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Controlling The Salesforce: SDM-Ch.7 1
Controlling The Salesforce: SDM-Ch.7 1
SDM-Ch.7 1
Learning Objectives
• To know criteria and types of salesforce expense
plans
• To understand salesforce audit and its evaluation
process
• To learn evaluation of effectiveness of a sales
organisation through sales, cost, profitability, and
productivity analysis
• To know purposes and procedure for evaluating and
controlling the performance of salespeople
• To understand ethical, social, and legal
responsibilities of sales managers and salespeople
SDM-Ch.7 2
Salesforce Expense Plans
• Salesforce expenses include travel, meals, lodging,
telephone, and customer entertainment
• Firms have salesforce expense plans to ensure proper
spending
• Objectives / Criteria of effective expense plans are:
It should be
• Fair to the salesperson and company
• Simple and economical to administer
• Clear to prevent misunderstanding
• Reimbursed without much delay
• Allowing differences in expenses among different
territories
SDM-Ch.7 3
Salesforce Expense Plans (Continued)
Four types of salesforce expense plans
• Salespeople pay all expenses
Merits: Simple, less cost for company, salespeople get
income tax advantage
Demerits: Less control on salespeople’s activities; non-
selling activities not done properly
• Company pays all expenses / Unlimited payment plan
Merits: Good control on salespersons activities; no
anxiety for sales people on spending money
Demerits: Salespeople spend more and may make
money unethically
SDM-Ch.7 4
Salesforce Expense Plans (Continured)
SDM-Ch.7 5
Salesforce Audit
• Salesforce or sales management audit is a part of marketing audit
• A marketing or salesforce audit is a comprehensive, systematic,
diagnostic, and prescriptive tool, to be used periodically
• Purpose. To assess adequacy of process, improve performance,
recommend changes
• Evaluation process of salesforce audit. It has 3 stages. Company
management should find out:
• What happened by comparing actual performance with goals
• Why it happened by identifying factors contributing to negative
variance. Difficult and time consuming task
• What to do about it by taking corrective actions
SDM-Ch.7 6
Evaluation of Effectiveness of Sales Organisation
• To know “what happened”, companies analyse their
sales, costs, profits, and productivity
• Effectiveness model of a sales organisation
Sales Analysis
Productivity Analysis
SDM-Ch.7 7
Sales Analysis
• Sales analysis of a company can be done in different ways:
• Different alternatives are shown in a framework below:
National and/or international levels sales organisation
Regional level
All levels
In Sales Branch /district level
Organisation Territory level
Individual level
Sales Analysis
SDM-Ch.7 12
Allocate Functional Expenses to Marketing Units
• Functional expenses are allocated to the marketing unit under study,
depending on several bases shown below, as examples
SDM-Ch.7 13
Prepare Profitability of Marketing Units
• This is done by preparing profit & loss statements for the
marketing units under study
• Two approaches are available in allocating marketing costs
for profitability analysis: (1) Full-cost, (2) Contribution
• Full-cost approach: All marketing costs, both direct &
indirect, are allocated to the marketing unit
• Useful for long-term profitability studies of products and
market segments
• Contribution approach: Only direct marketing costs are
allocated to the marketing unit
• Useful for short-term decisions like profitability of
branches / regions
SDM-Ch.7 14
An Example of Profitability Analysis
SNo Particulars Full-cost Contribution Approach
Approach
Western Region Branch A Branch B Branch C
SDM-Ch.7 16
Evaluating & Controlling Performance of Salespeople
• Purposes / objectives / importance of performance
evaluation of salespeople are:
• Mainly to find how salespeople have performed
• This information is used for other purposes, such as:
• Improving salespersons’ performance, by identifying
causes of unsatisfactory performance
• Deciding salary increments and incentive payments
• Identifying salespeople for promotion
• Determining training needs
• Motivating salespeople through recognition and
reward
• Understanding strengths and weaknesses of
salespeople
SDM-Ch.7 17
Procedure for Evaluating and Controlling
Salesforce Performance
SDM-Ch.7 18
Set Policies on Performance Evaluation & Control
SDM-Ch.7 19
Decide Bases for Salespersons’ Performance Evaluation
• A firm should decide which of the following bases / criteria it would use: (1)
result / outcome based, (2) efforts / behavioural based, or (3) both results &
efforts based
• A company selects performance bases or criteria from a list of alternatives,
some of them shown below:
SDM-Ch.7 20
Establish Performance Standards
• Performance standards are also called sales goals,
targets, sales quotas, sales objectives
• Performance standards for quantitative results are
related to the company’s sales volume or market share
goals
• Performance standards for efforts / behavioural criteria
are difficult to set
• For this, companies do “time and duty analysis” or
use executive judgement
• Performance standards should not be too high or too low
• After establishing standards, salespeople must be
informed
SDM-Ch.7 21
Compare Actual Performance with Standards
• Salesperson’s actual performance is measured and
compared with the performance standards
• For this, sales managers use different methods or forms:
• Graphic rating scales
• Ranking
• Behaviourally anchored rating scale (BARS)
• Management by Objectives (MBO)
• Descriptive statements
• Companies combine some of the above methods for an
effective evaluation system
SDM-Ch.7 22
Review Performance Evaluation with Salespeople
SDM-Ch.7 23
Decide Sales Management Actions and Control
• Many companies combine this step with the previous step
– i.e. performance review
• During performance review meeting with salesperson,
sales manager does the following:
• Identifies the problem areas. E.G. Sales quotas not
achieved
• Finds causes. E.G. less sales calls, poor market
coverage, or superior performance of competitors
• Decides sales management actions E.G. train
salesperson, redesign territories, or review company’s
sales / marketing strategies
• If a salesperson’s performance is good, he / she should
be rewarded and recognised
SDM-Ch.7 24
Business Ethics and Sales Management
SDM-Ch.7 25
Social Responsibilities
• Corporate social responsibility means distinguishing right from
wrong and doing the right
• Social responsibility is the management’s responsibility to take
decisions and actions for welfare and interests of society and the
company
• A company has following four responsibilities to its eight
stakeholders: Customers, Community, Creditors, Government,
Owners, Managers, Employees, and Suppliers, acronym:
CCCGOMES
• Ethical responsibilities. Deal with fairness, equity, impartiality
• Legal responsibilities. Follow laws and regulations
• Economic responsibilities. Produce and market goods /
services that society wants, and make reasonable profits
• Voluntary responsibilities. Make social (EG philanthropic)
contributions
SDM-Ch.7 26
Legal Responsibilities and Sales Management
• Laws and regulations by local, state, or central
governments have impact on sales management
• Price discrimination. As per MRTP act, 1969, seller should
not discriminate prices among similar buyers (e.g. retailers)
• Price fixing. Under MRTP act, it is unlawful for suppliers to
fix prices
• Consumer protection. As per Consumer Protection Act,
1986, it is illegal to make false or misleading claims about
products / services
• Bribes. Payment of money or giving gifts to gain a
customer is illegal under Indian Contracts Act 1872 and
Sale of Goods act, 1930. Sales managers must take
responsibility that laws are not violated
SDM-Ch.7 27
Key Learnings
• Salesforce expenses include travel, meals, lodging,
telephone, and customer entertainment
• Salesforce expense plans consists of (1) salespeople paying
all expenses, (2) company paying expenses partially, (3)
company paying all expenses, (4) combination plan
• Salesforce audit is done to access process adequacy,
improve performance, and recommend changes
• For evaluating effectiveness of a sales organisation, the
company analyse sales, costs, profits, and productivity
• Sales analysis is done at all levels in a sales organisation, for
(a) evaluation and control, and (b) identifying problems
• Purpose of marketing cost and profitability analysis is to
measure profitability of company’s marketing units
SDM-Ch.7 28
Key Learnings (Continued)
• Two approaches for profitability analysis are:
full-cost and contribution
• Most commonly used productivity ratio in sales
management is sales per salesperson
• Main purpose of performance evaluation of
salespeople is to find how salespeople have
performed
• Sales managers have ethical, social, and legal
responsibilities
• Corporate social responsibility is distinguishing
right from wrong and doing the right
SDM-Ch.7 29