Sales Management

Presentation 5
What Is Sales Force Expense in Sales
Management?
Managing a sales force requires more than just setting quotas and
tracking progress to determine success. An increase in sales isn’t
necessarily a positive thing for a business if the expense to generate
those sales result in a lower profit. Breaking down your sales costs,
including those expenses related to your sales force, will help you set a
budget, choose distribution channels and set prices.
Sales Force
Businesses use different types of sale forces, with individual companies
relying on one or a combination. A sales force might consist of contract
outbound and inbound telemarketers, in-house salespeople who sell
over the phone, a contract sales firm that represents you in the field or
a group of employees who travel to customers. You might use a
wholesaler or distributor that gets you into brick-and-mortar retailers,
catalogs or online shopping websites.
Direct Expenses
• Direct sales force expenses include the costs of the people who sell
for you. If you use contractors, these expenses might be limited to
commissions. If you have in-house staff, their expenses would include
salaries, commissions, bonuses, payroll taxes and benefits. You would
also include the constant expenses necessary for your staff, such as
phones, software, office equipment and space and computers.
Indirect Expenses
The support you offer your sales force might vary, resulting in indirect
expenses. This can include brochures, media kits, meals and
entertainment, gifts, travel, lodging, trade show and conference
expenses and training. These are expenses you would not have if you
did not have a sales force, but they are discretionary and not regular
expenses of maintaining a sales force. In addition, handling sales in
house might result in customer service costs you don’t have with a
distributor or wholesaler.
Expense Comparisons
• Knowing that using an in-house or contract sales force will result in
higher sales is not enough to make the decision as to which one to
use. You must calculate the total expenses associated with each type
of sales force to determine your profit margins and gross profits.
Taking the time to review your spending and calculating accurate
sales force expenses will help you make the right determination for
your business.
What is a Sales Quota?
• A sales quota refers to a time-bound sales target set by management
for a particular region, sales team, or individual rep. Sales quotas are
often attached to a daily, monthly, or quarterly period.
• Sales quotas can be measured in a number of different ways,
including by profits, sales, or rep activity.
The Importance of Setting Sales Quotas
Not only do sales quotas play an important role in sales forecasting and
monitoring rep activity, they also set expectations and motivate sales
reps to hit a given level of activity.
Managers can also use sales quotas to learn more about their team’s
productivity, success rate, and optimal sales processes.
1. Revenue Quotas
The most common type of sales quota is revenue-based. Reps are
expected to sell enough units or subscriptions to earn a certain amount
of revenue for the given period.
This type of sales quota is usually set for the quarter or the month.
However, businesses in industries with a longer sales cycle might use
annual revenue quotas. For instance, since many SaaS companies
operate on monthly contracts, they might choose to set quotas based
on the value of the client’s annual contract.
Activity Quotas
Another option is to create quotas based on sales activity. This can
include the number of new clients landed for a given period. However,
it can also expand to include activities that are part of the sales process
but don’t translate directly into sales.
Volume Quotas
Quotas based on volume incentivize reps to move a certain amount of
inventory or register a certain number of new users. These types of
quotas are often set for the team to achieve over a given year.
Depending on the business, the quota might break down further by
region, product, or individual sales rep.
Combination Quotas
Many sales teams operate with some combination of sales quotas in
place. Combined quotas often involve an aspect of both sales volume
and rep activity. For instance, reps might be asked to set ten
appointments with new prospects and close 40% of those leads for a
total of four new customers.
Transforming the Salesforce with Leadership
Salespeople are isolated and independent. In most cases, salespeople
are physically and psychologically separated from others in the
organization. Because sales-people usually work alone, they may have
no one with whom to share the disappointment of the lost order, the
frustration of the delayed shipment, or the exhilaration of the well-
earned sale.
Salespeople are in a glass cage.
• Selling involves the interaction of various people — salespeople,
sales managers, customers, prospects, competitors, and suppliers —
who may mix with each other in unpredictable ways. Since selling is
not as routinized and standardized as other functions, it is a desirable
occupation for many people.
Salespeople are boundary spanners.
The salesperson’s simultaneous links to prospects, customers,
managers, family, and self identify him or her as a boundary spanner or
a person who operates at the periphery or boundary of an organization
and is therefore subject to influences and pressures from individuals
within and outside of the organization.
Salespeople are subject to stress.
• The pressures of closing sales, meeting quotas, expediting shipments,
finding new prospects, absorbing rejection, and fulfilling family
obligations make the life of a salesperson difficult. Thus, the job of
selling is often viewed as a succession of ups and downs, a series of
field experiences resulting in alternating feelings of exhilaration and
depression. Salespeople must cope with competition inside and
outside the firm.
Leadership Styles in Sales
Autocratic
• During a emergency or crisis, an autocratic leader can make decisions
without input from the rest of workforce to solve the problem. For
example, to meet certain sales goals, you can authorize discounts on
products or waive certain fees from loyal customers to generate more
sales. This can give some members of your sales force an advantage
over their peers. The disadvantage is that when you make these
decisions without advice from the rest of your salesmen, it might
jeopardize your ability to engage and motivate them in the future.
Transactional
• Transactional leaders excel at completing tasks. When you have an
inexperienced sales force, this works well. Subordinates agree to take
direction from their leader and they accept advice regarding making
sales pitches, promoting a product’s features and benefits and closing
the sale. This type of leadership provides clear delineation of roles
and responsibilities. As sales team members become more
experienced, they might become less tolerant of this approach, which
they perceive as controlling and paternalistic. Ambitious sales
personnel will seek to take on the role of leader themselves and
establish new sales quotas, for example.
Charismatic
• Charismatic leaders tend to be expressive, creative and intuitive. They
build rapport with their sales teams and express optimism. They
sometimes neglect daily operations. This type of leadership style
works well when you are trying to build a network between sales,
development and support personnel. Under stress, though, you might
lose track of the details and shift the blame to your subordinates
when sales quotas are missed.
Transformational
• Transformational sales leaders recognize when strategies need to
change. They help the entire sales force make the transition to using
new tools and techniques by creating urgency and establishing a
compelling vision for the future. To use this style effectively, you must
present your ideas well and overcome objections from your
subordinates, who might be used to selling certain products a certain
way to an established audience. Finding new markets and establishing
a presence in emerging fields requires you take risks and manage the
outcomes effectively. For example, shifting to a consultative selling
model requires that the workforce learn to focus on solving
customer's problems, not just selling products and services.
Key Leadership Behaviors That Improve Sales
Force Performance
A Time for Change
The sales managers and leaders are under pressure, too. They are
visible, vulnerable, and accountable for their teams’ performances.
Rather than empowering individuals to make decisions for themselves,
they are going for the short-term fix and resorting to telling people
exactly what to do, resulting in mistakes and bad decisions. This
behavior is driving unhealthy competition among team members.
Salespeople are protecting their turf, keeping their ideas and
techniques to themselves, and pulling out all the stops to prove their
worth to the organization. They are holding onto their accounts,
unwilling to share anything, with the fear that someone else could get
a foot in the door and take over that account.
Three Critical Leadership Behaviors
There are three leadership behaviors that are essential to creating an
environment where high performance is both inevitable and sustainable—
vision, challenge, and support.
Leaders must develop and communicate a compelling vision that inspires
people. Employees will be able to connect emotionally with this strong and
meaningful vision. During these tough economic times, it is vital to an
organization’s survival strategy. People need to understand what is expected
from them and how it will contribute to achieving the vision. This will secure
their commitment and engagement. In a sales environment this includes
developing an understanding that, although short-term targets are
important, they must also focus on the future, their development, long-term
customer relationships, and innovation.
Sales leaders
must also challenge people to ensure they remain focused on
delivering high performance. While we know that levels of challenge
within sales teams are notoriously high, leaders should challenge
individuals to work more collaboratively, sharing best practice and
lessons learned regularly. Challenge can also come by encouraging
individuals to make decisions for themselves, to find solutions to their
own challenges rather than relying on their leader or manager.
The third key leadership behavior is support, often in low supply within
competitive sales teams. Sales leaders need to ensure they
individualize the support they provide. They must understand how the
pressurized environment affects people differently.
Research and present a case analysis regarding leadership.