaction Format
• Need-Satisfaction Presentation • Adaptive Selling • Consultative Selling

Slide 20-28

THE PERSONAL SELLING PROCESS: BUILDING RELATIONSHIPS
• Presentation

 Handling Objections
• Acknowledge and Convert the Objection • Postpone • Agree and Neutralize • Accept the Objection • Denial • Ignore the Objection
Slide 20-30

Techniques for handling objections

Slide 20-31

THE PERSONAL SELLING PROCESS: BUILDING RELATIONSHIPS
• Close

 Trial Close  Assumptive Close  Urgency Close  Final Close
• Follow-Up
Slide 20-32

THE SALES MANAGEMENT PROCESS
• Sales Plan Formulation: Setting Direction

 Sales Plan  Setting Objectives

Slide 20-37

7-1

The Consultative Selling— Customer Relationship Model
Performance Performance Goals Goals Mutual Mutual beneficial beneficial agreements agreements ••Costs Costs Long-term Long-term relationships relationships ••Productivity Productivity ••Sales Sales ••Profits Profits

Customer Customer strategic strategic needs needs

Salesperson’s Salesperson’s creative creative solutions solutions

7-2

Steps in the Preapproach: Planning the Sale

Determine Determine sales call sales call objective objective

Develop Develop customer customer profile profile

Develop Develop customer customer benefits benefits

Develop Develop sales sales presentation presentation

7-3A

Information Used in Profile and Planning
Customer Profile and Planning Sheet

1. Name: Address: 2. Type of business: Name of buyer: 3. People who influence buying decision or aid in using or selling our product: 4. 5. 6. 7. 8. 9. Buying hours and best time to see buyer: Receptionist’s name: Buyer’s profile: Buyer’s personality style: Sales call objectives: What are customer’s important buying needs:

7-3B

Information Used in Profile and Planning

10.

Sales presentation: a. Sales approach: b. Features, advantages, benefits: c. Method of demonstrating FAB: d. How to relate benefits to customer’s needs: e. Trial close to use: f. Anticipated objections: g. Trial close to use: h. How to close this customer: i. Hard or soft close: 11. Sales made—product use/promotional plan agreed on: 12. Post sales call comments (reason did/did not buy; what to do on next call; follow-up promised):

7-6A

Major Phases in a Presentation: A Sequence of Events to Complete in Developing a Sales Presentation
Rapport-building Uncover needs Attention, interest, transition Features Advantages Benefits How to resell (for reseller) How to use (for consumers and industrial user)

1. Approach 1. Approach

2. Fully discuss 2. Fully discuss your product your product

3. Present your 3. Present your marketing plan marketing plan

7-6B

Major Phases in a Presentation: A Sequence of Events to Complete in Developing a Sales Presentation
What’s in it for your customers? Recommend what to buy in order to fill their needs uncovered in the presentation

4. Explain your business proposition 5. Suggested purchase order

6. Close

Ask for the business! Do not give up! Act as a professional Leave the door open

7. Exit

7-7

The Prospect’s Five Mental Steps in Buying

Attention Attention

Interest Interest

Desire Desire

Conviction Conviction

Purchase Purchase

7-8A

The Selling Process and Examples of Prospect’s Thoughts and Questions
Prospect’s Mental Steps

Steps in the Selling Process
1. Prospecting Salesperson locates and qualifies prospects 2. Preapproach Salesperson determines sales call objective, develops customer profile, customer benefit program, and selling strategies. Customer’s needs are determined.

Prospect’s Potential Verbal and Mental Questions

7-8B

The Selling Process and Examples of Prospect’s Thoughts and Questions
Prospect’s Mental Steps
Attention due to arousal of potential need or problem. Interest due to recognized need or problem and the desire to fulfill the need or solve the problem.

Steps in the Selling Process
3. Approach Salesperson obtains interview, meets prospect, and begins individualized sales presentation. Needs are further uncovered.

Prospect’s Potential Verbal and Mental Questions
Should I see salesperson? Should I continue to listen, interact, devote much time to a salesperson? What’s in it for me?

7-8C

The Selling Process and Examples of Prospect’s Thoughts and Questions
Prospect’s Mental Steps
Interest in information that provides knowledge and influences perceptions and attitude. Desire begins to develop based on information evaluation of product features, advantages, and benefits. This is due to forming positive attitudes that product may fulfill need or solve problem. Positive attitudes brought about by knowledge obtained from presentation.

Steps in the Selling Process
4. Presentation Salesperson relates product benefits to needs, using demonstration, dramatizations, visuals, and proof statements.

Prospect’s Potential Verbal and Mental Questions
Is the salesperson prepared? Are my needs understood? Is the seller interested in my needs? Should I continue to listen and interact? So what? (to statements about features) Prove it! (to statements about advantages) Are the benefits of this product the best to fulfill my needs?

7-8D

The Selling Process and Examples of Prospect’s Thoughts and Questions
Prospect’s Mental Steps
Desire continues based on information evaluation.

Steps in the Selling Process
5. Trial close Salesperson asks prospect’s opinion on benefits during and after presentation. 6. Objections Salesperson uncovers objections.

Prospect’s Potential Verbal and Mental Questions

Desire continues based on information evaluation.

Do I understand the salesperson’s marketing plan and business proposition? I need more information to make a decision. Can you meet my conditions?

7-8E

The Selling Process and Examples of Prospect’s Thoughts and Questions
Prospect’s Mental Steps
Desire begins to be transformed into belief. Conviction established due to belief the product and salesperson can solve needs or problems better than competitive products. Appears ready to buy.

Steps in the Selling Process
7. Meet Objections Salesperson satisfactorily answers objections.

Prospect’s Potential Verbal and Mental Questions
Let me see the reaction when I give the salesperson a hard time. I have a minor/major objection to what you are saying. Is something nonverbal being communicated? Did I get a reasonable answer to my objection?

7-8F

The Selling Process and Examples of Prospect’s Thoughts and Questions
Prospect’s Mental Steps
Conviction becomes stronger.

Steps in the Selling Process
8. Trial Close Salesperson uses another trial close to see if objections have been overcome; or if presentation went smoothly before the close, to determine if the prospect is ready to buy.

Prospect’s Potential Verbal and Mental Questions
Can I believe and trust this person? Should I reveal my real concerns?

7-8G

The Selling Process and Examples of Prospect’s Thoughts and Questions
Prospect’s Mental Steps
Action (purchase) occurs based on positive beliefs that the product will fulfill needs or solve problems.

Steps in the Selling Process
9. Close Salesperson has determined prospect is ready to buy and now asks for the order.

Prospect’s Potential Verbal and Mental Questions
I am asked to make a buying decision now. If I buy and I am dissatisfied, what can I do? Will I receive after-the-sale service as promised? What are my expectations toward this purchase? Why don’t you ask me to buy? Ask one more time and I’ll buy.

7-8H

The Selling Process and Examples of Prospect’s Thoughts and Questions
Prospect’s Mental Steps
Satisfaction—Dissatisfaction

Steps in the Selling Process
10. Follow-Up Salesperson provides customer service after the sale.

Prospect’s Potential Verbal and Mental Questions
Did the product meet my expectations? Am I experiencing dissonance? How is the service associated with this product? Should I buy again from this salesperson?

Sales planning & Forecasting
Estimating the top line

Sales Forecasting
Introduction • Sales forecasting is a difficult area of management. Most managers believe they are good at forecasting. However, forecasts made usually turn out to be wrong! Marketers argue about whether sales forecasting is a science or an art. The short answer is that it is a bit of both.

• Why estimate market potential?
– Entry/exit decisions – Resource allocations – Location decisions – Set sales objectives & evaluate performance – Set forecast (% of potential)

Estimating potential for new product
• • • • Relative advantage over current product Compatibility with current system / norms Risk (monetary, social and psychological) Rate of adoption of comparable products

Estimating potential for mature product
• Past experience • Recent trends
– Competition – Customers – Environment

Information sources
• Secondary data • Past sales data • Primary data

Forecasting: specific product & target
• Why forecast sales?
– Compare proposed changes to current results – Help set budgets – Provide basis for monitoring results – Aid in production planning

Considerations in forecasting
• • • • Customer behavior (past & future) Competitors’ behavior (past & future) Environmental trends Product strategies

Range of forecasted results
• Each combination provides one scenario • Each scenario has range of possible results
– Limit to three – expected, better and worse than expected

Types of forecasting
• There are two major types of forecasting, which can be broadly described as macro and micro: • Macro forecasting is concerned with forecasting markets in total. This is about determining the existing level of Market Demand and considering what will happen to market demand in the future. • Micro forecasting is concerned with detailed unit sales forecasts. This is about determining a product’s market share in a particular industry and considering what will happen to that market share in the future.

The selection of which type of forecasting to use depends on several factors as under: • (1) The degree of accuracy required – if the decisions that are to be made on the basis of the sales forecast have high risks attached to them, then it stands to reason that the forecast should be prepared as accurately as possible. However, this involves more cost • (2) The availability of data and information in some markets there is a wealth of available sales information (e.g. clothing retail, food retailing, holidays); in others it is hard to find reliable, up-to-date information

The selection of which type of forecasting to use depends on several factors as under: • (3) The time horizon that the sales forecast is intended to cover. For example, are we forecasting next weeks’ sales, or are we trying to forecast what will happen to the overall size of the market in the next five years? • (4) The position of the products in its life cycle. For example, for products at the “introductory” stage of the product life cycle, less sales data and information may be available than for products at the “maturity” stage when time series can be a useful forecasting method.

Methods of forecasting
• • • • Judgment based Sales extrapolation Customer based Model based

Judgment-based forecasting: qualitative
• Jury of expert opinion (most common)
– Delphi method

• Naïve extrapolation / opinion (2nd most common) • Sales force composite (3rd most common)

Sales extrapolation: quantitative
• Assumes future will follow on past
– Appropriate for mature, static industry

• Moving average (most common quantitative method)
– Average of three period sales over time – Average of change in three period sales over time

• Exponential smoothing
– Alternative method to smooth data

• Regression analysis (next most common in U.S.)
– Forecast sales = a intercept + b slope (time)

• Does not assume future will follow on past
– Appropriate for dynamic markets / new products

Customer-based forecasting methods

• Market testing • Market surveys • Can be fed into forecasting model

Model-based forecasting methods
• Regression with other factors
– Sales = a intercept + b (advertising) + c (price) – Develop model on half of past data – Test model on other half of data

Forecasting products with new features
• Show basic product
– Ask what they would pay – This price may be arbitrary

• Add feature: e.g., a videogame expansion card
– Ask what they would pay – Follow-up prices are coherent

• Add another feature: e.g., a “Friendstar” device
– Ask what they would pay

• Add another feature: e.g., a hard drive
– Ask what they would pay

• Add another feature: e.g., a Microsoft office
– Ask what they would pay

Creating the Sales Forecast for a Product
The First stage in creating the sales forecast is to estimate Market Demand. Definition: Market Demand for a product is the total volume that would be bought by a defined customer group, in a defined geographical area, in a defined time period, in a given marketing environment. This is sometimes referred to as the Market Demand Curve.

Stage two in the forecast is to estimate Company Demand
• Company demand is the company’s share of market demand. • This can be expressed as a formula: • Company Demand = Market Demand v/s Company’s Market Share • A company’s share of market demand depends on how its products, services, prices, brands and so on are perceived relative to the competitors. All other things being equal, the company’s market share will depend on the size and effectiveness of its marketing spending relative to competitors.

Step Three is then to develop the Sales Forecast
• The Sales Forecast is the expected level of company sales based on a chosen marketing plan and an assumed marketing environment. • Note that the Sales Forecast is not necessarily the same as a “sales target” or a “sales budget”. • A sales target (or goal) is set for the sales force as a way of defining and encouraging sales effort. Sales targets are often set some way higher than estimated sales to “stretch” the efforts of the sales force. • A sales budget is a more conservative estimate of the expected volume of sales. It is primarily used for making current purchasing, production and cash-flow decisions. Sales budgets need to take into account the risks involved in sales forecasting. They are, therefore, generally set lower than the sales forecast.

Obtaining information on existing market demand
• As a starting point for estimating market demand, a company needs to know the actual industry sales taking place in the market. This involves identifying its competitors and estimating their sales. • An industry trade association will often collect and publish (sometime only to members) total industry sales, although rarely listing individual company sales separately. By using this information, each company can evaluate its performance against the whole market.

Obtaining information on existing market demand
• This is an important piece of analysis. Say, for example, that Company A has sales that are rising at 10% per year. However, it finds out that overall industry sales are rising by 15% per year. This must mean that Company A is losing market share – its relative standing in the industry. • Another way to estimate sales is to buy reports from a marketing research firm such as AC Neilsen, Mintel etc. These are usually good sources of information for consumer markets – where retail sales can be tracked in great detail at the point of sale. Such sources are less useful in industrial markets which usually rely on distributors.

Estimating Future Demand
• • • • So far we have identified how a company can determine the current position: Current Company Demand = Current Market Demand x Current Market Share How can future market demand and company demand be forecast? Very few products or services land themselves to easy forecasting . These tend to involve a product whose absolute level or trend of sales is fairly constant and where competition is either non-existent (e.g. monopolies such as public utilities) or stable . In most markets, total demand and company demand are not stable – which makes good sales forecasting a critical success factor.

A common method of preparing a sales forecast has three stages
(1) Prepare a macroeconomic forecast – what will happen to overall economic activity in the relevant economies in which a product is to be sold. (2) Prepare an industry sales forecast – what will happen to overall sales in an industry based on the issues that influence the macroeconomic forecast. (3) Prepare a company sales forecast – based on what management expect to happen to the company’s market share.

Sales forecasts can be based on three types of information:
(1) What customers say about their intentions to continue buying products in the industry (2) What customers are actually doing in the market. (3) What customers have done in the past in the market. There are many market research businesses that undertake surveys of customer intentions – and sell this information to businesses that need the data for sales forecasting purposes. The value of a customer intention survey increases when there are a relatively small number of customers, the cost of reaching them is small, and they have clear intentions. An alternative way of measuring customer intentions is to sample the opinions of the sales force or to consult industry experts

Time Series Analysis
• Many businesses prepare their sales forecast on the basis of past sales. • Time series analysis involves breaking past sales down into four components: • (1) The trend: are sales growing, “flat-lining” or in decline? • (2) Seasonal or cyclical factors. Sales are affected by swings in general economic activity (e.g. increases in the disposable income of consumers may lead to increase in sales for products in a particular industry). Seasonal and cyclical factors occur in a regular pattern;

Time Series Analysis
• (3) Erratic events; these include strikes, fashion fads, war scares and other disturbances to the market which need to be isolated from past sales data in order to be able to identify the more normal pattern of sales • (4) Responses: the results of particular measures that have been taken to increase sales (e.g. a major new advertising campaign).

Using time series analysis to prepare an effective sales forecast requires Mgt. to:
Smooth out the erratic factors (e.g. by using a moving average) Adjust for seasonal variation Identify and estimate the effect of specific marketing responses

SALES FORECAST VERSUS PLAN
• THE SALES FORECAST IS A PROJECTION INTO THE FUTURE OF EXPECTED SALES, GIVEN A STATED SET OF ENVIRONMENTAL CONDITIONS. • THE SALES PLAN IS A SET OF SPECIFIED MANAGERIAL ACTIONS TO BE UNDERTAKEN TO MEET OR EXCEED THE SALES FORECAST.

SALES FORECASTING TERMS
• THE SALES FORECASTING LEVEL IS THE FOCAL POINT IN THE CORPORATE HIERARCHY WHERE THE FORECAST IN NEEDED • THE SALES FORECASTING TIME HORIZON IS THE TIME FRAME FOR THE PLAN • THE SALES FORECASTING TIME INTERVAL COINCIDES WITH HOW OFTEN THE PLAN IN UPDATED • THE SALES FORECASTING FORM IS THE MEASURE IN WHICH THE FORECAST NEEDS TO BE EXPRESSED (DOLLARS, UNITS, CUBE ETC.

Conclusions
• Forecasting is necessary, but difficult • All methods have plusses and minuses
– All are based on prior experience – Will generally miss the turning points

• Best to come up with different scenarios
– Have expected, best and worst forecasts for each

• Be prepared!

Sales territory management

Territory Management
Managing Existing Accounts Personal Time Management

Generating New Accounts

Mergers and Acquisitions Introducing New Products
10% 15% 33%

Acquiring New Customers

42%

Increasing Business with Existing Customers

What’s the Best Way to Grow?

Territory Management
Key to Productivity

Sales Concentration
% Total Sales 100 80 60 40 20 0 Top Top 10% Top 20% Top 50%

Source: SMM, Jan. 02, p. 40

Personal Selling
Developing a list of Prospects
1. Direct Inquiry • Advertising • Direct Mail • Trade publications • Trade shows 2. Directories/Internet -- Thomas Register 3. Referrals 4. Cold canvassing

Personal Selling
Qualifying Prospects
1. Needs for your products/services 2. Authority to make purchase 3. Credit rating & ability to pay 4. Rating scale applied to characteristics by each salesperson

Salesperson Cost per Call
Cost per Call = Direct Selling Expense Total Calls per Year

Key to Productivity

Territory Management

Total Calls per Year = (Net Selling Days) x ( Avg. Calls per day)

Territory Management
Key to Productivity

Breakeven Sales Volume
(Cost per Call) x (Number of Calls to Close) Sales Expenses as a % of Sales

Territory Management
Key to Productivity Customer Break-even Analysis

What are appropriate strategies for each account?
A

• Greater account penetration • Sell expanded product mix • Consolidate orders • Service by phone • Concede to competition • Protect from competition

B

C

Territory Management
Key to Productivity

Account Analysis and Time Allocation
• Single Factor Model: ABC Account Classification • Portfolio Models • Account Opportunity • Competitive Position • Decision Models • Sales Funnel - complex selling; not straight rebuy • Unqualified Opportunity • Qualified Opportunity • Best Few Opportunities What are weaknesses of each???

Territory Management
Key to Productivity

Time Allocation: Problem 2 Why not allocate calls strictly based on % of sales? What additional information should you consider in allocating time?

A Portfolio Model
Competitive Position Weak Strong
Account Opportunity

High

Accounts are very Accounts are Accounts are very Accounts are attractive. Potentially attractive. attractive. Potentially attractive. Invest heavily in Invest heavily in May want to invest May want to invest in heavily Selling resources. . in heavily Selling resources

Core Core Accounts Accounts

Growth Growth Accounts Accounts

Low

Accounts are very Accounts are Accounts are very Accounts are unattractive. moderately attractive. unattractive. moderately attractive. Invest to maintain Minimal investment Invest to maintain Minimal investment current position. of selling resources. . current position. of selling resources

Drag Drag Accounts Accounts

Problem Problem Accounts Accounts

Competitive Position Competitive Position
Strong

O P P O R T U N I T Y

Segment 1- Core Accounts Attractiveness: Accounts are very attractive because they offer high opportunity and sales organization has strong competitive position. High Selling Effort Strategy: Accounts should receive a heavy investment of sales resources to take advantage of opportunity and maintain/improve competitive position.

Competitive Position Competitive Position
O P P O R T U N I T Y
Weak Segment 2 – Growth Accounts Attractiveness: Accounts are potentially attractive due to high opportunity, buy sales organization currently has weak competitive position. Selling Effort Strategy: Additional analysis
should be performed to identify account where sales organization’s competitive position can be strengthened. These accounts should receive heavy investment of sales resources, while other accounts receive minimal investment.

High

Competitive Position Competitive Position
Strong

O P P O R T U N I T Y

Segment 3 – Drag Accounts Attractiveness: Accounts are moderately attractive due to sales organization’s strong competitive position. However, future opportunity is limited. Selling Effort Strategy: Accounts should receive a sales resource investment sufficient to maintain current competitive position.

Low

Competitive Position Competitive Position
O P P O R T U N I T Y
Weak Segment 4 – Problem Accounts Attractiveness: Accounts are very unattractive: they offer low opportunity and sales organization has weak competitive position. Low Selling Effort Strategy: Accounts should receive
minimal investments of sales resources. Less costly forms of marketing (for example, telephone sales calls, direct mail) should replace personal selling efforts on a selective basis, or the account coverage should be eliminated entirely.

Territory Management
Key to Productivity

Portfolio Analysis: Problem 3
Where do allocation problems seem to occur? Why might this happen? • Salesperson allocating on basis of current competitive position, not on basis of account opportunity • Too much time on low opportunity accounts • Best Target: high opportunity, weak competitive cell • High opportunity, strong comp may be vulnerable to comp.

Territory Management
Key to Productivity

Portfolio Analysis: Problem 3
Possible more productive effort allocation strategy: Assuming number of Accounts in each cell roughly equal: High/Strong High/Weak Low/Strong Low/Weak 36 Calls per year 24 Calls per year 10 Calls per year 4 Calls per year

Is the assumption realistic?

The Sales Funnel
Unqualified
13 24 21 20 15 19 23 17 22 16 18 14

9

12 10 7 8 3 1 2 5 6

11

Qualified

50% closure probability 75% closure probability

Best few

4

90% closure probability

Territory Management
Key to Productivity

Prospecting Model -- Selling Priorities Sales Funnel
FIRST SECOND THIRD Close your “Best Few” sales objectives Prospect for “Unqualified” objectives Work the “Qualified” objectives

Service Calls
13% 29%

Administrative Tasks

16%

Selling Face-to-Face

17%

25%

Waiting and Travel

Selling over the phone

How Salespeople Spend Their Time

Territory Management
Key to Productivity

Salespeople’s Time Wasters
1. Telephone interruptions 2. Drop-in visitors 3. Lack of self-discipline 4. Crises 5. Meetings 6. Lack of objectives, priorities & deadlines 7. Indecision and Procrastination 8. Attempting too much at once 9. Leaving tasks unfinished 10. Unclear communication

Personal Time Management
Importance High Low Time Time Wasters Wasters

High
Urgency

Emergencies Emergencies

Low

Personal Personal Growth Growth

Recreation Recreation

Source: Stephen Covey

Territory Management
Key to Productivity

Sales Management Guidelines for Involvement in Territory Management
1. Be aware of your management style which with you and your salespeople is most comfortable and productive. 2. Consider experience & maturity of your sales force in deciding management style

3. Cold calling & prospecting are special cases --give extra attention when these are part of sales job

Territory Management
Key to Productivity

Paths for Productivity Improvement
Rank 1 2 3 4 5 6 New Technology Incentives for Strategic Accounts Incentives for Strategic Products Improve Motivation Programs Increase Incentives on Volume Use Alternative:Telemarketing

% Rating Important* 69% 69% 68% 57% 56% 45%

*Based on 10000 salespeople from 192 companies
Source: Sales & Marketing Management, Jan. 02, p. 41

Traditional Model
100,000 Catalog Drops

Internet Model
100,000 Website Visits

10,000 Calls

5,000 Calls

2,000 Orders

500 E-Orders

1,750 Orders

Reasons Companies Develop and Use Sales Territories
• To obtain thorough coverage of the market. • To establish each salesperson's responsibilities. • To evaluate performance. • To improve customer relations. • To reduce sales expense. • To allow better matching of salesperson to customer’s needs. • To benefit both salespeople and the company.

Elements of Time and Territory Management for the Salesperson
Salesperson’s Salesperson’s territory’s territory’s sales quota sales quota Account analysis Account analysis Set account Set account objectives and objectives and sales quotas sales quotas

Territory-time Territory-time allocation allocation

Territory and Territory and customer customer evaluation evaluation

Scheduling and Scheduling and routing routing

Customer sales Customer sales planning planning

Location of Accounts and Sequence of Calls
66 270

4. 6.
Texas Instruments

Ling Television

3.

Zip Grocery

5.

Jones Hardware

35

40 62

Trailor Mfg. Home

8.

7.

Ace Equipment

40

1, 9.

Oklahoma City

62

35 62

Distribution Center

2.

Weekly Route Report
Today’s Date: December 16 Date For week beginning December 26 City Location Dallas Home Dallas Home

December 26 (Monday) December 27 (Tuesday)

December 28 (Wednesday) Waco Holiday Inn/South December 29 (Thursday) December 30 (Friday) Fort Worth Home Dallas Home

Three Basic Routing Patterns
Straight-Line Pattern

First call
c

c

c

c

Work back

Three Basic Routing Patterns
Cloverleaf Pattern
c c c c c c c c c c

c c

c c

Base
c c c c c c c c c c

Each leaf out and back the same day

Three Basic Routing Patterns
Major-City Pattern

2 1 4

3
1 = Downtown

5

A Partial Map of Your Sales Territory
L E F K B C
Your favorite restaurant

H N

M

O

R

J

D

P

I A

G

Start

Sales quota

LEARNING OBJECTIVES
Objectives and quotas are fundamental parts of a company, because they provide the sales force with direction and goals. Selling by objectives (SBO) is a system that unites the sales force. This chapter should help you understand:  The relationship between sales objectives and quotas.  Why quotas are important.  The various types of quotas.  The methods for setting quotas.  Criteria needed for a good quota plan.  Major areas for establishing objectives.  How organizations set objectives.  The selling by objectives process.

WHAT IS A QUOTA?
A quota refers to an expected performance objective. Quotas are tactical in nature and thus derived from the sales force’s strategic objectives.

WHY ARE QUOTAS IMPORTANT?
• Quotas provide performance targets.

• Quotas provide standards. • Quotas provide control. • Quotas provide change of direction. • Quotas are motivational.

TYPES OF QUOTAS
• Sales volume quotas.

Sales volume quotas includes dollar or product unit objectives for a specific period of time.

TYPES OF QUOTAS
• Sales volume quotas. • Break down total sales volume.

• Product lines. • Individual established and new products. • Geographic areas based on how the sales organization is designed, which would include: • Sales division. • Sales regions. • Sales districts. • Individual sales territories.

TYPES OF QUOTAS
• Sales volume quotas. • Break down total sales volume.

• Profit quotas.

The two types of profit quotas: • Gross margin quota determined by subtracting cost of goods sold from sales volume. • Net profit quota determined by subtracting cost of goods sold and salespeople’s direct selling expense from sales volume.

TYPES OF QUOTAS
• Sales volume quotas. • Break down total sales volume.

• Profit quotas. • Expense quotas.

Expense quotas are aimed at controlling costs of sales units. Often expenses are related to sales volume or to the compensation plan.

TYPES OF QUOTAS
• Sales volume quotas. • Break down total sales volume.

• Profit quotas. • Expense quotas. • Activity quotas.

Activity quotas set objectives for job-related duties useful toward reaching salespeople’s performance targets.

Customer satisfaction refers to feelings about any differences between what is expected and actual experiences with the purchase.

TYPES OF QUOTAS
• Sales volume quotas. • Breakdown total sales volume.

• Profit quotas. • Expense quotas. • Activity quotas. • Quota combinations.

METHODS FOR SETTING SALES QUOTAS
• Quotas based on forecasts and potentials.

• Quotas based on forecasts only. • Quotas based on past experience. • Quotas based on executive judgments. • Quotas salespeople set. • Quotas related to compensation.

TABLE 7.4 LEVELS OF ORGANIZATIONAL SALES PLANNING

LEVEL 1. Marketing

PURPOSE: WHAT IS PLANNED

WHO (USUALLY) IS INVOLVED

•Organizational goals Upper management and (increase in market share sales and marketing or penetration, increase in executives customers, increase in sales dollars and units sold) •Priorities (which regions, Regional and district sales markets, and products to managers (which input emphasize) from sales reps) •Dollar allotment (for promotion, advertising, new employees, sales incentives, and so on) District managers and sales representatives

2. Regional plan

3. District plan

4. Territorial plan

•Goals for number of new Sales representatives customers and for increased business with old customers in each region and territory

SELLING BY OBJECTIVES SETS FUTURE TARGETS
Two basic steps to implementing sales strategies: Step 1: Step 2: Organize the jobs. Define annual objectives in important areas.

FIGURE 7.2 THE FOUR MAJOR AREAS TO ESTABLISH OBJECTIVES WITH EACH SALESPERSON
SALES MANAGEMENT

Step 1: Organizing the Job

Salesperson

Territorial Management • Limits • Potential Business • Size • Customer Base • Prospects • Leads • Market Share • Growth • Trade Relations • Dealer Relations Step 2: Defining Annual Objectives 1. Regular 2. Problem Solving 3. Innovative

Account Management • Portfolio of Accounts • Potentials • Coverage • Records • Order Size • Penetration • Reports • Customer Satisfaction

Call Management • Preparation • Selling Technique • Training • Communication • Buyer Behavior • Impact • Handling Resistance

Self-Management • Appearance • Manner • Communication Skills • Abilities • Attitudes • Selling Abilities

SELLING BY OBJECTIVES SETS FUTURE TARGETS
• Treating the territory as a business.

• Managing each account.

Tactical plan for managing accounts: 1. Build the stars. 2. Harvest the cash cows. 3. Fix the problems. 4. Divest the dogs.

SELLING BY OBJECTIVES SETS FUTURE TARGETS
• Treating the territory as a business.

• Managing each account. • Managing each call.

Questions about the content of calls: • Is the sales rep properly armed with information, leads, and materials before the call occurs? • Is the sales rep applying the major principles of selling technique during the presentation? Or is the sales rep inventing his or her own and perhaps making every mistake every salesperson in history has made? • Has the salesperson planned some coherent attack for the sales presentation, and is it working well?

Questions about the content of calls:

continued

• Does the sales rep have enough training in communication, in meeting sales resistance, in understanding buyer behavior, in improving call impact, in gaining greater account penetration, in follow-through methods to do the job? • Does the sales rep have enough knowledge of the product and its applications, service and system backup, and technical problems to handle the toughest calling situation?

SELLING BY OBJECTIVES SETS FUTURE TARGETS
• Treating the territory as a business.

• Managing each account. • Managing each call. • Managing oneself.

Self-management in selling includes the following: • Since selling involves making contact with strangers, dress, style, demeanor, and personal decorum are part of the salesperson’s tool kit.
• Communication skills, memory, logical speaking

habits, and writing competence are vested in the person.

• Attitudes and outlook toward the job, the product, the company, and the customers all have an important bearing in the results to be achieved. • The knowledge of selling techniques, what the various kinds are and how and when to use them, are personally vested in the sales rep and can be produced and polished by training.

BASIC LEVELS OF INDIVIDUAL OBJECTIVES
1. Regular, ongoing, and recurring objectives. 2. Problem-solving objectives. 3. Innovative or creative objectives. The highest level of excellence is reserved for people who are attaining all three.

THE PROCEDURES FOR SETTING OBJECTIVES AND QUOTAS WITH SALESPEOPLE
• Prepare the way. • Schedule conferences with each salesperson. • Prepare a written summary of goals agreed upon. • Optional group meeting to share objectives.

FIGURE 7.3 SELLING BY OBJECTIVES FORM

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A GOOD OBJECTIVE AND QUOTA PLAN IS SMART Specific Measurable Attainable Realistic Time specific

A simple three-way test to judge how well quotas and objectives are written: Test 1: Test 2: Test 3: Does this quota state exactly what the intended result is? Does this quota specify when the intended result is to be accomplished? Can the intended result be measured?

SELLING-BY-OBJECTIVES MANAGEMENT
Selling by objectives (SBO) is the process elaborated on earlier whereby the manager and salesperson jointly identify common goals, define major areas of responsibility, and agree on the results expected.

FIGURE 7.4 SETTING OBJECTIVES AND QUOTAS IS A TWO-WAY PROCESS BETWEEN MANAGER AND SALESPERSON

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THE SALES TERRITORY IS WHERE QUOTAS ARE MADE
The sales territory is “where the action is!”

THE BOTTOM LINE
Quotas are important to a company because they establish the “end state” sought, and they change according to external and internal forces. Many different types of quotas exist. Methods for setting quotas may vary. Setting a sales quota can be an involved process. Selling by objectives (SBO) is a common concept and is widely used by sales organizations.

Sales force -recruitment

LEARNING OBJECTIVES
A successful sales force is determined by who is hired; this is the end result of sales human resource management. This chapter should help you understand:  What sales human resource management is and what its key relationships are.  The importance of planning for sales personnel needs.  What people planning and employment planning are.  What recruitment means and why it is so important.  The recruiting process: what it is, who does it, and where recruits are sought.

WHAT IS SALES HUMAN RESOURCE MANAGEMENT?
Sales human resource management (SHRM) refers to activities undertaken to attract, develop, and maintain effective sales force personnel within an organization.

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What’s a salesperson worth?
A salesperson’s worth depends on what the salesperson costs to the company and on the profits from the products he or she sells.

Goal: Hire above-average performers.
Selecting someone who will become an aboveaverage performer improves the overall performance of the sales group. A successful hire is someone who performs above average.

WHO DOES THE PLANNING?
• National sales manager. • Field sales managers. • Top management.

S a l e s F o r c e O b j e c t i v e s S t r a t e g P l a n s T D C u r r e n t i c S a l e s F+ o P e r s o n n H i r i n g , P r cr oe m o -t T e rl a n s f e Q T i Po rTs o u e r n r r i t s r m o s m, Ia nn s R e , i n o t f e t i r a t i o n s , P e o p l e =i o F n o s r, e c a s t s r s O u t , e m e n t

e r r i t o r i a l e s i g n

DETERMINING THE TYPE OF PERSON FOR THE JOB
A job analysis refers to the formal study of jobs to define specific roles or activities to be performed in sales promotions. The three steps in the job analysis are to:
1. Examine the total sales force and each job, and determine how each job relates to other jobs. 2. Select the jobs to be analyzed. 3. Collect the necessary information through observation of what people actually do in the jobs, interviews of people in the jobs, and questionnaires completed by job holders.

JOB DESCRIPTIONS AND SPECIFICATIONS FOR SUCCESSFUL PEOPLE
Job specifications convert job descriptions into the qualifications.

WHAT ARE JOB SPECIFICATIONS FOR SUCCESFUL SALESPEOPLE?
• Intelligence
• Education

• Personality • Experience • Appearance

CHARACTERISTICS OF SUCCESSFUL SALESPEOPLE

1. High energy level 2. High self-confidence 3. Need for material things 4. Hardworking 6. High perseverance 7. Competitive

8. 9.

Good physical appearance Likable

10. Self-disciplined 11. Intelligent 13. Good communication skills

5. Requires little supervision 12. Achievement oriented

PROFILING THE SUCCESSFUL CANDIDATE
Success in a company may include the following: • Intelligence
• Prospecting ability

• Ability to create a follow-up system • Ability to influence people’s decisions and opinions • Ability to cultivate long-term client relationships • Ability to negotiate contracts and prices

PROFILING THE SUCCESSFUL CANDIDATE

continued

• Ability to determine prospects’/customers’ needs (hot buttons).
• Computer skills.

• Selling ability. • Conceptual ability.

RECRUITMENT’S PURPOSE
Recruitment is the set of activities and processes used to legally obtain a sufficient number of individuals in such a manner that the recruits’ and the sales force’s best interests are taken into consideration.

MAJOR INFLUENCES AND COMPONENTS OF SALES RECRUITMENT

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e c r u i t m

E x t e r n a l S o u r c e s

LEGAL INFLUENCES
Equal Employment Opportunity Commission (EEOC) is the principal governmental agency responsible for monitoring discriminatory practices.

RECRUITMENT OF SALESPEOPLE
To be an effective recruiter, a sales manager must have the answer to several questions, including:
• How many people do I need to recruit? • Who does the recruiting? • Where do I find recruits? • How can I develop a qualified pool of applicants? • How can recruiting programs be evaluated?

RATIO AND DAYS FROM SALES JOB ANNOUNCEMENT TO REPORTING TO WORK

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SOURCES OF RECRUITS – WHERE ARE THEY FOUND?
INTERNAL SOURCES
Internal recruitment sources come from inside the company: • Current Employees. • Promotions. • Transfers.

EXTERNAL SOURCES
• Walk-ins. • Employment agencies. • Radio and television. • The Internet. • Internships. • Colleges and universities.

• Newspaper advertisements. • Competitors. • Telephone-in advertisements.

REALISTIC JOB PREVIEWS HELP BOTH COMPANY AND RECRUITS
A “realistic job preview” means that a person is given pertinent information about the job without distortion or exaggeration.

Companies can expect these results from realistic previews:
• Newly hired salespeople have a higher rate of job survival than those hired using traditional previews. • Salespeople hired indicate higher satisfaction. • Managers can set the job expectations of new salespeople at realistic levels. • Realistic previews do not reduce the flow of highly capable applicants.

THE QUALIFIED APPLICANT POOL
The organization should find out: • How candidates obtain information regarding job availability. • What attracts people to the job. • What the likes and dislikes are about the job. • Why the person took the job.

THE BOTTOM LINE
Sales human resource management (SHRM) is comprised of two elements: people planning and employment planning. Developing a successful sales team requires the planning of personnel needs and analyzing the sales jobs to achieve more efficient use of human resources. Job analysis is the definition of specific roles or activities to be performed. The goal of managing sales human resources is to hire aboveaverage performers. In order to hire the right person for the job, there must be a recruitment strategy.

Sales force -training

Sales force training
• • • • • • • • • • Product Organizational culture Reporting pattern Understanding territory management Team management Management of the channel Handling objections Merchandising MIS Interpersonal relationships

Sales force - Motivation

What is Motivation??
• Drive to initiate an action. • The intensity of effort in an action • The persistence of effort over time.

Why the concern Why the concern for sales force for sales force motivation? motivation?

What are the What are the different theories different theories of motivation? of motivation?

Motivation Tools Motivation Tools SelfSelfmanagement management Quotas Quotas Incentive Incentive programs programs Recognition Recognition programs programs

Reasons for Motivating Salespeople
• Frequent rejection • Physical separation from company support • Direct influence on quality of sales presentation • Indirect influence on performance

Steps to Greater Personal Motivation
1. Define what you want. 2. Inform a special person of your goals. 3. Do something. 4. Don’t let failure deter you. 5. Break down problems into pieces. 6. Set deadlines. 7. Turn work into play. 8. Associate with people who motivate you.

Sales Force Needs Status

Company Actions to Fill Needs Change title from “salesperson” to “area manager.” Buy salespeople more luxurious cars to drive. Allow salespeople to help plan sales quotas and sequences of calls.

Control Respect

Invite salespeople to gatherings of top executives. Put pictures of top salespeople in company ads and newsletters. Assign each salesperson a core of loyal customers that are called on regularly.

Routine

Sales Force Needs and Ways to Fill Them

Sales Force Needs Accomplishment Stimulation

Company Actions to Fill Needs Set reasonable goals for the number of calls and sales. Run short-term sales contests. Schedule sales meetings in exotic locations. Deliver promptly all rewards and benefits promised.

Honesty

Sales Force Needs and Ways to Fill Them

MASLOW’S HIERARCHY OF NEEDS

Self-Actualization Self-Esteem Love-Belonging Safety-Security

Intense job challenge, full potential, full expression, creative expansion. Achievement, respect, recognition, responsibility, prestige, independence, attention, importance, appreciation. Belonging, acceptance, love, affection, family and group acceptance, friendships. Security, stability, dependency, protection, need for structure, order, law, tenure, pension, insurance. Hunger, thirst, reproduction, shelter, clothing, air, rest.
Motivation and Personality, Abraham Maslow, 1970

Physiological

AN EXERCISE TO DETERMINE YOUR MOTIVATIONAL NEEDS
To perform the exercise, read through the following statements…check those which are most important in motivating you to do your best work. Select the ten most important statements. 629 847 333 311 836 151 937 743 431 Job security Being trusted to do my job the way I think it should be done. Participating in work group conversations. Having adequate shelter to protect from the elements. Having a job which allows me time with my family. Having an opportunity for personal growth. Socializing with my friends. Being considered for an advancement opportunity. Working with other people.

AN EXERCISE TO DETERMINE YOUR MOTIVATIONAL NEEDS
Select the ten most important statements. (Cont’d.) 819 Having children. 458 Doing something meaningful with my life. 757 Being in a position to contribute new ideas. 828 Having an associate that looks out for my interests. 735 Including other people in what I do. 949 Being selected for an exclusive award. 234 Being involved with work associates in social and recreational activities. 616 Being sexually satisfied. 146 Having a responsible person tell me when I’ve done a good job. 539 Having an active part in work related social activities. 341 Knowing that other people respect me and my work. 132 Acceptance as a work group member

Determining Your Motivational Needs
Second Number to left of statement indicates the category; how many in each: Number Category 1 Physiological 2 Safety - Security 3 Love - Belonging 4 Self Esteem 5 Self Actualization

YOUR SCORE

To determine results: the statements are divided into five categories intended to represent the five levels in Maslow’s Hierarchy of Needs. The second digit in each statement number indicates the category. These categories are: 1-Physiological, 2Safety-Security, 3-Love-Belonging, 4-Self-Esteem, 5-Self-Actualization.

Maslow’s Hierarchy – U.S. Salespeople’s Responses
Number Percent 847 341 757 431 828 458 743 86% 74% 54% 51% 37% 37% 34%

INDIVIDUAL NEEDS
Maslow’s Hierarchy of Needs Selfactualization Esteem Belonging Safety & security Physiological Related Sales Force Motivators Challenging tasks calling for creativity Recognition programs President’s Club $1 mil. Job security & fringes Cash wages & bonuses

Chinese Culture Hierarchy of Needs

Selfactualization in service to society

Safety

Physiological

Affiliation (belonging)

What Makes Great Salespeople? The Competitor This person not only wants to win, but derives satisfaction from beating specific rivals -- another company or even colleagues. They tend to verbalize what they are going to do, and then do it. The Ego-driven They are not interested in beating specific opponents, they just want to win. They like to be considered experts, but are prone to feeling slighted, change jobs frequently, and often take things too personally.

What Makes Great Salespeople? The Achiever This type of person is almost completely selfmotivated. They usually set high goals and as soon as they hit one goal, they move the bar higher. They like accomplishment, regardless of who receives the credit. The Service-oriented Their strengths lie in building and cultivating relationships. Winning is not everything to this person, but they do respond to feelings of gratitude and friendship from other people.

Role Perceptions
• Sales is a boundary spanning position – you must be responsive to expectations of multiple people. Company Sales Manager Customers Family

Salesperson’s Role Perceptions
• Expectations: • Ambiguity: • Accuracy: • Conflict: What do others expect me to do? How sure am I about what others expect? Is what I think what they really expect? Does meeting expectations of one person mean not meeting the expectations of another?

Role Perceptions
• Typical Sales Job Activities • Where is their potential for the following: –Ambiguity –Lack of Accuracy –Conflict

Typical Sales Job Activities
Job Dimension
SELLING FUNCTION

Activities
Plan Activities Develop leads Prospecting Identify DecisionMakers Write orders Find last orders Expedite orders Handle back orders Prepare Presentations Make Presentations Overcome Objections Introduce New Products

WORKING WITH ORDERS

Handle shipping problems

PRODUCT SERVICING

Learn about Train customers product Test equipment Supervise repairs Supervise Perform maintenance installation Receive feedback Provide feedback Provide technical information

MANAGING INFORMATION

Source: Adapted from William C. Moncrief, “Selling Activity and Sales Position Taxonomies for Industrial Sales Force,” Journal of Marketing Research, August, 1996), pp. 266-67.

Typical Sales Job Activities
Job Dimension
SERVICING THE ACCOUNT

Activities
Stock shelves Set up displays Count inventory Promote local advertising Product exhibitions Training sessions

ATTENDING CONFERENCES

Sales conferences Client conferences

TRAINING/RECRUITING

Recruit new reps Train new reps Travel with trainees Parties Drinks Out-of-Town Dinner Lunch In-Town

ENTERTAINING

TRAVELING DISTRIBUTION

Sell through Train Establish Credit processing relationships

Source: Adapted from William C. Moncrief, “Selling Activity and Sales Position Taxonomies for Industrial Sales Force,” Journal of Marketing Research, August, 1996), pp. 266-67.

Motivation Career Stages
• Does everyone go through these stages? • What can be done to address the concerns of management at each stage? • How can sales managers address the management concerns at each stage?

Career Stages
Exploration Career Concerns Finding an appropriate occupational field. Establishment Successfully establishing a career in a certain occupation. Maintenance Disengagement Holding on to Completing what has been one’s achieved; career. reassessing career, with possible redirection.

Motivational Job Related

Learning the Using skills to Developing Establishing a skills required produce results. broader view of stronger selfto do Adjusting to work and identity the job well. working with organization. outside Becoming a greater Maintaining a high of work. contributing autonomy. performance Maintaining an member of level. acceptable an organization. performance level.

Career Stage Characteristics

Career Stages

Exploration Personal Challenges Establishing a good initial professional self-concept.

Establishment Producing superior results on the job in order to be promoted.

Maintenance Maintaining motivation, though possible rewards have changed. Facing concerns about aging. Reduced competitiveness Security Helping younger colleagues

Disengagement Acceptance of career accomplishments.

Psychological Needs

Support Peer Acceptance Challenging position

Achievement Esteem Autonomy Competition

Detachment from the organization and organizational ife.

Career Stage Characteristics

Career Stage Research Findings
Job Satisfaction and Career Concerns 200 Salespeople -- Large Industrial Organization:
– all are least satisfied with promotion & pay – pay satisfaction is only dimension on which exploration sales people are more satisfied than establishment or maintenance salespeople – maintenance salespeople are less satisfied with supervision than are establishment salespeople

Career Stage Research Findings
Career Concerns and Age 200 Salespeople -- Large Industrial Organization:
– Note proportion

of people in each stage

– Note overlap in ages of people in each stage – Disengagement as well as maintenance occurs quite early for some people --

Is this a management concern?

Relationship Between Career Concerns and Age

Proportion of Career Concerns Sales Force Exploration Establishment Maintenance Disengagement
14% 29% 42%

Age Range
20 30 40 50 60 65

15%

Sales volume quota Profitbased quotas
14%

60% 55% 32% Bar 2 Bar 1 28% 14%

Large firms’ Sales >$40M Small firms’ Sales < $40M

Activity 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% quota

Use of the Various Types of Quotas

Quotas & Reasons for Use
1. Help motivate salespeople 2. Direct where to put effort 3. Provide standards for evaluation.
a. Sales volume in dollar or point system • Points allow for different weights for different important products independent of price. • Points not affected by inflation. • Sales quota may be developed for: – Total territory sales, and/or – Individual product or product group.

Quotas & Reasons for Use
2. Profit-based quotas are rarely based on bottom line profits
– Difficult to account for indirect expenses – Profits are usually configured as gross margins minus some load factor

3. Activity-based quotas are based on activities directly related to sales volume
– More directly under control of the salesperson – Biggest problem is falsification of call reports – Issue of quantity vs. quality of activity?

Incentive Programs
• What is difference from regular compensation such as commission? • Key decisions
– – – – Goals Timing Participants Theme -- Rules -- Awards -- Publicity -- Cost

• What is difference between Incentive and Recognition programs

Types of Incentive Awards Used by 168 Firms
Percentage of Firms Using 59 46 25 22

Type of Award Cash Selected Merchandise Merchandise Catalog Travel

Giving Status to Salespeople
1. Compensation -- exceed first-line managers 2. Job Title -- no cost but considerable payback 3. Company Car Upgrade -- salespeople spend much time in car - reminds them of their value. 4. Car Phone -- justified on a purely business basis 5. Field Sales Council -- meet president for 1/2 day openended discussion on field marketing conditions - report back to field meetings the results 6.Outside Secretarial Support -- or more exclusive central. 7. Published Success Stories -- high form of recognition 8. Task Force Assignments -- e.g., review of all paperwork.

Sales force – compensation , appraisal

Appraisal
• SMART objectives • On the job • Time period for review
– Weekly – Monthly – Quarterly – Annual

Appraisal
• One to one • Team appraisal • Results of appraisal
– Promotions – Competency development – Compensation review – New territory

Compensation
• Compensation in the global market is an extremely important managerial area • This is because the compensation plan:
– Helps attract potential salespersons – Impacts a salesperson’s motivation – Is a determinant of status and value – Determines lifestyle and purchasing power

In Global Market
• Compensation package is complex and affected by multiple forces:
– A balance between company policies and country-specific elements – Total compensation package includes financial
• Salary, commission, bonus, stock options, benefits

– and non-financial incentives
• Awards, recognition, vacation, and promotion

Compensation Plans
• Hard to compare compensation plans because of their differences
– Lower salary, but higher deferred components – Cannot simply transfer a compensation plan from one culture to another
• What works in one culture will not work in another!

– Compensation should motivate sales force to accomplish goals set by management
• Compensation may be changed to meet firm goals

Three Types of Compensation Plans
• Straight Salary • Straight Commission • Combination Plan

Straight Salary
• Salesperson paid a set amount of money based upon hours or days worked
– Often adopted when salesperson must devote significant amounts of time to other duties
• Market research, customer service, administration

– Simple to administer by sales manager – But, no direct link between performance and reward!
• More commonly used in Europe and may be difficult to change by global sales managers

Straight Commission
• Adopted by performance-oriented firms that pay salesperson for their achievements
– Each person is paid a percentage of their total sales
• • • • • Easy to evaluate performance Plans encompass an element of insecurity Not believed acceptable in some cultures, like EU Some evidence of acceptance in Japan Can lead salesperson to shirk duties or pressure customers to buy

Combination Pay Plan
• The combination plan is the most popular
– Employed by more than 80% of US firms – May appear in many forms:
• Salary, commission, individual and group bonuses

– Basic security bestowed by set salary – Motivation introduced by commission/bonus

• Combination plans more time consuming for sales managers to oversee

Ethical Compensation Issues
• Major dilemma – hire the best salesperson for the lowest possible salary. Other dilemmas include: – Pay at, below or above market salaries? – Setting a cap on total pay? – Assigning lucrative sales territories? – Team vs. individual incentives? – Frequency of paying commission? – Pay discrimination?

Sales Contests
• Sales contests are short-term incentive programs implemented to motivate salespersons to achieve specific goals or activities • For sales contests to be successful:
– Objectives must be specific and clearly defined – Contest theme must be exciting and clearly communicated – Each salespersons must believe they can win – Awards must be attractive to participants – Contest must be promoted and managed properly

Sales Contest Elements
• Contest Objectives
– To increase total and product sales most common – Sales force must be given sufficient time – All contest information and rules must be clear

• Theme
– Contests receive a theme to create excitement

• Chance of winning
– Compete against self, others, or as a team?
• In U.S. salesperson has about a 40% chance of winning

Types of Rewards
• Sales contests can offer many types of reward in the form of:
– Cash, prizes, or travel – Perceived value very important as it must be of sufficient value to motivate additional effort

• Promotion of contest important
– Launched as a special event with handouts – Large scorecards to communicate progress – Newsletter articles or interim prizes can keep motivation up

Sales Contest Concerns
• A number of concerns have been raised about sales contests
– When not properly designed contests take a lot of managerial time to administer – Improper contests can actually de-motivate – Do sales contests generate additional sales? – Should sales force be paid twice for doing job? – If contests are for short-term, then why have a “never-ending” sales contest?

Non-Financial Incentives
• Human needs require approaches other than compensation to remain satisfied
– Ability to grow – Recognition programs
• Salesperson of the year, President’s Club

– Opportunity to travel – Educational assistance

Sales Expense Plans
• Linked to salary in some ways
– Globally, firm may pay salesperson’s expenses to live overseas that include family – Expatriate expenses are significant

• Expense plans include
– Unlimited – Per diem – Limited expense plan

Unlimited Expense Plan
• All legitimate expenses are reimbursed • Plan has a number of advantages
– Communicates trust to the sales force – Sales manager can focus on more important issues – Salesperson cannot complain that resources not available to make sale

• Sales force must be given guidance and expenses must still be monitored to insure sound judgment
– Reimbursed expenses vary by country – e.g. entertainment and alcohol

Per Diem Expense Plan
• The salesperson is given a set amount of money for each day s/he is in the field
– For example, US$250 per day
• Budget can be set by multiplying rate times total days sales force expected to travel • Single rate unlikely to work in all locales due to varying costs • Sales manager must adjust per diem rates regularly as prices expand or contract

Limited Expense Plan
• The firm sets a maximum daily amount paid for each category of expense
– That is, US$125 for lodging, $50 for meals, $30 for auto rental, and $20 for miscellaneous
• Limits firm’s upper travel expense limit • Must be updated and will vary by location • When actual costs exceed plan, salesperson may try to save in some areas to meet expenses in other • Salesperson’s attention may be diverted from client