The Data Institute Acquisition Manual

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Volume 5

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ACQUISITION MANUAL for THE TARGET COMPANY

6
Corporate Development
7
Product Management
8
Overseas Development
9
Product Distribution & Service
10
Advertising + P.R.
16
New Technology Primers
17
Physical Process & Orders
18
Competition Analysis
19
Product Perceptions
20
Customer Perceptions
Financial
Industry
Markets
Products
Data Grids
World MDB
Research MDB
Product MDB
Corporate MDB
Reference MDB

Volume
5

 

The Sales Director's Market Targets

Starting with a highly detailed Market analysis of all the important national markets for the Company. The market data covers all the products or market sectors and is given - for each year - historically plus a forecast to the year 2028 and beyond.

Average Industry Sales Promotion Costs and Expenditure is given for all the national markets and these are compared with the cost and expenditure at the Company.

Likely Financial Scenarios for Sales Management at the Company is shown as the consequence of 12 possible sales critical investment and/or expenditure decisions.

Each of the Product and Market sector areas for the Company are analyzed, by country, by product and over time.

Sales-force problems and decisions for the Company are seen through a number of perspectives and the term "Sales-Force" is applied in its widest sense and does not only refer to salesmen, but all those engaged in contact with the customer or client.

  1. Base Market Data

  2. Market & Product Sector Data

  3. Sales Promotion

  4. Financial Scenarios for Sales Management

  5. Product Industry Summary

  6. Sales Force Decisions


 

1

Base Market Data:

 

BASE MARKET SCENARIOS
 

There are four basic issues to investigate when considering the marketing environment for the Company and the industry.

  •    Market Growth

  •    Market Structure

  •    Market/s Serviced

  •    Customer & End User Factors


Market Growth (both short-term and medium term) by each Product and Market Area is quantified below, as is the historic market data (See: HISTORIC MARKET VALUES).

The Market Structure for the industry is very critical for profitability. The nature of the market, the location of the Market-Place, the customer base and the supplier structure is exhaustively covered.

Market/s Serviced is the term used to denote the function between the product/s and services offered by the Company and the industry and the particular market sector which the marketing effort reaches. The Market Serviced is the true market for the Company and the industry in terms of product/s and services.


THE TRADING AREA

The Market analysis provides data in terms of the maximum operational trading cell areas of the Company. This being the regions, countries or states which form the effective competitive and market environment for the Company. Whether or not the Company currently operates in the various areas covered is immaterial as the effects of the Market-Place exist nonetheless.


BASIS OF MARKET COVERAGE

Reports give coverage of all the Major Products and Markets supplied and serviced by the Company and the base reference industry. The reported Target Markets are those which are perceived to be the most important area for the Company in the Medium and Long Term.

In that this report is conceived as Market & Corporate documents it is felt important to concentrate only on those markets which represent the corner-stones of the industry customer bases and not become involved in any peripheral activities of the industry.

Market coverage is designed to encompass not only the existing markets for the Company, but also areas of market expansion, product segmentation, parallel markets, et al. By the same token the data excludes those market areas or sectors which are unavailable to the Company for whatever technical or commercial reasons.

 

The MARKET figures given in this section are notated as DSP (5) and the notations indicated signify the following:-

(1) = VALUE GIVEN AT INDUSTRY SHIPMENT VALUES OR PRICES
(2) = VALUE GIVEN AT WHOLESALE VALUES OR PRICES
(3) = VALUE GIVEN AT RETAIL VALUES OR PRICES
(4) = VALUE GIVEN AT PRICE PAID BY END USERS as appropriate
(5) = VALUE GIVEN AT ACTUAL PRICE PAID discounted as appropriate

UNITS = Units times the multiplier given in brackets, E.g. ( '000 ) = x 1000 Units

 

TERMS USED IN THIS REPORT

MSP: - Supplier or Producer Prices
WSP: - Wholesale or Distributors Sale Prices.
RSP: - Retail Sale Prices.
CSP: - The price at End User or final distribution level.
DSP: - The price actually paid net of discounting.

TURNOVER: Turnover is sales plus investment income, grants and other funds received, income from disposals and other sources.

 

VALUE TERMS AND VOLUME TERMS

The standard report generated usually provides data in VALUE terms. This is by far the most popular (as demanded by readers) measure of commercial activity. We can also provide data in VOLUME or UNIT terms and this can be specified when the report is ordered. Obviously some reports do not lend themselves to Volume quantification and thus availability of this data will vary according to the report and the database.

 

 

Market & Revenue Comparisons: Base Macro Economic Forecasts

 

Target Company

Base Reference Market

 

MEDIAN ECONOMIC FORECAST Scenario Revenue Forecast

MEDIAN ECONOMIC FORECAST Scenario Product Share Forecast

BEST ECONOMIC FORECAST Scenario Revenue Forecast

BEST ECONOMIC FORECAST Scenario Product Share Forecast

WORST ECONOMIC FORECAST Scenario Revenue Forecast

WORST ECONOMIC FORECAST Scenario Product Share Forecast

MEDIAN ECONOMIC FORECAST Scenario Market Forecast

MEDIAN ECONOMIC FORECAST Scenario Product Share Forecast

BEST ECONOMIC FORECAST Scenario Market Forecast

BEST ECONOMIC FORECAST Scenario Product Share Forecast

WORST ECONOMIC FORECAST Scenario Market Forecast

WORST ECONOMIC FORECAST Scenario Product Share Forecast

 Market Definitions

 

 

2

Market & Product Sector Data:

 

CURRENCY DATA:  The currency figures given in this report are in U.S. Dollars.
If the Windows Regional Settings on your computer is set to a non-U.S. setting then the currency symbol ($) may appear in the local currency (, , , etc.).
Either reset your Regional settings, or alternatively read all currency figures in this report as being U.S. Dollars (US$).

 Market Definitions

 


 

3

Sales Promotion:

 

SALES PROMOTION


The product features and benefits have been decided, the packaging designed, the consumer proposition researched, and the launch date, price and distribution margins decided, the advertising agency has been briefed and it has come up with a good creative theme for the products. What's more, the whole operation has reached a stage whereby it is developing well into mail, poster, newspaper and cinema campaigns.

How often are sales promotion and merchandising considered far too late in the day to be fully effective in the marketing mixture? From the look of some sales promotions one sees, virtually everywhere the answer is, unfortunately, far too often.

Certainly in the market served by the Company, the track record of many is far from encouraging and as a consequence many companies in the market have undoubtedly suffered.


1. Integrating the total marketing operation

Company sales promotion, and by that is meant special incentives aimed at persuading customers to buy products and distribution channels incentives designed to encourage retailers to stock and fully display the product, need to be considered early in an existing campaign or new-product launch. This is the only positive way of ensuring that sufficient funds are set aside to enable promotion and merchandising to be carried out on a proper scale. Early planning is also essential so as to enable the various options to be considered, researched and evaluated in order to achieve the maximum cost effectiveness.

 

i.

Promotional aims

The first consideration, however, must be to decide what, precisely, promotion and merchandising are to achieve in the particular marketing situation being faced by the Company. When the actual campaign is being discussed, the primary promotion and merchandising objectives are likely to be couched in such terms as: To achieve trial of the optimum quantity in such a way as to encourage the consumer to repeat purchase and develop loyalty within a prescribed period. Such an objective, however, needs to be completely complementary with the advertising strategy for the new product and also with the promotion and merchandising of the other products in the industry. Also, one should take into account the likely competitive activity at the time, and also the possible reaction by them to the product.

The foregoing, of course, applies only to new campaigns. When it comes to existing campaigns then the promotion and merchandising objectives are quite different. In such cases the aim may be to increase frequency of purchase, to stimulate additional use of the product, to achieve retrial of a previously rejected product, to deepen brand loyalty of regular users or to defend the product from the attacks of its current or future competitors.

ii.

Coordination

After the medium-and-long term aims have been decided on, the planning now needs to be sufficiently advanced to allow for the best development and co-ordination of the plan. In most promotions, communications need to be simple and precise, warm and encouraging. Packaging, for example, should be intrusive yet not undo all the good work of the basic package design. For its part, the POS material should create excitement around the product and the point of sale, and command the best display sites because of its mechanical suitability, and promotional main-media support advertising should be designed to do the same job. At the same time the marketing man needs to take every possible step to ensure that the distribution channels understand the precise intentions of the industry. Because of security it is not always possible to tell the distribution channels everything, but the company certainly needs to keep distributors well informed. Another point to bear in mind is that in far too many cases major distribution channels buyers and even the competitors know all about the company's plans and the only people left wondering are the company's salesmen in the field. So if the promotion is aimed at the distribution channels, then the company needs to inform everyone concerned, not simply the distribution channels in the hope that he will inform all the customers. Probably direct mail can help here. Caution is needed because, if direct mail is to be effective then it needs to be planned carefully: the direct-mail firms themselves need looking at particularly closely, they need to be well briefed, and the actual printing needs placing with the printers to allow plenty of time for the operation to be carried out efficiently and well. At the same time, thought needs to be given to the right distribution channels and consumer public-relations activity surrounding the promotion so that it fully complements other elements of the campaign. While needing to exploit all worth while opportunities which could lead to extra sales, money and effort should not be wasted on trying to make the whole thing too elaborate.

iii.

Sales-force presentation

The presentation to the salesforce should contain all the key elements for success - drama, personal incentive, realistic targeting. Only if this is done will the salesforce feel sufficient enthusiasm for the project. It is specially important that the salesman is left in no doubt as to what is required from him in the promotion and that it is put properly into perspective against his other responsibilities.



2. Budgeting

Where does Sales Promotion fit into the marketing-mix? Is it, for instance, the icing on the cake? Possibly thus. It is certainly not the cake itself because that is the basic product. Even so, it needs to stand up, by itself, as an adequate consumer proposition aimed at holding a useful share of its market without continuous promotion.

The next question is: How often does the industry promote within a year's marketing plan and what budgets does it allow? Clearly, this will depend on the product field; the product's share of the market; whether that share and the market as a whole are increasing or decreasing; what the special problems are; and what the opportunities are for tactical promotion and merchandising.

For a start, one must assume that the marketing manager has up-to-date knowledge in these areas and has the benefits of current research into distribution channels and stock holdings, into consumer trial, retention rate and quantity usage, and into consumer penetration, etc. Also one must assume that he has information on awareness of the product amongst the target market. Probably, most of these problems and opportunities will be highlighted when this information is analyzed. The next step is to decide just how much to spend 'above' and how much to spend 'below' the mystical line. Ideally , of course, the industry will want to spend as much as is useful on promotion, merchandising and other below-the-line activities, provided that the consumer franchise is not seriously prejudiced by reducing the theme advertising below that critical point - the assessment of which must be one of the marketing man's most difficult decisions.



3. Frequency of promotions

How often the industry promotes will depend on a number of factors: selling time available, the traditions of the distribution channels, the competitors' likely activities, the apparent loyalty of current users, consumers' buying habits, etc.

If, then, the brand's manager decides that three consumer promotions a year should meet all these requirements he will, naturally enough, need to be sure that his budget is sufficient to allow all the back-up promotional services, for example, full distribution channels incentive support, special point-of-sale display, main-media support, perhaps stocking support, sales-force aids and an incentive plan. In addition, he will need to test and evaluate the promotions as well as provide continuous merchandising and display material.

By and large this sort of marketing - running three promotions a year - applies to high-turnover product companies. Companies marketing, say, seasonal products, are unlikely to have more than one consumer promotion opportunity a year.


4. Matching product to promotion

How does the industry decide on the best promotion for its product? This is done by testing the various options and using the most cost-effective. But how is this done? The simple answer is: by following the recommendations of the sales promotion manager or, if such an animal does not exist within the company and a good one is not affordable, by hiring a good sales promotion consultancy and taking its advice. The basic essentials of all promotion tests are that they should be properly controlled, adequately analyzed and, most important, capable of national or regional development. If these essentials are not met, the promoter might as well save his time and money.


5. Different types of testing

There are many forms of testing techniques available to the promoter: hall tests, mail tests, store tests and discussion groups. The problem is to choose the best combination, given the requirements of time, the particular objectives of the promotion and the constant aim of keeping costs as low as possible.

It should also be borne in mind that research into promotion has certain limitations. Used as a so-called aid to judgment it is certainly very valuable; used as a decision maker it can sometimes be very misleading, mainly because the success of promotions is so often dependent on the winds of fashion.
 

i.

Conditions and restrictions

The promoter should ensure that the promotion conforms with the prevailing legal restrictions, and thereafter ensure that the conditions under which the offer is made to the consumer or to the distribution channels are indelibly clear. If this is not so then existing customer relationships may be damaged.

ii.

Selecting services and supplies

The promoter is well advised to select service companies and suppliers from within the promotions industry. This means printers, handling companies, demonstrator agencies, pioneer-salesmen companies, rack suppliers, point-of-sale material makers, door-to-door distribution companies, premium suppliers, and direct-mail companies. Companies will not only get specialists but will also pay the right price for the job. Admittedly, there are many companies around that will be prepared to do the job just that little bit cheaper, but picking a bad one can turn out to be a costly experience.



6. Meeting deadlines

Sufficient lead times should be allowed for each element of the promotion (personnel hire, legal clearance, transport arrangements, material supply, briefings and other communications), with a sensible 25% addition for unexpected delays and problems.
 

 

Continuity of interest

The right controls must be applied as soon as the promotion takes off. This should ensure that the operation keeps at near boiling throughout and does not cool once it has been effectively launched and the initial heating is over. In turn, sales personnel should be properly motivated throughout (whether by incentives, or motivation activities) as must the distributor staff. Consumer and distribution channels correspondence and telephone calls must have prompt, and expert, attention. Many consumer and distribution channels queries can be anticipated and it is worth preparing standard replies, within the bounds of courtesy, to many of these enquiries. A close watch also needs to be kept, as the promotion progresses, on stock levels, material stock levels, response time, the supply of leaflets and material to distributors, and the maintenance of adequate product special stock.



7. Evaluating campaigns

Evaluation of sales-promotion and merchandising campaigns is one of the most neglected and abused aspect of the industry. So often the evaluation is either restricted to one of two comments: "Yes, it worked because... ", or: "No, it failed because... ". Sometimes, it even fails because it takes companies so long to analyze the results that by the time the analysis is complete it is too late to be of any real use.

The most effective method of evaluating most sales promotion and merchandising schemes is to ask a number of simple questions:

   1) What did it cost?
   2) What did it sell?
   3) Did it achieve the scheme's major objective?

Beyond answering these questions it is worthwhile measuring the results using a control-town system, considering other benefits and drawbacks from the promotion and contemplating the possible outcome of other options, particularly those relating to competitors' promotional activities. Still other factors include the variations in proof of purchase and the variation in support-advertising weight. These are only worth discussing, of course, if they have not been included in control-town tests. The main point to be made, however, is that these interesting but lesser considerations should not cloud the issue of a promotion's success or failure against its classified objective, and the major lesson for the future.


Target Company
Base Reference
SALES CAMPAIGNS

Marketing Integration

Budgeting Efficiency

Campaign Performance

Campaign Monitoring & Evaluation Procedures

Campaign Flexibility

Performance Grid Definitions


 

 

Emotional response

Sales promotion techniques, in common with most other marketing practices, are constantly evolving. But, unlike most other marketing activities, many of them rely, for the major part of their success, on emotive response. It is irrational, for instance, that customers should choose a gift instead of small discount on the purchase price - but they do.

On the other hand there is an increasing tendency for suppliers to select price promotions to meet objectives of one sort or another. The same kind of energy seems to be going into merchandising equipment, especially in marketing to the newer links in the distributive chain.



8. Increasing promotional activity

Over the next few years there will undoubtedly be many new suppliers in the market who will start using those promotional techniques which have hitherto been used almost exclusively in the highly specialized and hybrid businesses. This will be particularly so in view of the fact that there is increasing competition amongst hitherto non-competing companies, for consumer spending. As this sort of marketing situation evolves more and more, so we will see the breakdown of many distribution channels traditions and agreements - presumably some of this will be to the public good, and some far less so. But one thing is certain: it will all change.

There will continue to be changes in the choice of below-the-line activities so as to meet new consumer requirements and there will also be changes in the relationship of promotional activities to theme advertising.

More and more marketing men and advertising agencies in the industry are beginning to recognize that advertising and promotions are independent parts of a total plan designed to gain or retain a major share of business.

Furthermore, there will be further changes in supplier / distributor relationships. As the dust begins to settle around the current own-label activity, added-value marketing, captive or franchised distribution channels, et cetera, suppliers are going to ensure that the marketing activity pumped into their products is not simply pilfered for the benefit of others in the distribution channels.

Likewise, large groups will gradually recognize the importance of sales promotion and advertising to the generic development of product groups. Suppliers and retailers will unquestionably start to work closer together as this situation develops and much of the current in-fighting with 'display' bonuses will disappear. Government legislation may even play a part in these developments.

For the Company the role of sales promotion in the marketing-mix is therefore due for some changes. This means that each marketing man will need to study his own situation and promote accordingly. The one thing that can safely be forecast is an increasing need for promotion in most product fields. The more sophisticated marketing becomes, the closer the character of competing products becomes - and the more, therefore, the consumer looks for the icing on the cake, to help him make the product choice.



PROMOTION EVALUATION


Sales promotions in the industry are defined in the current context to include the following, whether or not they are supported by media advertising:

1)

Any point-of-sale promotional activity to the customer such as premium offers, reduced-price offers, stamps and coupons, gifts, competitions and banded packs.

2)

Any distribution channels incentives or discounts to the retailer.

3)

All display material whether in support of specific promotions or not.

4)

Any point-of-sale aids such as leaflets, brochures and store demonstrations.

5)

Any direct promotion to the consumer, such as coupons or free samples.

6)

Sponsorship.

The Company’s market place comprises of more than simply the advertiser and consumers, linked by advertising and sales promotion. One can identify the producer, his competitors, the government, distributors, retailers and the salesforce, as well as the final consumer. The producer advertises and promotes a product or service. So do his competitors. The retailer tries to attract the consumer to his shop often by separate advertising and promotional activity. In some cases salesmen may influence the consumer; in others the government is an active market force; in others consumers influence more consumers.


1. PERCEPTION OF THE MARKET

Part of the reason why marketing in the industry is such a complex subject is that it is dealing with people. Consumers are not only different in terms of their wants, needs, beliefs, attitudes, feelings and motives, but they perceive the market differently. They see it differently from each other and from the way the advertiser perceives the market place. How the advertiser sees market forces acting on the consumer, the consumer may see entirely differently. For example, while advertisers may know that there are six brands in a market, any one consumer may know a mere two or three of them. While they see their own product as such-and-such, the consumer may see it as something else. The producer spends money on advertising and sales promotion, but what does the consumer see? They may or may not see individual advertisement or promotional schemes, or parts of campaigns. Exactly what they perceive in terms of content, information and persuasion cannot be taken for granted. The advertiser may temporarily cut the price of a brand, but does the consumer see the price cut as a bargain?

The actual factors likely to figure in the consumer's perception of their market situation or their 'decision environment' go to determine how individual consumers behave and explain why people behave differently.


The pattern of consumer behavior will largely be a function of the factors in the consumer's market environment:

    1.   The brand knowledge
    2.   The advertisements perceived
    3.   The points-of-sale known
    4.   The in-store factors encountered
    5.   Other point-of-sale factors
    6.   Promotions
    7.   Availability
    8.   Price
    9.   Retailer communication
   10.  Salesman communication
   11.  Communication from other consumers
   12.  The social setting
   13.  Perceived opportunities for using the product

In this section we shall just be concerned with three major factors: point-of-sale influences (which will include promotions to the retailer), point-of-sale factors and other promotional activity.


2. SALES PROMOTIONS RESEARCH

At the current level of research technology there would not appear to be a proven single method, either simple or complex, that provides an accurate and valid way of measuring the effectiveness of sales promotion activity. (The same observation applies equally to media advertising.)

What exists are a number of different approaches to a range of different problems that are, as yet, partial solutions. Each approach, in relation to a specific kind of activity and set of circumstances, may provide valuable information and insights into promotional evaluation. None of these amount to a measurement approach that is sufficiently accurate and valid to the extent of being able to be applied as a rule of thumb. In combination with experience, they represent a compromise preferable to pure guess work, but not as good as the perfect measure that may be regarded as only a theoretical concept.

At this time a perfect evaluation measure represents a goal researchers must aim for. In practice, one does not believe that this goal will ever be absolutely attainable because human responses are extremely complex, and we are concerned with problems where behavioral, psychological and market-place variables are too numerous for one to take account of in any evaluation model. Moreover, some variables are probably unknown or 'invisible' and other known ones may be difficult to measure because of inadequacies in measurement techniques. Additionally, one does not know precisely how sales promotions work. Until this is known, or a least until one has a better idea as to how they work, perfect evaluation is a somewhat academic issue. However, by continuing to seek ideal solutions, and given a constantly improving technology, it should be possible, at the very least, to improve evaluation measures.

When one thinks about evaluating sales promotions, apart from the problems of complex market places, complex consumers, a large number of influencing factors and the fact that one does not know how promotions work, there is also the point that when one speaks of sales promotions, one is speaking of a number of things rather than something in particular. Sales promotions come in all shapes and sizes. Thus when one talks about evaluating sales promotions, one is talking about evaluating activities as diverse as offering retailers a bonus for stocking a product on the one hand, to sponsoring a national sporting event on the other.


The industry have a number of types of sales promotion activities which are well-tried research techniques that are clearly laid down as being the most appropriate. They include such research methods as follows:

 

i.

Research pre-testing

There are various techniques for pre-testing sales promotions, such as:

1.

Group discussions and 'depth interviews'

2.

Hall tests

3.

Van tests

4.

Mini-van tests

5.

Postal and door-to-door tests

6.

Pre-testing the advertising of promotions

7.

In-store tests

8.

Area experiments

The limitations of consumer-based pretests are that:

1)

The methods do not really measure what is likely to take place in the actual market situation. They cover preferences and attitudes and should not be used to forecast potential sales.

2)

They cannot be used for certain types of promotional activity, for example, price changes, display positions, shelf-space allocation, et cetera.


The limitations of in-store and area pretests are that:

1)

They are difficult to control.

2)

They tell one nothing about the consumer, for example, whether the promotion is attracting new buyers or people who would have bought anyway. This limitation can sometimes be overcome by linking in-store consumer interviews to the test.

3)

Again, they are limited to being appropriate for certain types of activity only.

ii.

Research post-testing

Techniques that can be used to evaluate sales promotion activities either during the activity or after the event include:

   1.  Store checks
   2.  Retail audits
   3.  Consumer panels
   4.  Usage and attitude surveys
   5.  Inter-media or 'test' -v- 'no-test' area experiments


The major problem in any post-testing of sales promotions is the one of isolating the other influencing variables like seasonality and competitive activity. Controls can sometimes be set up but these are usually expensive and difficult to operate.

The retail audit has certain limitations:

1)

The timing of a retail audit, for example, bimonthly, may not fit in with the promotional activity.

2)

Retail audits are rather inflexible. It may be impractical or expensive to adapt an ongoing service to the specific needs of a particular promotion.

3)

Retail audits provide no information about the consumer, for example, on repeat-buying behavior.

Consumer panels do not verify information on certain in-store activity, like distribution, display and the penetration achieved by a promotion.

iii.

Constraints on research
However, circumstances often preclude the most appropriate research technique being applied. What circumstances might these be? Unfortunately, in the real world, research cannot always be conducted according to the textbook. Certain constraints may be imposed that result in compromises having to be made regarding method; circumstances like:

1)

The available money for research: often the best method cannot be used because the funds are insufficient.

2)

Timing: again, the amount of time available can restrict the research approach.

3)

The lack of alternative facilities, for example, one might prefer to evaluate a particular promotion by using a consumer panel but unfortunately a ready-made panel is not available. The cost and time factors can enter in here because there may be insufficient of both to, say, set up an ad hoc panel.

4)

The need to maintain comparability: very often an alternative and better method cannot be used because there are even better grounds for carrying on with a less satisfactory alternative merely to maintain comparability with previous research.

Thus, whereas it may be possible to conclude that there are good and not-so-good methods of evaluating particular sales promotions, one tends to believe that, more often than not, the choice of techniques will be determined largely by circumstances. This is rather unfair on research since, if given sufficient resources, the researcher could do a much better job than he is often allowed (or constrained) to do.



3. METHODOLOGY

A large number of advertisers make no attempt to measure the effectiveness of their advertising and promotional investment. Could this be because they are disenchanted with the results after having tried, skeptical of research anyway, or that they just do not care? To some extent the first two reasons might be justifiable, but the third can never be. Sound management practice dictates that all new phases and operations of the Company be subject to systematic review in order to achieve a maximum level of performance. This should include advertising and, of course, sales promotion activity. In the industry the short-term and long-term benefits of systematically reviewing these activities are:

1)

Marketing management is forced to define specifically what each element of its programme is intended to accomplish in advance of exposure.

2)

An accurate feedback system provides management with details of company achievement on a running basis. This enables more effective use to be made of both tactical and strategic measures and counter measures in a dynamic market situation.

3)

A body of experience can be built up from both successes and failures in order to create more effective future communication.

In the industry measuring the performance of sales promotion activities (against expectations or targets) by means of an organized feedback of information becomes an essential part of management by objectives.



4. PROBLEMS OF EVALUATION OF SALES PROMOTION

In discussing the matter of evaluation, there are three major problems:

1)

What do we mean by evaluation?

2)

What criteria can we use to evaluate by?

3)

How do we undertake the actual business of evaluation?


When discussing the whole business of evaluating the effectiveness of sales promotions, what is meant by evaluation? Evaluation implies a value judgment and invariably this is in terms of concepts like goodness or badness. In seeking to discover whether a certain promotional activity is good or bad, we are not really concerned with the intrinsic or aesthetic merits of that activity. We are interested in its performance. Performance ceases to be merely a value judgment if we have some valid criterion, standard or norm by which to objectively judge the performance of an activity.

However, there are two major difficulties:

1)

How can one evaluate something, the precise working of which, one is uncertain about?

2)

It is not always a simple matter to establish performance criteria.

As far as the first point is concerned, more is claimed to be known about how advertising works than about how sales promotion actively works. Sales promotions are likely to be concerned with reinforcement of some sort of behavior pattern or habit formation. This would be a valuable field within which to conduct research, but at present it would be fair to say that nobody really knows. So if one does not know how something works, it is difficult to evaluate it.

As far as the second point is concerned, the trouble is that for most promotional activity either no criteria or inadequate criteria are put forward, which makes the task of evaluating performance impossible from the very outset. Given that one has correct, adequate performance criteria, a start can be made on evaluation. What criteria then can be used to evaluate promotions?
 

 

Proofs of success

The current unsatisfactory situation has been discussed by reference to how an analysis of proofs of success for 135 advertising campaigns put out by 40 leading American agencies, showed that almost none of the agencies really knew, or ever could know, whether or not their campaigns were successful. The fact that they could never have known even if they had wanted to, is the important point. Why was this? It was primarily because of deficiencies in the statement of promotional objectives. These were of three types, as detailed below. Although one analyzed above-the-line or 'mixed' advertising campaigns, the same comments apply to sales promotions and their objectives.

Deficiencies in statement of objectives for sales promotions are, for example:

1)

Failure to state the objective(s) in quantifiable terms: For example, to increase the awareness of product X. (By how much?)

2)

Failure to identify the target market: For example, to increase the awareness of product X by 50%. (From what and amongst whom?)

3)

The use of superlatives: For example, to maximize sales of product X. (What does this mean?)

A better statement of objectives might be:

To increase the awareness of product X from 25% (of all buyers) as determined by the last awareness check, to 50% of all buyers; and to increase sales by 60% over the corresponding period in the last fiscal year.

An alternative approach is to make 'communication goal statements'. For example:

Objective: To increase ratings of product 'X' regarding economy by 20% in the current fiscal year.

Target market: All male heads of households who are aware of product 'X'.

Dates goal is to be in effect: February 200? - January 200?

Size of target: 10,000 Buyers.


The implications in these two examples are that awareness and sales may be taken as evaluation criteria. This is a debatable point, which is discussed in detail in the next section.



5. SALES PROMOTIONS EVALUATION CRITERIA

If one regards advertising or, indeed, any promotional activity as an independent variable, and makes the assumption that the effectiveness (measured by some dependent variable) of that activity will increase as the quantity of it increases, all other things being equal, one has a response function typified, say, by the S curve. The major question is: What can be selected as the dependent or 'response' variable?

A list of 'success criteria' or possible dependent variables that may be used in assessing promotions, is related to specific promotional objectives in that some criteria apply to some objectives but not others. As a general list, it is a useful checklist of likely measurement criteria, although in many instances measurement will not be possible on grounds of practicability.

The list covers:

1)

Number of 'promoted' units taken up.

2)

Number of new users who repeat purchase.

3)

Profit per promoted unit and profit for those unprompted units which can be ascribed to the promotion.

4)

Attitudes (short- and long-term) towards the brand (product) amongst actual and potential users.

5)

Ascribable profit from both new and former users who take up the promotion.

6)

Ascribable sales and profit against promotional cost.

7)

Distribution and display increases in impulse buying, sales, distribution channels (and consumer) goodwill.


To these may be added:

8)

The size and cost of target audience reached by the promotion.

9)

The extent of brand switching from competitive to promoted brand.

10)

The general organization of the product.

11)

The corporate goodwill achieved.

These criteria can then be examined to see whether, in the context of the Company, they might be applicable to 'tactical' (or short-term) or 'strategic' (or medium- or long-term) promotional objectives, or both.


6. TACTICAL AND STRATEGIC OBJECTIVES

 

i.

Tactical below-the-line activities

These may be offensive, defensive, or merely concerned with preserving the status quo in the industry. Their effect or benefit (whether measurable or not) is meant to be felt amongst the exposed and/or target group in the immediate period of, and following, the promotion. The target group may be a large or small market segment, or within a geographic region.

ii.

Strategic below-the-line activities

These are not expected to yield any noticeable immediate effect or benefit upon the exposed or target group for the industry. Over a period of time, it is hoped that they will produce a more favorable marketing climate for the product, brand or company.

All tactical activity thus contains an element of the strategic, but the converse may not be true. Strategic activity, amongst its other effects, will create a climate in which tactical activity may be more fruitful.



7. PERFORMANCE-EVALUATION CRITERIA

Performance-evaluation criteria in the industry are as follows:

1)

Profit (as a percentage of overall company sales, by product line, by product by geographic area, by distribution channel, and by type of customer). Strategic.

2)

Sales targets (for the Company as a whole, by product line, by product, by distribution channel, by type of customer and by customer). Strategic and Tactical.

3)

Continuing growth of sales at least at the pace of industry to enable the firm to maintain its share of the market. Strategic.

4)

Increase in relative market share. Strategic and Tactical.

5)

Sales quotas by geographic territory and by salesman. Strategic and Tactical.

6)

Growth in earnings to provide resources for reinvestment. Strategic.

7)

Continuing addition of new products and product lines. Strategic and Tactical

8)

Continuing expansion of the firm's target market(s). Strategic and Tactical.

9)

Absence of excessive seasonal or cyclical fluctuations in sales and earnings and of consequent loss of competitive position through externally forced inefficiency in the use of the firm's resources. Strategic and Tactical.

10)

'One-off' cost-benefit studies of single activities, and synergistic analysis of multiple activities. Tactical.

11)

Increase in net current worth of the firm. Strategic.


For the Company the essential differences between the problem of measuring the effectiveness of tactical below-the-line promotions compared with strategic promotions, is the time period. In a short time period (relating to tactical activity) one is likely to be concerned with fewer extraneous variables exercising a smaller aggregate effect on any dependent variable one chooses. Conversely, in a long time periods (relating to strategic activity) one is likely to be concerned with many extraneous variables which exercise a large aggregate effect on the dependent variable. It may be concluded, therefore, that it is relatively easier to measure the effectiveness of tactical below-the-line promotions like competitions, premiums, coupons, et cetera, than strategic promotions like sponsorship.


8. SALES AS THE DEPENDENT VARIABLE

In the industry two sorts of criticisms appear to be leveled at the suggestion that sales response is the best measure of the effectiveness of advertising (or promotional activity of any sort, including below-the-line activity). First, there is no proven causal relationship between sales and advertising, and second, if there is, it is difficult to ascertain the true level of sales (for most products) in a particular time period, thus making it an immeasurable dependent variable.

To suggest that Products & Services sales are caused by advertising implies that if advertising is varied, while all other factors that might affect sales are held constant, sales will vary in a predictable way.

It has often been argued that this is not so, and no foolproof case has yet been established that suggests that it is. However, one may question the need to establish unequivocally, a causal relationship between sales and advertising or sales and promotional activity. A fair test of validity (of the sales effectiveness of advertising and promotional activity) is the fact that hundreds of millions are spent each year on them. On the face of it, it would appear reasonable to accept Company sales as a viable criterion or dependent variable and then set about the practical problems of measuring sales accurately. As a dependent variable, sales appear more sensible than, say, awareness or attitude measures. Achieving high awareness of favorable attitudes does not indicate, necessarily, an effective promotion. In the final analysis, sales have to enter into the equation somewhere, so why not treat this variable as a key one from the outset? In addition, there are other variables that may be chosen. Indeed, in selecting evaluation criteria, it is advisable to utilize several criteria if possible, for example, sales plus awareness and attitude measures.

Thus for the Company it would be true to say that a satisfactory measurement approach would need to account for a number of criteria or dependent variables within a total response function.



9. MODEL RESEARCH BRIEF

Below is an example of an ideas research brief that can enable a researcher to begin to evaluate sales promotions in the industry properly.

 

i.

Research objectives

Amongst target group:

1)

To establish the level of awareness of the companies undertaking the promotion.

2)

To establish the level of awareness of promotional details A, B, C and D.

3)

To establish a demographic profile of the target group (clearly defined).

4)

To establish attitudes towards the promotion along specified dimensions.

5)

To establish attitudes towards the promoted brand, along specified dimensions.

6)

To establish attitudes towards the company, along specified dimensions.

7)

To achieve a purchasing penetration of 15% (or to sell x 000 units).


Amongst non-target group:

1)

To establish attitudes towards the company, along specified dimensions.

2)

To establish attitudes towards the promoted brand, along specified dimensions.

3)

To establish attitudes towards the promotion, along specified dimensions.

4)

To establish the level of awareness of the supplier undertaking the promotion.

ii.

Action criteria

1)

To continue the promotion unaltered.

2)

To modify the promotion and repeat it in modified form.

3)

To discontinue/reject the promotion for future use.

iii.

Decision criteria

1)

Level of target-group and non-target awareness of promotion.

2)

Level of target-group awareness of details of promotion.

3)

Demographic profile of target group.

4)

Attitudes towards

(a) Promotion

(b) Promoted brand

(c) Company

5)

Sales.

iv.

Action standards

1.

Minimum acceptable level of awareness of promotion by target group to be 70%.

2.

Minimum acceptable level of awareness of promotion by non-target group to be 20%.

3.

Minimum acceptable level of awareness of promotional details by target group to be A:75%, B:30%, C:30%, and D:30%.

4.

Demographic profile of target group to be in line with current brand profile. (Specific criteria set here).

5.

Maximum acceptable level of adverse comment about the promotion to be 10%.

6.

Attitudes towards brand and company to be better amongst 'aware' respondents than amongst those unaware by Y%.

7.

Minimum acceptable purchasing penetration to be 10% (or to sell x 000 units).


Target Company
Base Reference
PROMOTIONAL PERFORMANCE

Promotional Research & Methodology

Promotion Evaluation & Monitoring

Promotion Performance & Efficiency

Promotion Targeting

Promotion Flexibility

Performance Grid Definitions



10. THRESHOLD AND TARGET GOALS

For the Company the next stage will be to refine these objectives still further by incorporating the concepts of threshold goals and target goals. By threshold goal is meant the minimum point of acceptability; by target goal is meant the desired, optimum or maximum level of expectancy.

The goal-threshold range becomes the basis for an evaluation yardstick. If a promotion fails to reach its threshold achievement goal, it should be rejected. If it is above, it should be evaluated as more or less desirable, depending upon how close it is to the target goal. If it reaches the target goal, it has achieved the desired result. The usefulness of a range of values lies in the fact that it permits different promotions to be evaluated. Once decision criteria have been set and action standards agreed (E.g. to continue with, discontinue, modify, etc.), performance can be related to achievement, threshold goals and target goals, and to the promotional expenditure.

Threshold and target goals may be determined by the industry:

   1)  Previous experience.
   2)  An estimate of future trends.
   3)  The anticipation of competitor activity.
   4)  The amount of resources committed to the project


Obviously, in evaluating promotions in such a way, the cost of the promotion must be taken into account. It is possible to work out figures relating to cost per 1000 impacts for awareness, and cost per unit sales. Another important point to bear in mind is the importance to be attributed to the measures set as threshold and target. Clearly, sales are more important than merely creating awareness. A promotion that exceeded its target considerably in terms of awareness but fell short on sales would be less successful than another that exceeded its sales targets by a great deal without affecting awareness.

The conclusion is a simple one and merely serves to illustrate the points:

1)

Actual figures or percentages should be stated for expectations and target goals.

2)

In evaluating a promotion there is a minimum point of acceptance as a measure of success or failure.



PRODUCT LAUNCH MARKETING COSTS

Historic Marketing Data

Base Reference Country

HISTORIC MARKETING DATA

 

Product Launch or Revision Marketing Scenario

Target Company

Base Reference Country

PRODUCT LAUNCH MARKETING DATA

PRODUCT LAUNCH MARKETING DATA

PRODUCT LAUNCH MARKETING RATIOS

PRODUCT LAUNCH MARKETING RATIOS

 FINANCIAL DEFINITIONS


Target Company
Base Reference
SALES PROMOTION COSTS  

Advertising : Mail : Media

Sales Personnel : Expenses : Materials

Sale Promotion Materials : Print

Sales Point-of-Sale Systems & Materials

Publicity : P.R. : Exhibitions

Performance Grid Definitions

 

HISTORIC FINANCIAL INDUSTRY DATA

HISTORIC FINANCIAL INDUSTRY DATA

 Financial Definitions


 

SALES PROMOTION FINANCIAL SCENARIOS

 

SALES PROMOTION SCENARIOS BASED BALANCE SHEET FORECASTS


The SALES PROMOTION FINANCIAL SCENARIOS BALANCE SHEET FORECASTS section gives a series of Forecasts for the Company and the industry using a number of assumptions relating to the sales promotion decisions available to the management of the Company.

The Balance sheet forecast given shows the effects of sales promotion improvements which Financial Management is likely to recommend:

SALES PROMOTION FINANCIAL SCENARIOS

  • Base Forecast : Median Market Scenario

  • Marketing Expenditure

  • Variable Marketing Cost Objectives

  • Selling Cost Objectives

  • Advertising Cost Objectives

  • Promotional & Pricing Cost Objectives

  • Promotional Expenditure

  • Sales & Marketing Cost Scenarios

Managers in the Company will, in both the short-term and the long-term, have vital decisions to make regarding the sales promotion improvements, margins and profitability and these decisions will need to be evaluated in light of the customers, markets, competitors, products, industry and internal factors. The scenarios given isolate a number of the most important factors and provide balance sheet forecasts for each of the scenarios.

The data provides a short and medium term forecast covering the next 6 years for each of the Forecast Financial and Operational items. The Financial and Operational Data sections show each of the items listed below in terms of forecast data and covers a period of the next 6 years.

 

 

Financial Comparisons: Scenarios

 

Target Company

Base Reference Industry

 

MEDIAN  FORECAST : Financials

MEDIAN  FORECAST : Margins & Ratios

PRODUCT LAUNCH: Financials

PRODUCT LAUNCH: Margins & Ratios

MEDIAN  FORECAST : Financials

MEDIAN  FORECAST : Margins & Ratios

PRODUCT LAUNCH: Financials

PRODUCT LAUNCH: Margins & Ratios

 

 

 Financial Definitions

 


 

 

4

Financial Scenarios for Sales Management:

 

SALES MANAGEMENT FINANCIAL SCENARIOS

 

TACTICAL OPTIONS FINANCIAL SCENARIOS BASED BALANCE SHEET - FORECASTS


The SALES MANAGEMENT FINANCIAL SCENARIOS BALANCE SHEET FORECASTS section gives a series of Forecasts for the Company and the industry using a number of assumptions relating to the Sales & Selling decisions available to the sales management of the Company.

The Balance sheet forecast given shows the effects of sales and selling tactics which Sales Management is likely to recommend:


SALES MANAGEMENT FINANCIAL SCENARIOS

  • Base Forecast : Median Market Scenario

  • Sales Cost Improvement

  • Long Term Product Price Cutting

  • Long Term Product Price Increase

  • Promotional Expenditure

  • Target Markets Development

  • Order Taking Improvements

  • Product Positioning

  • Product Branding + Multi-branding Investment

  • Customer / Order Processing Systems Investment

  • Systems Investment

  • Overseas Development

  • Sales Personnel + Staff Improvement


Managers in the Company will, in both the short-term and the long-term, have vital decisions to make regarding the selling and sales improvements, margins and profitability and these decisions will need to be evaluated in light of the customers, markets, competitors, products, industry and internal factors. The scenarios given isolate a number of the most important factors and provide balance sheet forecasts for each of the scenarios.

The data provides a short and medium term forecast covering the next 6 years for each of the Forecast Financial and Operational items. The Financial and Operational Data sections show each of the items listed below in terms of forecast data and covers a period of the next 6 years.

 

Financial Comparisons: Scenarios

 

Target Company

Base Reference Industry

 

MEDIAN  FORECAST : Financials

MEDIAN  FORECAST : Margins & Ratios

MEDIAN  FORECAST : Financials

MEDIAN  FORECAST : Margins & Ratios

 


THE TARGET COMPANY FORECASTS

MARKETING EXPENDITURE : Financials

MARKETING EXPENDITURE : Margins & Ratios

SALES COST IMPROVEMENT: Financials

SALES COST IMPROVEMENT: Margins & Ratios

LONG-TERM PRODUCT PRICE CUTTING : Financials

LONG-TERM PRODUCT PRICE CUTTING : Margins & Ratios

LONG-TERM PRODUCT PRICE Increase: Financials

LONG-TERM PRODUCT PRICE Increase: Margins & Ratios

PROMOTIONAL EXPENDITURE : Financials

PROMOTIONAL EXPENDITURE : Margins & Ratios

TARGET MARKETS DEVELOPMENT : Financials

TARGET MARKETS DEVELOPMENT : Margins & Ratios

ORDER TAKING IMPROVEMENTS : Financials

ORDER TAKING IMPROVEMENTS : Margins & Ratios

PRODUCT POSITIONING : Financials

PRODUCT POSITIONING : Margins & Ratios

PRODUCT BRANDING + MULTI-BRANDING Investment: Financials

PRODUCT BRANDING Investment: Margins & Ratios

CUSTOMER / ORDER PROCESS SYSTEMS Investment: Financials

CUSTOMER/ORDER PROCESS SYSTEMS: Margins & Ratios

SYSTEMS Investment: Financials

SYSTEMS Investment: Margins & Ratios

OVERSEAS DEVELOPMENT : Financials

OVERSEAS DEVELOPMENT : Margins & Ratios

SALES PERSONNEL + STAFF IMPROVEMENT: Financials

SALES PERSONNEL + STAFF IMPROVEMENT: Margins & Ratios


FORECAST FINANCIAL SCENARIOS

MARKETING EXPENDITURE : Financials

MARKETING EXPENDITURE : Margins & Ratios

SALES COST IMPROVEMENT: Financials

SALES COST IMPROVEMENT: Margins & Ratios

LONG-TERM PRODUCT PRICE CUTTING : Financials

LONG-TERM PRODUCT PRICE CUTTING : Margins & Ratios

LONG-TERM PRODUCT PRICE Increase: Financials

LONG-TERM PRODUCT PRICE Increase: Margins & Ratios

PROMOTIONAL EXPENDITURE : Financials

PROMOTIONAL EXPENDITURE : Margins & Ratios

TARGET MARKETS DEVELOPMENT : Financials

TARGET MARKETS DEVELOPMENT : Margins & Ratios

ORDER TAKING IMPROVEMENTS : Financials

ORDER TAKING IMPROVEMENTS : Margins & Ratios

PRODUCT POSITIONING : Financials

PRODUCT POSITIONING : Margins & Ratios

PRODUCT BRANDING + MULTI-BRANDING Investment: Financials

PRODUCT BRANDING Investment: Margins & Ratios

CUSTOMER / ORDER PROCESS SYSTEMS Investment: Financials

CUSTOMER/ORDER PROCESS SYSTEMS: Margins & Ratios

SYSTEMS Investment: Financials

SYSTEMS Investment: Margins & Ratios

OVERSEAS DEVELOPMENT : Financials

OVERSEAS DEVELOPMENT : Margins & Ratios

SALES PERSONNEL + STAFF IMPROVEMENT: Financials

SALES PERSONNEL + STAFF IMPROVEMENT: Margins & Ratios

 

 Financial Definitions

 

 

 

5

Product Industry Summary:

 

PRODUCT INDUSTRY SUMMARY

 

Target Company

Products & Services

Significant Company Products

Company Product / Brand Sector 1

Company Product / Brand Sector 2

Company Product / Brand Sector 3

Company Product / Brand Sector 4

Company Product / Brand Sector 5

Company Product / Brand Sector 6

Company Product / Brand Sector 7

Company Product / Brand Sector 8

Company Product / Brand Sector 9

Company Product / Brand Sector 10

Company Product / Brand Sector 11

Company Product / Brand Sector 12

Company Product / Brand Sector 13

Company Product / Brand Sector 14

Company Product / Brand Sector 15

Major Industry Products

Industry Product Sector 1

Industry Product Sector 2

Industry Product Sector 3

Industry Product Sector 4

Industry Product Sector 5

Industry Product Sector 6

Industry Product Sector 7

Industry Product Sector 8

Industry Product Sector 9

Industry Product Sector 10

Industry Product Sector 11

Industry Product Sector 12

Industry Product Sector 13

Industry Product Sector 14

Industry Product Sector 15


 


The Product Sector Summary and Norms for Products & Services are shown in this section. This represents the major product sector data for the industry and as such forms the basis of comparison.

Only the most critical factors should be compared with the various scenarios given above as product averages can at best represent an indication and not a specific point of measure.

Reliance on Product Summaries and Norms are often used by analysts in order to support theories and suppositions and these are in turn used for investment scenarios. In fact, Product Summary Norms or Averages are not tangible as they combine and manipulate data from companies in wide ranging activities and thus much of the data is uncritical.

Much of the benefit in the analysis of Product Summaries and Norms is to use the data to provide guide-lines or parameters which can be seen to define and identify the target product sector.

Since these Product Summaries and Norms should be representative of the entire product range it is wise to maintain an average which encompasses all the major countries in the trade cell.

 

INDUSTRY & PRODUCT NORMS

Target Company

Base Reference Country

INDUSTRY & PRODUCT NORMS

INDUSTRY & PRODUCT NORMS

 


 

 Industry Definitions


 

Products & Services covered in this database:


 

 

**** This report covers all the products or brands which were previous, are currently, or will potentially be in the future, important to the Company.

 

 

 

6

Sales Force Decisions:



SALES FORCE DECISIONS


Salesmen are used by the great majority of companies and many assign them the pivotal role in the creation of sales. As salesmen are capable of performing a wide variety of tasks, each company must decide exactly what it expects to accomplish through direct selling. The objectives set for the salesforce influence the strategies and tactical decisions arising in the management of an effective sales operation.

At the strategic level, the Company must decide on the size of its salesforce and how it should be organized. In principle, the salesforce should be expanded up to the point where an additional salesman would impose more cost on the company than he generates in the way of a gross margin on sales. In practice, sales-force size decisions are made on estimates of salesman productivity in different territories or feasible territory workloads. The effectiveness of the salesforce will depend upon whether it is organized along territorial, product, or customer lines and whether sales territories are designed thoughtfully in terms of size and shape.

Salesmen must be continuously recruited and selected on the basis of scientific procedures to hold down the high costs of hiring the wrong men. Salesman training programmes are growing more elaborate and require careful thought and planning to justify their costs and those who emerge from the training must be assigned to territories in a way that recognizes their varying productivity in different possible assignments. Compensation is predictably the most important single element in their motivation and should somehow provide a measure of both incentive and security to be maximally effective. The average salesman needs supervision and continuous encouragement because he must make a large number of decisions and is prone to many pressures. Regularly his performance must be formally evaluated to help him do a better job.

Personal selling in most companies represents a larger marketing expenditure than advertising. In general firms spend almost twice as much on personal selling than on advertising. Salesmen serve as a unique link with the company's customers and the salesman is the company to most of its customers. He provides and tailors the company's offering to the individual customer's needs. He also provides the company with much needed intelligence from the marketplace. The term "salesman" covers a broad range of positions, within which the differences are often greater than the similarities.

The following is suggested as a classification of selling positions:

1.

Positions where the "salesman's" job is predominantly to deliver the product.

2.

Positions where the salesman is predominantly an order-taker or in a retail / sales counter situation.

3.

Positions where the salesman is also predominantly an order-taker but works in the field.

4.

Positions where the salesman is not expected or permitted to take an order but is called on only to build good will or to educate the actual or potential user.

5.

Positions where the major emphasis is placed on technical knowledge and the salesman is primarily a consultant to the client companies.

6.

Positions which demand the creative sale of tangible products.

7.

Positions move along a spectrum ranging from the least to the most creative types of selling. The earlier jobs call primarily for maintaining accounts and taking orders, while the latter require hunting down prospects and creating new sales. Most of this section deals with the creative type of salesman.



1. THE BUYER-SELLER RELATIONSHIP

Effective selling is in large part a matter of having the correct attitude toward the customer. The customer needs help in solving his problems. An effective salesman recognizes his customer's problems and knows how to be of service.

Companies are striving to overcome the problems of ineffective salesmen through better selection and training of their salesforce. They are wary of "the old stereotyped salesman." Much of the old sales job has been taken over by mass media and non-personal retailing. The new breed of salesman is better schooled and able to absorb a vast amount of information about many products and customers. The new salesman is likely to have technical training and be backed by a top-rate team of technical and market researchers. He knows how to read the needs of customers and recognizes that they are growing more interested in buying systems and services than single products. He goes after the long-run relationship rather than the quick sale. In the 1990s, he is a traveling executive and even his name has been changed to "field manager", or "market specialist", or "sales engineer", or "service representative". As technology grows more complex and competition more keen, one can expect to see more of this new breed of salesman.


2. SALES TASKS

Selling is only one of several tasks of the salesman. He may perform as many as six different activities:

 

i.

Prospecting

The Company does its best to generate leads for the salesman, but he is expected to search for additional prospects.

ii.

Communicating

Much of a salesman's work consists of communicating information to existing and potential buyers about his company's products and services.

iii.

Selling

The salesman engages in the art of salesmanship - approaching, presenting, answering objections and closing sales.

iv.

Servicing

The salesman provides various services to his customers - consulting on their problems, rendering technical assistance, arranging financing and expediting delivery.  

v.

Information gathering

The salesman conducts market research and intelligence work for his company and is responsible for supplying regular reports on his sales call activity and findings.

vi.

Allocating

In times of product scarcity, the salesman helps evaluate customer profitability and advises on customer allocation.



The salesman's actual mix of tasks varies with the character of the purchase decision process and establishes the kind of activities that the salesman must perform in order to develop and maintain satisfied customers and the sales activities required to handle straight new task buying situations.

Company marketing strategy also influences the salesforce strategy. In some markets suppliers use a pull strategy, relying on massive consumer advertising to draw customers into the retailers' establishments to ask for their brands. The company salesmen play a servicing role of seeing to it that the retailers carry a sufficient stock, give good shelf exposure and co-operate in sales promotion programmes. Other suppliers may use a push strategy, placing a primary role on their salesmen's selling the trade on carrying their brands. Even within the selling task, the Company may vary in how much time they want their salesmen's mix of tasks, also varies with the state of the economy. When product shortages appear, salesmen may find themselves with nothing to sell and therefore some observers jump to the conclusion that the salesmen is redundant and should be dismissed. But this overlooks the other roles of the salesman - allocating the product, counseling unhappy customers, communicating company plans on remedying the shortage, and selling the company's other products that were not in short supply.


Target Company
Base Reference
SALESFORCE INTERACTION

Customer Prospecting

Customer Communications

Customer Servicing

Selling

Information Gathering & Usage

Performance Grid Definitions


SALES FORCE SIZE DECISIONS


Salesmen are among the most productive and expensive assets the Company has. Increasing their number will increase both sales and costs. There are two popular approaches to setting the right sales-force size:


1. SALESMAN PRODUCTIVITY APPROACH

A proposed solution to the problem of sales-force size depends upon measuring the sales productivity of salesmen in different-size territories. It is noted that salesmen in territories rated as having higher sales potential produced more sales but that their sales were less than proportionate to the increase in sales potential.

A particular case might find that the sales in a territory with 5 percent of total potential were $200,000. In this latter case, there is only $40,000 of sales for every 1 percent of potential.

If the company employed one hundred salesmen and wanted them all to work territories of equal potentials, it would create one hundred territories, each with 1 percent of total potential. This means that sales would average $160,000 in each territory, according to the previous analysis. Since there are one hundred men, total company sales would be $16 million.

If the company employed only twenty men, it would create twenty territories, each with 5 percent of the total potential. In this case, sales would average $200,000 in each territory according to the previous analysis. Since there were twenty men, total company sales would be only $4,000,000. If one applied the same reasoning to other possible sizes of the salesforce. For each size, one projected the total sales volume, based on the estimated productivity of salesmen in different-size territories.

The final step was to convert each sales volume into operating profit on investment. One first estimated the operating profit before variable selling cost on each sales volume. Then one deducted the variable selling cost, specifically the number of men times the cost per salesman. This left an estimate of operating profit on that sales volume. Then one estimated the working capital and plant investment required at alternative sales volumes. Finally, one expressed the estimated operating profit as a ratio to the required investment. In this example, the operating profit on investment was 11.6 percent with one hundred men and only 8.7 percent with twenty men. The optimal-size salesforce called for sixty-five men, with the estimated rate of return of 22.0 percent.

This method depends on having a sufficient number of existing territories to allow making a statistical estimate of creating territories of equal sales potential. It also assumes that sales productivity is a function only of territory sales potential, neglecting the variations that might be produced by the mix of accounts in the territory, their geographical dispersion and other factors.



2. SALESMAN WORKLOAD APPROACH

Another calculation proposed an approach based on equalizing the workload of salesmen rather than territory sales potential. This method assumes that management has determined the economic number of calls to make on accounts of different sizes.

The method consists of the following steps:

i.

Customers are grouped into size classes according to their annual sales volume.

ii.

The desirable call frequencies (number of sales calls on an account per year) are established for each class.

iii.

The number of accounts in each size class is multiplied by the corresponding call frequency to arrive at the total workload for the country, in sales calls per year.

iv.

The average number of calls a salesman can make per year is determined.

v.

The number of salesmen needed is determined by dividing the total annual calls required by the average annual calls made by a salesman.

Suppose, for example, the company estimates that there are one thousand A-accounts and two thousand B-accounts in the nation; and A-accounts require thirty-six calls a year and B-accounts twelve calls a year. This means the company needs a salesforce that can make sixty thousand sales calls a year. Suppose the average salesman can make one thousand calls a year; then company would need sixty full-time salesmen.



SALES FORCE DESIGN


1. SALES-FORCE STRUCTURE

The effectiveness of a salesforce depends a great deal on how it is organized. A salesforce can be organized around company territories, products, customers, or some mixture of the three.

 

i.

TERRITORIAL-STRUCTURED SALES FORCE

In the simplest sales organization each salesman has an exclusive territory in which he represents the company's full line. This sales structure has a number of advantages. First, it results in a very clear definition of the salesman's responsibilities. As the only salesman working the territory, he bears the credit or blame for area sales to the extent that personal selling effort makes a difference. This tends to encourage a high level of effort, especially when management is able to gauge fairly accurately the area's sales potential. Second, his responsibility for a definite territory increases his incentive to cultivate local business and personal ties. These ties tend to improve the quality of both his selling effectiveness and his personal life. Third, salesman travel expenses are likely to be relatively small, since each salesman's travel takes place within the bounds of a small geographical territory.

The territorial form of sales organization works quite well in the industry with a relatively homogeneous set of products and customers. But these same companies, as their products or markets become diversified, find this form increasingly less effective. At the heart of the problem is the fact that to be effective, the salesman must know his products and his customers. But there is a clear limit to how much knowledge a salesman can acquire about different types of products and customers.

ii.

PRODUCT-STRUCTURED SALES FORCE

The importance of salesmen's knowing their products, together with the desire for product responsibility, has led many companies to structure their salesforce along product lines.

Specialization of the salesforce by product is particularly warranted where the products are
 1) technically complex, or
 2) highly unrelated, or
 3) very numerous.

The mere existence of different Company market and products sectors, however, is not a sufficient argument for specializing the salesforce by product. A major drawback may exist if the company's separate product lines are bought by many of the same customers.

For example: One company has four major divisions and several subsidiaries, each with its own salesforce. All of these salesforces call on the same customers. It is conceivable that as many as seven different salesmen representing the same company may call on the same buyer on the same day.

This means that company salesmen travel over the same routes, and each uses up valuable time waiting in the outer office to see the customer's purchasing agents. These extra costs must be weighed against the benefits that may result from the higher level of customer service and the more knowledgeable product representation.

iii.

CUSTOMER-STRUCTURED SALES FORCE

Companies may set up separate salesforces along customer lines. The customers may be differentiated by:

 a) Type of industry
 b) Size of Customers
 c) Channel of distribution
 d) Company or Product Group

The most obvious advantage of customer specialization is that each salesforce can become more knowledgeable about specific customer needs.

The major disadvantage of customer-structures salesforces arises if the various types of customers are scattered evenly throughout the country. This means an overlapping coverage of territories, which is always more expensive.

iv.

COMPLEX SALES-FORCE STRUCTURES

When a company sells a wide variety of products to many types of customers over a broad geographical area, it often combines several principles of sales-force structure. Salesmen may be specialized by territory-product, territory-customer, product-customer, or ultimately by territory-product-customer. A salesman may then be responsible to one or more line managers and/or one or more staff managers; however, multiple lines of supervision should generally be avoided.

The structure of a salesforce, no matter how effective it may originally be, is always in danger of antiquation in the course of time. A company should reconsider periodically whether its salesforce is organized along the most effective lines. In comparing the existing structure with a proposed alternative, the most detailed analysis of the economic and human factors is required. Even when the economic advantages seem substantial, the human factor should not be treated lightly. If any reorganization is perceived by all or a substantial part of the salesforce as reducing its opportunities, its alleged economic advantages on paper may never be realized in practice.

 


2. TERRITORIAL DESIGN

The great majority of companies assign their salesmen to specific territories whether or not they are further specialized by product or type of customers. The territories are aggregated into larger groupings called districts, and in turn these districts may be aggregated into major sales regions. Many of the larger companies, for example, utilize an eastern, southern, central, and western regional plan for field operations.

In designing a system of territories, the company generally tries to achieve the following territorial characteristics: the territories are easy to administer; their sales potential is easy to estimate; they keep down total travel time; and they provide a sufficient an equitable workload and sales potential for each salesman. These characteristics are achieved through decisions about the size and shape of territorial units.


Target Company
Base Reference
xSALESFORCE STRUCTURE   x

Territory Value Structured

Workload Structured

Territory Structured

Product Structured

Customer Structured

Performance Grid Definitions

i.

TERRITORY SIZE

There are two competing philosophies on the proper size of territories. One approach calls for forming territories of equal sales potential, and the other calls for forming territories of equal workload. Each principle offers advantages at the cost of some real dilemmas.

The logic of creating territories of equal potential is to provide each salesman with the same income opportunities and to provide the company with a means of evaluating performance. It is thought that under this principle chronic differences in sales yield by territory reflect differences in the ability or effort of individual salesmen. This awareness will encourage salesmen to work at their top capacity.

Alas because customer geographical density almost always varies, territories with equal potential typically cover vastly different areas. For example, the potential for the sale of a particular product may be as large in one city as it is in a number of the regions.

The problem is the salesmen assigned to the larger and sparser territories are either going to end up with less sales - and income, where commissions are involved - for equal effort or with equal sales only through extraordinary effort. Is there any way around the problem? One possible adjustment is to pay higher compensation to the rural salesman, providing him with incentive and insuring that good men will be attracted to larger territories. But this reduces the profit on sales in the larger territories. An alternative adjustment is to acknowledge that territories differ in attractiveness and assign the better men to the better territories. Transfers to the better territories would be awarded on the basis of seniority and demonstrated ability. But this has several disadvantages. The salesmen are taken out of their territories just when they begin to know them well. Their home life is disrupted by the frequent transfers. Transfer expenses, which may be high, must be absorbed by the firm, and the men who do not get the better territory may be bitter.

ii.

TERRITORY SHAPE

Territories are formed by combining smaller units, such as counties or states, until they add up to a territory of a given potential or workload. They are put together with reference to the location of natural barriers, the compatibility of adjacent areas, the adequacy of transportation, and so forth. The industry also tries to achieve a certain territory shape because these can influence the cost and ease of coverage and the salesman's satisfaction.

Three different common territorial shapes are:

a)

A circular territory with the salesman headquartered in the centre offers two advantages. The circle makes it easier for the salesman to prepare a routing plan that requires a minimum of backtracking. In effect, he travels in a circle, and when finished, he returns to his branch location. Furthermore, he is not very far from any of his accounts when special trips have to be made.

b)

A clover leaf pattern territory with the salesman headquartered in the centre enables the salesman to travel in a series of loops around his territory. If clover leaves are made the right size, the salesman can start out each Monday and finish a clover section by Friday evening and return home. Furthermore, the cost of special trips is low because the accounts are not far away.

c)

A wedge-shaped territory radiating out from a central metropolitan area is often employed when a metropolitan area is too large for one salesman to handle. It also tends to balance rural and urban calls among salesmen. Its major disadvantage is it places the salesman quite far from some of his accounts. In making special calls on these accounts, his return to headquarters would represent a lot of "deadheading."

Actual routing costs depend on the geographical location of accounts within the territory as well as the territory's shape. It is not generally obvious which routing through a set of points is the most efficient. An increasing number of companies are subjecting the routing problem to mathematical analysis. By finding solutions to the "traveling salesman problem," they can help their salesmen reduce travel time or cost.



SALES FORCE SELECTION


1. SALESMEN SELECTION

At the heart of a successful sales-force operation is the selection of good salesmen. The performance level of an average salesman and that of a top salesman are quite different. A survey of over five hundred companies revealed that 27 percent of the salesmen brought in over 52 percent of the sales. Beyond the differences in salesman productivity are the great wastes in hiring the wrong men. Of the sixteen thousand salesmen who were hired by the surveyed companies, only 68.5 percent still worked for their company at the end of the year, and only 50 percent were expected to remain through the following year. The cost of recruiting, training, and supervising an individual salesman for one year was estimated as representing the equivalent of a year's salary.


2. WHAT MAKES A GOOD SALESMAN?

Selecting salesmen would not be so much a problem if one could be sure what characteristics make up an ideal salesman. If ideal salesmen are outgoing, aggressive and energetic, it would not be too difficult to check for these characteristics in clients. But a review of the most successful salesmen in any company is likely to reveal a good number who are introverted, mild-mannered, and far from energetic. The successful group will also include men who are tall and short, articulate and inarticulate, well groomed and slovenly.

Nevertheless, the search for the magic combination of traits that spell sure-fire sales ability continues unabated. The number of lists that have been drawn up is countless. Most of them recite the same qualities.

One observer with broad experience wrote: It is my conviction that the possessor of effective sales personality of a habitual "wooer," an individual who has a compulsive need to win and hold the affection of others. His wooing, however, is not based on a sincere desire for love because, in my opinion, he is convinced at heart that no one will ever love him. Therefore, his wooing is primarily exploitative . . . his relationships tend to be transient, superficial and evanescent.

Another opinion lists five traits, in addition to the wooing instinct, that made the super-salesman:

a)

a high level of energy

b)

abounding self-confidence

c)

a chronic hunger for money

d)

a well-established habit of industry

e)

a state of mind that regards each objection, resistance, or obstacle as a challenge.


Yet another opinion offers one of the shortest lists of traits common to good salesmen.

Seven years of fieldwork led to the conclusion that the good salesman has at least two basic qualities:
 a)  empathy, the ability to feel as the customer does
 b)  ego drive, a strong personal need to make the sale.

Using these two traits, one is able to make a fairly good prediction of the subsequent performance of applicants for sales positions.

It may be true that certain basic traits may make a man a good salesman in any line of selling. From the viewpoint of a particular company, however, these basic traits are rarely enough. Each selling job is characterized by a unique set of duties and challenges. One only has to think about insurance selling, computer selling and automobile selling to realize the different educational, intellectual, and personality requirements that would be sought in the respective salesmen.

How should a company proceed to determine the characteristics its prospective salesmen should "ideally" possess? The particular duties of the job suggest some of the characteristics to look for in applicants. Is there a lot of paperwork? Does the job call for much travel? Will the salesman confront a high proportion of refusals? In addition, the traits of the company's most successful salesmen suggest additional qualities to look for. Some companies compare the standing of their best versus their poorest salesmen to see which characteristics differentiate the two groups of men.


3. RECRUITMENT PROCEDURES

After management develops general criteria for new sales personnel, it has the job of attracting a sufficient number of applicants. The recruiting is turned over to the personnel department, which seeks applicants, through various means, including soliciting names from current salesmen, using employment agencies, placing press advertisements and contacting students. As for the students, companies have not found it easy to sell them on selling. A survey of one thousand students in 123 colleges indicated that only one in seventeen students showed an interest in selling. The reluctant ones gave as reasons the fear of insecurity and a dislike of travel and being away from their families. To counter these objections company recruiters emphasized starting salaries, income opportunities and the fact that one-quarter of the chief executives of large companies started out in marketing and sales.


4. APPLICANT-RATING PROCEDURES

Recruitment procedures should lead to the development of more applicants than jobs, and the company's task is to select the better applicants. The selection procedures vary in elaborateness from a single informal interview to highly detailed testing and interviewing, not only of the person but of family life as well.

An increasing number of companies are giving formal tests to applicants for sales positions. Although test scores are only one information element in a scheme that includes personal characteristics, references, past employment history and interviewer reactions, they are weighed quite heavily by some companies. One company claims that the use of tests has resulted in a 48 percent reduction in turnover and that test scores have correlated well with the subsequent progress of new salesmen in the sales organization.

The choice of an appropriate battery of tests is not simple. Standard tests are available to measure intelligence, interests, sales aptitude, personal adjustment, personality characteristics and social intelligence. There are also tailor-made tests for special selling situations. These tests vary considerably in reliability and validity. Furthermore, many of them are vulnerable to manipulation by the applicant. A man can fake a lower IQ if he thinks this is desirable. He can also spot red-herring questions, such as "Do you prefer golf or reading?"

One researcher laid down the following rules for the job applicant who takes company psychological tests:

1.

Give the most conventional answer;

2.

show that you like things as they are;

3.

indicate that you never worry; and

4.

deny any taste for books or music.



SALES FORCE TRAINING


Not too long ago many companies sent their salesmen out into the field almost immediately after hiring them. The salesman would be supplied with a pack of samples, order books and instructions to sell west of a certain line on the map. Training programmes were considered luxuries. A training programme meant large outlays for instructors, materials and space; the payment of a base salary to a man who is not selling; and lost opportunities because he is not in the field.

Nowadays a new salesman can expect to spend from a few weeks to many months in the limbo state known as training. In certain industries, the new salesman is not on his own for perhaps two years! A number of environmental changes have convinced sales management that an extended training period may generate more value than cost. The salesman of today is selling to more cost-conscious and value-conscious buyers. Furthermore, he is selling a host of products, often loosely related, and sometimes technically complex. He is preparing more reports. His company wants him to appear mature and knowledgeable before the customer even though he was recently hired.

During training, companies hope to pass on some mix of the following skills and understandings:

a.

The salesman should know his company and identify with it.

Most companies devote the first part of the training programme to describing the history and objectives of the company, the organizational setup and lines of authority, the names of the chief officers the company's financial structure and facilities, and the company's chief products and sales volume.

b.

The salesman should know his products.

The sales trainee is shown how the products are produced and how they function in various uses.

c.

The salesman should know customers' and competitors' characteristics.

The salesman is introduced to the different types of customers and their needs, buying motives and buying habits. He learns about his company's and competitors' policies on credit, shipment and so forth.

d.

The salesman should learn how to make effective sales presentations.

Companies explain the major sales arguments for each product, and some go as far as to develop scripts. Part of the training time is used to develop the salesman's personality and provide hints on self-development.

e.

The salesman should be introduced to field procedures and responsibilities.

He should know how he is expected to divide his time between active accounts and potential accounts; how to use his expense account, prepare reports, route himself effectively.


New methods of training are continually being sought to speed up and deepen skill development and understanding. Among the instructional approaches are role playing, sensitivity training, cassette tapes, video tapes, programmed learning and films on salesmanship and company products.

The substantial costs of company training programmes raise the question whether a company would be better off to hire experienced men away from other companies The gain is often illusory, however, because the experienced man is brought in at a higher salary, which sometimes may simply represent a capitalization of the equivalent training costs. From a socioeconomic point of view, there is probably a net loss when an industry practices pirating on a large scale. Some of his specific training and company experience is wasted when a man transfers to another company. Within some industries, companies have entered into tacit agreement not to hire men away from each other.



SALES FORCE COMPENSATION


The major requirements for building a top-flight salesforce are:

   (1) attracting good men and women
   (2) motivating them
   (3) keeping them

In all three areas company compensation policies can make the crucial difference.

It is not easy to formulate a compensation plan that can be trusted to attract, motivate, and keep good salesmen. This is because diverse and often incompatible sets of objectives are sought by salesmen and by management. Prospective salesmen would like a plan that offers the following features:

a.

Income regularity

Since sales are influenced by many factors beyond the salesman's control, he wants to be assured of some regular base income regardless of his sales. This minimum income will help him pay his bills and feed his family in periods of declining sales.

b.

Reward for above-average performance

Most salesmen think they can sell more than the average salesman and want a compensation plan that provides superior income for superior performance.

c.

Fairness

Salesmen want to feel that their pay is about right in relation to their experience and ability, the earnings of co-workers and salesmen working for competitors, and the cost of living.



On the other hand, an ideal compensation plan from management's point of view would emphasize:

a.

Control

Management likes a plan that facilitates its control over how salesmen send their time.

b.

Economy

Management wants to establish a level of pay that is reasonable in relation to the value of the salesman's effort and the cost and value of company products.

c.

Simplicity

Management prefers a plan that is simple to administer from a payroll point of view, simple to explain to sales supervisors and salesmen, and simple to change as product situations and business conditions alter.



Management is obviously hard pressed to reconcile all these objectives in one plan. Plans with good control features are generally not simple. Management goals, such as economy, conflict with salesmen's goals, such as financial security. In the light of these and other conflicts, it is understandable why compensation plans exhibit a tremendous variety, not only among industries but among companies within the same industry.


1. THE LEVEL OF COMPENSATION

Management must determine the level, components, and structure of an effective compensation plan. The level must bear some relation to the going market price for the type of sales job and abilities required. If the market price for sales manpower is well defined, the individual firm has little choice but to pay the going rate. To pay less would not bring forth the desired quantity or quality of applicants, and to pay more would be unnecessary. More often, however, the market price for sales manpower is not well defined. For one thing company plans vary in the importance of fixed and variable salary elements, fringe benefits, and expense allowances. Furthermore data on the average take-home pay of salesmen working for competitive firms can be misleading because of significant variations in the average seniority and ability levels of the competitors' salesmen. Published comparisons of industry-by-industry salesman compensation levels are infrequent and generally lack sufficient detail.

The theoretical solution to the problem of the optimal compensation level would be based on the actual gross profitability of the salesman. Assume a situation where a company is preparing to establish a specialized salesforce of ten men to handle a new product. They will be paid on a straight salary. Higher salary levels would allow the company to recruit better men and lead to higher sales volumes. The sales curve can be assumed to be S-shaped with respect to greater total expenditures on the salesforce. From the estimated sales curve would be deducted all costs before the total sales-force expenditures to find gross profits. Then total sales-force expenditures would be deducted from gross profits, allowing a projection to be made of net profits. At the point where net profits are highest, the optimal total sales-force expenditure is found. This figure can be divided by the size of the planned salesforce, ten men in this case, to find the optimal salary level.


2. THE ELEMENTS OF COMPENSATION

After a firm decides on the average pay level, it must determine the appropriate mix of the four basic elements of salesmen's compensation:

  a)   a fixed amount
  b)   a variable amount
  c)   expenses
  d)   fringe benefits

The fixed amount, which might be salary or a drawing account, is intended to satisfy the salesman's need for some stability of income. The variable amount, which might be commissions, bonus, or profit sharing, is intended to stimulate and reward greater effort. Expense allowances are intended to enable the salesman to undertake selling efforts that are considered necessary or desirable. The fringe benefits, such as paid vacations, sickness or accident benefits, pensions and life insurance, are intended to provide security and job satisfaction.

Top sales management must decide which elements should be in the compensation plan and their relative importance. A popular rule seems to favor making about 70% of the salesman's total income fixed and allocating the remaining 30% among the other elements. But the variations around this average are so pronounced that it can hardly serve as a sufficient guide in planning. For example, fixed compensation should have more emphasis in jobs with a high ratio of non-selling duties to selling duties and in jobs where the selling task is technically complex. Variable compensation should have more emphasis in jobs where sales are cyclical and/or depend on the personal initiative of the salesman.

Fixed and variable compensation taken alone give rise to three basic types of salesman compensation plans straight salary, straight commission and combination salary and commission.

 

i.

STRAIGHT SALARY

With this plan, the salesman receives a fixed sum at regular intervals in total payment for his services. Generally he also receives an amount to defray part or all of the expenses he has incurred in performing his duties. Once the most popular plan for salesmen, it has been increasingly modified by the addition of incentive elements, so that today a minority of firms operate exclusively on this basis.

From management's point of view, a number of advantages are secured under a straight salary plan. The primary one is that management is freer to direct and alter salesmen's duties without incurring strong opposition from the men affected. Men on fixed salaries are more ready to go along with requests from management to spend more of their time in activities not associated with immediate sales, such as trying to open new accounts, providing technical services, or filling out longer reports. In addition, straight salary plans are generally less costly to administer and easier to explain. They also simplify the task of projecting the sales payroll for the coming year. Finally, by providing the salesman with security through stability of income, the straight salary plan may lead to a greater evenness in the morale of the salesmen.

The chief weakness of the straight salary plan is that it does not present the salesmen with any direct incentive to do a better than average selling job. This puts a greater supervision burden on management to control, evaluate and reward the performances of individual salesmen. Other problems posed by straight salary plans are an inflexible selling-expense burden during down swings in business; the danger that during upswings salesmen on fixed salaries do not have sufficient incentive to do a better than average selling job. This puts a greater supervision burden on management to control, evaluate, and reward the performances of individual salesmen. Other problems posed by straight salary plans are an inflexible selling-expense burden during down-swings in business; the danger that during upswings salesmen on fixed salaries do not have sufficient incentive to exploit the increased business potential; thorny questions in salary adjustment for ability, rising living costs, length of service; and the probability that the more hard-driving type of salesman is not easy to attract.

Some of these advantages and disadvantages are reversed under straight commission plans.

ii.

STRAIGHT COMMISSION

This plan pays the salesman some fixed or sliding rate related to his sales or profit volume. The salesman may or may not also receive reimbursement for the expenses he incurs in performing his selling function. Although the general trend is away from straight plans, the straight commission plan is still found in many companies and industries, especially where there is a need for aggressive selling and the salesman's non-selling duties are relatively minor.

The straight commission plan offers at least three advantages. The most obvious one is that it provides a maximum financial incentive for the salesman to work to capacity. The earnings of individual salesmen are more likely to reflect their true abilities and efforts under this plan. A second advantage is that a straight commission plan leads to selling expenses more closely related to funds either currently available or becoming available through sales revenues. The company avoids the hazards of bearing fixed selling expenses in the face of declining sales revenues. A third advantage is that commission plans enable management to employ financial incentives to direct salesmen in their use of selling time. Higher commission rates can be established for those products or accounts that management wants to emphasize.

These advantages of straight commission plans come at a substantial price however. The foremost difficulty is that management encounters great resistance when it tries to get salesmen to do things that do not generate immediate sales. Salesmen may neglect to follow up leads, fill out reports, or provide sufficient customer service. Their personal financial involvement in getting the sale may lead them to use high-pressure tactics or price discounting, which in the long run may damage customer goodwill and company profits. Second, straight commission plans are generally more costly to administer. The cost arises in auditing salesmen's reports, applying sliding scales, and making more elaborate calculations. Third, straight commission plans provide little security and could have a deteriorative effect on the morale of salesmen when sales fall through no fault of their own.


In developing a commission plan, management has several options regarding the commission base, the nature of commission rates, and the starting point for commissions. The commission base may be gross sales volume, net sales after returns, gross margins, or net profits. The commission rates may be identical for all sales or differentiated by customers and/or products; they may be constant with sales volume or vary in a progressive or regressive fashion. The starting point for commissions may be the first sale or some sales level above a break-even point.

Most companies base sales commissions on sales volume because of administrative simplicity and because of sales management's traditional interest in promoting volume. But this base is coming under increasing attack by more profit-conscious sales executives. Sales commissions based on sales volumes may not properly relate selling effort to company profitability the payment of commissions on gross margin has been recommended as a better base and one that is practical to administer. It has been shown mathematically that commissions tied to product gross margins would do a superior job of directing the salesmen to act in a way that would maximize the contribution to company profits.

ii.

COMBINATION SALARY AND COMMISSION

The great majority of firms use a combination of salary and commission features in the hope of achieving the advantages of each while avoiding the disadvantages. The combination plan is especially appropriate where sales volume depends upon the salesman's motivation and yet where management wants some control over the amount of non-selling duties performed by the salesman. The plan also means that during down-swings the company is not stuck with rigid selling costs but neither does the salesman lose his whole income.

Many companies pay bonuses as a supplement or a substitute for commission-type incentives. Bonuses are non-contractual payments for extra effort or merit or for results beyond normal expectations. They are used to reward salesmen for performing tasks that are desirable but not rewardable through commissions such as preparing prompt reports, supplying useful selling ideas, protecting the customer's inventory interests, and developing unusual product or market knowledgeability. The main problem with bonuses is that managerial judgment enters into their determination, and this can raise questions of fairness in the minds of individual salesmen.



3. THE STRUCTURE OF COMPENSATION

Sales management must develop a rational pay structure for the various positions in the sales organization. The simplest sales organization contains sales trainees, junior salesmen, senior salesmen, and sales managers. More complex sales organizations contain separate salesforces differing in ability, type of selling, and so forth. It is necessary to arrive at some overall system of compensation that will be regarded as both fair and motivating to the diverse members of the salesforce.

Over the years, job evaluation techniques have been refined, and they represent a rational management approach to developing a structure of compensation for an organization. Among a number of existing job evaluation systems, one of the best-known and most widely used is the point system. It is based on the identification of job factors, such as responsibility, education, creativeness, experience, and other elements deemed to be important. Each factor is assigned a maximum number of points. The points are assigned to each job, representing the amount of each factor required. Finally all jobs are ranked by point values, and ranges of points are set up as compensation classes.


Target Company
Base Reference
SALESFORCE EMPLOYMENT

Recruitment Procedures

Applicant Vetting & Selection Procedures

Salesforce Training

Salesforce Compensation

Compensation & Incentivization Development

Performance Grid Definitions


SALES FORCE SUPERVISION


Company salesmen are given more than their territory and a salary - they are given supervision. Supervision is the fate of all men who work for someone else. It is the expression of the employer's natural and continuous interest in the activities of its agents. Through supervision, the employer hopes to direct and motivate the salesman to do a better job.


1. DIRECTING SALESMEN

Companies differ in the extent to which they try to prescribe to their salesmen what they should be doing. Much depends upon the nature of the selling job and the particular salesmen. Salesmen who are paid largely on commission and who are expected to hunt down their own prospects are generally left on their own. Salesmen who are largely salaried and who must cover a definite set of accounts are likely to receive substantial supervision.

The importance of efficiency in making calls is highlighted by figures on the cost of sales calls. The average sales call today costs the company between $80 and $100.

Clearly, the sales manager has a major interest in helping his men manage their time better. Salesmen spend their time in the field engaged in three major activities: traveling, waiting and selling. In many jobs, they end up spending about one-third of their time in each activity. Although traveling and waiting time is not all a loss, because the time might be used to fill out reports and plan, it is desirable to reduce these to the smallest extent possible. Here the sales manager can help by showing salesmen how to use the phone more effectively, how to route better and so on. A more important task is to help the salesmen make the right calls in the first place.

 

i.

DEVELOPING CUSTOMER CALL NORMS

Most companies classify their customers into a number of types, such as A, B, C, D, reflecting the sales volume or profit potential of the different accounts. They establish a certain desired number of calls per period that their salesman should make to each customer type. Thus A accounts may be assigned to receive twelve calls a year, B accounts six calls, C accounts four calls, and D counts two calls. The exact levels that are set depend upon competitive call norms and expected account profitability.

These call norms are to be taken as rough guidelines only. The real issue is how much sales volume could be expected from a particular account as a function of the annual number of calls made to that account. In one current computer model for sales call planning, the salesman is asked to estimate sales for each of his accounts for five different possible call levels. The computer then calculates the optimal number of calls he should make on each account, given these subjective sales-response functions, the account profit margins, and the total available sales call time.

It may be possible to determine the sales call response function experimentally. One experiment described where salesmen were asked to vary their call pattern in a particular way to determine what effect this would have on sales. The experiment called first for sorting accounts into major classes. Each account class was then randomly split into three sets. The respective salesmen were asked, for a specified period of time, to spend fewer than five hours a month with accounts in the first set, five to nine hours a month with the second set, and more than nine hours a month with the third set. The results demonstrated that additional call time increases sales volume, leaving only the question of whether the magnitude of sales increase was sufficient to justify the additional increase.

ii.

DEVELOPING PROSPECT CALL NORMS

Companies like to specify to their salesmen how much time to spend prospecting for new accounts. For example, one company wants its men to spend 25 percent of their time prospecting; and to stop calling on a prospect after three unsuccessful calls.

There are a number of reasons why many companies try to set up a minimum requirement for the canvassing of new accounts. If left alone, many salesmen tend to spend most of their time in the offices of present customers. Present customers are better-known quantities. The salesmen can depend upon them for some business, whereas a prospect may never deliver any business or deliver it only after many months of effort. Unless the salesman receives a bonus for new accounts, he assumes the risks during the courting period. Some companies try to open new accounts by using salaried missionary salesmen exclusively.

The key issue in developing prospect call norms is to have a way to estimate the value of any given prospect. This problem is especially acute in situations where there are more prospects than time available for developing them. They must be ranked so that salesmen can concentrate on the best prospects. A useful model can be formulated by looking at the value of an account in terms of investment theory. First the salesman should estimate the value of the prospect's business if the prospect were converted to a customer. The value of the prospect's business may be represented in terms of a discounted income stream lasting so many years.

Specifically,

 

 

mQt - X

Z =

STt=1


 

 

(1+r) t

where,

    Z  =  present value of the future income from a new customer
    S  =  Sigma
    m  =  gross margin on sales
    Q=  expected sales from new customer in year t
    X  =  cost of maintaining customer contact per year
    r  =  company discount rate
    t  =  a subscript for year t
    T  =  number of years that this new customer is expected to remain a customer

Thus the salesman estimates that this prospect, if converted to a customer, would annually purchase from the Q units with a profit per unit of m less a customer contact cost (X) and that this will last for t periods. Future income is discounted at an interest rate r.

The next step is to consider the investment necessary to convert this prospect into a customer. The investment can be described as:

    I = nc

where,

    I  =  investment in trying to convert the prospect into a customer
    n  =  number of calls to convert the prospect into a customer
    c  =  cost per call

The number of calls to the prospect will influence the probability of his conversion - that is,

    p = p(n)

The value of the prospect's business should be scaled down by this probability. Putting the previous elements together, the following investment formula emerges for the value (V) if a prospect:

 

mQt - X

 

V = p(n) STt=1


-  nc

 

(1+r) t

 


According to this formula, the value of a prospect depends on the difference between the expected present value of the income stream and the investment made in prospect conversion. Both the expected present value and the investment depend in turn on the intended number of calls, n, upon the prospect. The intended number of calls should be the optimal number of calls, and this can be found mathematically if the probability-of-conversion function is known.

The formula could easily be incorporated into a computer programme wherein the salesman sits down at a terminal, types in a set of estimates for each prospect regarding the expected volume of his business, maximum probability of conversion, and so on, and receives back a ranking of all the prospects in order of their investment value along with the suggested number of calls to make on each.



2. MOTIVATING SALESMEN

A small percentage of salesmen in any salesforce can be expected to do their best without any special stimulation from management. To them, selling is the most fascinating job in the world. These men are ambitious, and they are self-starters. But the majority of salesmen on nearly every salesforce require personal encouragement and special incentives to work at their best level. This is especially true for creative field selling for the following reasons:

a.

The nature of the job

The selling job is one of frequent frustration. The salesman works alone; his hours are irregular; he does not lead a normal family life; he confronts aggressive competing salesmen; he is in an inferior status relative to the buyer; he sometimes does not have the authority to do what is necessary to win an account.

b.

Human nature

Most men operate below capacity in the absence of special incentive. They won't "kill themselves" without some prospect of financial gain or social recognition.

c.

 Personal problems

The salesman, like everyone else, is occasionally preoccupied with personal problems, such as sickness in the family, marital discord, or debt.

 


Management can affect the morale and performance of the salesmen through its organizational climate, sales quotas, and positive incentives.

i.

ORGANIZATIONAL CLIMATE

Organizational climate describes the feeling that the salesmen get from their company regarding their opportunities, value, and rewards for a good performance. Some companies treat their salesforce as being of minor importance. Other companies treat their salesmen as the prime movers and allow unlimited opportunity for income and promotion. The company's attitude toward its salesmen acts as a self-fulfilling prophecy: if they are held in low opinion, there is much turnover and poor performance; if they are held in high opinion, there is little turnover and high performance.

The quality of personal treatment from the salesman's immediate supervisor is an important aspect of the organizational climate. An effective supervisor keeps in touch with the salesman through periodic correspondence and phone calls, personal visits in the field, and evaluation sessions in the home office. At different times he is the salesman's boss, companion, coach, and confessor.

ii.

SALES QUOTAS

Many companies set sales quotas for their salesmen specifying what they should sell during the year. Sometimes this is a total monetary figure, sometimes a set of sales figures for different products in the line. Often the compensation system is related to the quotas salesmen selling more than their quota in order to earn a bonus or commission. If salesmen fulfill their quotas on the average, the company will have a profitable year.

Sales quotas are developed each year in the process of developing the annual marketing plan. The company first decides on a sales forecast that is reasonably achievable and this becomes the basis of planning production, workforce size, and financial requirements. The management establishes sales quotas for all of its territories, which typically add up to more than the sales forecast. Sales quotas are set higher than the sales forecast in order to move the sales managers and salesmen to their best effort. If they fail to make their quotas, the company nevertheless may make its sales forecast.


Each field sales manager takes his quota and divides it up among his salesmen. He too may make the sum of their quotas higher than the territory's actual quota. Actually, there are three schools of thought on quota setting. The high-quota school likes to set quotas that are above what the salesmen will achieve but that are possible for all. They are of the opinion that high quotas spur extra effort. The modest-quota school likes to set quotas that a majority of salesmen can attain. They feel that the salesmen will accept the quotas as fair, attain them, and gain confidence from attaining them. Finally, the variable-quota school thinks that individual differences among salesmen warrant high quotas for some, modest quotas for others.

According to one observer: Actual experience with sales quotas, as with all standards, will reveal that sales representatives react to them somewhat differently, particularly at first. Some are stimulated to their highest efficiency, others are discouraged. Some sales executives place considerable emphasis upon this human element in setting their quotas. In general, however, good men will in the long run respond favourably to intelligently devised quotas, particularly when compensation is fairly adjusted to performance.

More formally, the variable-quotas school will base quotas for the individual salesman on a number of considerations, including the salesman's sales performance in the previous period, his territory's estimated potential, and a judgment of his aspiration level and reaction to pressure and incentive.

Some propositions in this area are:

1. The sales quota for salesman j at time t, Qjt should generally be set above his sales in the year just ending. Sj,t-1 ;  that is,

        Qjt > Sj,t-1

2. The sales quota for salesman j at time t should be higher, the greater the positive gap between the estimated sales potential of his territory SPjt  and his sales in the year just ending; that is,

        Qjt ~ (SPjt - Sj,t-1)

3. The sales quota for salesman j at time t should be higher, the more positively he responds to pressure, Ej ; that is,

        Qjt ~ Ej


These three propositions can be combined in an equation for setting a salesman's quotas:

        Qjt = Sj,t-1 + Ej (SPjt - Sj,t-1)

Thus, salesman j 's quota at time t should be at least equal to his actual sales last period, plus some fraction E of the difference between estimated territorial sales potential and his sales last year; the more positively he reacts to pressure, the higher the fraction.

iii.

POSITIVE INCENTIVES

Companies use a number of positive motivators to stimulate salesmen effort. Periodic sales meetings provide a social occasion, a break from routine, a chance to meet and talk with "company brass," a chance to air feelings and to identify with a larger group. Companies also sponsor sales contests when they want to spur salesmen to make a special selling effort above what would be reasonably expected. Planning these contests has developed into a real science, and experienced administration is needed for good results.

What is the relative effectiveness of different types of incentives on salesmen? This topic has not been researched experimentally and one of the few studies is a survey of the opinions of sales executives conducted a number of years ago. The sales executives were asked: "Which of the following methods will do the most to stimulate your average salesman to better his usual or normal performance?" Their assigned rankings were converted into ratings with the following results:

 

EFFECTIVENESS OF SALES INCENTIVES

Rating

     Factor

100

Basic compensation

60

Sales Contests

50

Bonus Payments

40

Friendly and Informal Supervision

40

Scientific planning of quotas and territories

20

Awards and Acclamation

20

Sales Conventions

20

Profit Sharing

20

Fringe Benefits

10

Holidays

2

Employee Suggestions

0

Complaints procedures



In the opinion of sales executives, financial incentives assume the first three positions of importance. They are followed by a succession of more social incentives. Thus in the minds of sales executives, monetary motivation is of prime importance but must be complemented by social sources of motivation.


Target Company
Base Reference
SALESFORCE SUPERVISION  

Direction: Customer Call Norms

Direction: Prospect Development

Motivation: Organization

Motivation: Sales Quotas

Motivation: Incentives

Performance Grid Definitions


SALES FORCE EVALUATION


In describing the so called feedforward aspects of supervision - being, the efforts of management to communicate to the salesmen what they should be doing and to motivate them to actually do it, one must remember that good feedforward requires good feedback; and good feedback means getting regular information from and about salesmen to evaluate their performance.


1. SOURCES OF INFORMATION

Management gains information about its salesmen through a number of channels. Probably the most important source of information is the salesmen's periodic reports. Additional information comes through personal observation, through customers' letters and complaints, and through other salesmen's conversations.

A distinction can be drawn between salesmen reports that represent plans for future activities and those that represent write-ups of completed activities. The best example of the former is the salesman's work plan, which most salesmen are required to submit for a specified future period, usually a week or a month in advance. The plan describes the calls he will make and the routing he will use. This report serves the purpose of encouraging the salesman to plan and schedule his activities, inform management of his whereabouts, and provide a basis for comparing his plans with his accomplishments. The salesman can be evaluated for his ability to "plan his work and work his plan." Occasionally, management contacts the salesman after receiving his plan and suggested improvements.

Companies moving toward annual marketing planning in depth are beginning to require their salesmen to draft an annual territory marketing plan in which they outline their programme for developing new accounts and increasing business from existing accounts. The formats vary considerably, some asking merely for ideas on territory development and others asking for detailed estimates. This type of report reflects the conception of the salesman as an entrepreneur and as the manager of his territory. The plans are studied by the immediate supervisor and become the bases for rendering constructive suggestions to salesmen and developing branch sales objectives and estimates for higher-level management.

Several forms are used by salesmen to write up their completed activities and accomplishments. Perhaps the best known is the call report on which the salesman records pertinent aspects of his dealings with a customer, including competitive brands used, best time for calling, degree and type of resistance, and future account promise. Call reports serve the objectives of keeping management informed of the salesman's activities, indicating the status of the customer's account, and providing information that might be useful in subsequent calls.

Salesmen also report their expenses incurred in the performance of selling duties, for which they are partly or wholly reimbursed. The objective from management's standpoint is primarily to exercise control over the type and amount of expenses and secondarily to have the requisite expense data for income-tax purposes. It is also hoped that the salesmen will exercise more care in incurring expenses when they must report them in some detail.


Additional types of reports that some companies require from their salesmen are:

a.

A report on new business secured or potential new business.

This alerts management to new accounts and new prospects for which it can formulate special marketing plans in the form of direct mail, team solicitation and so on. It is also used to evaluate the extent and effectiveness of the salesman's prospecting work.

b.

A report on lost business.

This report enables the company to keep abreast of competitive efforts, needed product or service improvements, and, not the least important, to evaluate the effectiveness of the individual salesman.

c.

A periodic report on local business and economic conditions.

This report aids the development of territory norms and sales programmes, although it must be recognized that salesmen sometimes distort the local picture to rationalize their own performance.



The reports that companies require their salesmen to submit contain a wealth of information. Salesmen, however, frequently complain that they have to devote too much time to writing when they should be selling and that their reports are not read. Management must guard against these criticisms by thinking carefully through the intended uses of the information. The forms should be brief and easy to fill out. Management should make a point of regularly responding to the information.


2. FORMAL EVALUATION OF PERFORMANCE

The salesmen's reports along with other reports from the field and the manager's personal observations supply the raw materials for formally evaluating the salesmen. Formal evaluation procedures lead to at least three benefits. First, they lead management to develop specific and uniform standards for judging salesman performance. Second, they lead management to draw together all its information and impressions about individual salesmen and make more systematic, point-by-point evaluations. Third, they tend to have a constructive effect on the performance of salesmen. The constructive effect comes about because the salesmen know that they will have to sit down one fine morning with their supervisor and explain certain facets of their routing or call decisions or their failure to secure or maintain certain accounts and the like.

i.

SALESMAN-TO-SALESMAN COMPARISONS

One type of evaluation frequently made is to compare a salesman's current performance with that of other company salesmen. Such comparisons, however, can be misleading. Relative sales performances are meaningful only if there are no variations from territory to territory in the market potential, workload, degree of competition, company promotional effort, and so forth. Furthermore, sales are not the best denominator of achievement. Management should be more interested in how much each salesman contributed to net profits, and this cannot be known until the salesman's sales mix and his sales expenses are examined. A possible ranking criterion would be the salesman's actual contribution to company net profits as a ratio to his territory's potential contribution to company net profits. A ratio of 1.00 would mean that the salesman did the best job possible in his territory. A ratio of .50 would mean that a salesman earned only 50 percent of what a perfect salesman could have earned in that territory. The lower a salesman's ratio, the more supervision and counseling he needs.

ii.

CURRENT-TO-PAST-SALES COMPARISONS

A second common type of evaluation is to compare a salesman's current performance with his own past performance. This should provide a more direct record of his progress.

Many things can be learned by the sales manager from the information. One of the first things to note is if the salesman's total sales increased every year. This does not necessarily mean that the salesman is doing a better job. The product breakdown may show that he has been able to push further the sales of product B than product A. According to his quotas for the two products, his success in increasing sales of product B may be at the expense of product A. According to gross profits, the company may earn about twice as much on A as B. Thus a picture begins to emerge that the salesman may be pushing the higher-volume, lower-margin product at the expense of the more profitable product.

Sales expense may show a steady increase, although total expense as a percentage of total sales may seem to be under control. The upward trend in the salesman's total monetary expense does not seem to be explained by any increase in the number of calls, although it may be related in part to his success in acquiring new customers. However, there is a possibility that in prospecting for new customers, he is neglecting present customers, as indicated by an upward trend in the annual number of lost customers.

The level and trend in the salesman's sales per customer and the gross profits on his sales per customer may become more meaningful when they are compared with overall company averages. For example, if the salesman's average gross profit per customer is lower than the company's average, he may be concentrating on the wrong customers or may not be spending enough time with each customer. Looking back at his annual number of calls, it may be that the salesman is making fewer annual calls than the average salesman. If distances in his territory are not much different, this may mean he is not putting in a full workday, he is poor at planning his routing or minimizing his waiting, or he spends too much time with certain accounts.

iii.

QUALITATIVE APPRAISAL OF SALESMEN

The appraisal usually includes an evaluation of the salesman's knowledge, personality and motivation. He can be rated on the extent of his knowledge of his company, products, customers, competitors, territory and responsibilities. Personality characteristics can be rated, such as his general manner, appearance, speech and temperament. The supervisor can also consider any problems in motivation or compliance. Since an almost endless number of qualitative factors might be included, each company must decide what would be most useful to know. It also should communicate these criteria to the salesmen so that they are aware of how their performance is judged.



SALESFORCE COSTS

HISTORIC MARKETING DATA

Base Reference Country

HISTORIC MARKETING DATA

 

FORECAST MARKETING COSTS

Market Forecast : Median Scenario

Target Company

Base Reference Country

FORECAST MARKETING DATA

FORECAST MARKETING DATA

 

FORECAST MARKETING RATIOS

Target Company

Base Reference Country

FORECAST MARKETING RATIOS

FORECAST MARKETING RATIOS

 

 Financial Definitions


Target Company
Base Reference
SALESFORCE EVALUATION

Sales Information Monitoring

Sales Performance Reporting

Sales Evaluation: Personal Comparisons

Sales Evaluation: Sales Period Comparisons

Sales Evaluation: Qualitative Comparisons

Performance Grid Definitions

Target Company
Base Reference
SALESFORCE COSTS

Sales Personnel Costs : Fixed

Sales Personnel Costs : Variable

Sales Personnel Expenses

Sales Overhead Expenses

Sales Material Costs

Performance Grid Definitions

HISTORIC FINANCIAL INDUSTRY DATA

HISTORIC FINANCIAL INDUSTRY DATA

 Financial Definitions



SALESFORCE DECISIONS FINANCIAL SCENARIOS

 

SALESFORCE DECISIONS BASED BALANCE SHEET FORECASTS


The SALESFORCE DECISIONS FINANCIAL SCENARIOS BALANCE SHEET FORECASTS section gives a series of Forecasts for the Company AND the industry using a number of assumptions relating to the sales management decisions available to the Company.

The Balance sheet forecast given shows the effects of sales improvements which Financial Management is likely to recommend:

SALESFORCE DECISIONS FINANCIAL SCENARIOS

  • Base Forecast : Median Market ScenarioS

  • Marketing Expenditure

  • Export Sales Improvement

  • Personnel + Staff Improvement

  • Fixed Marketing Cost Objectives

  • Variable Marketing Cost Objectives

  • Selling Cost Objectives

  • Sales Cost Improvement

  • Promotional Expenditure

  • Sales Personnel + Staff Improvement

  • Sales & Marketing Cost Scenarios


Managers in the Company will, in both the short-term and the long-term, have vital decisions to make regarding the sales improvements, margins and profitability and these decisions will need to be evaluated in light of the customers, markets, competitors, products, industry and internal factors. The scenarios given isolate a number of the most important factors and provide balance sheet forecasts for each of the scenarios.

The data provides a short and medium term forecast covering the next 6 years for each of the Forecast Financial and Operational items. The Financial and Operational Data sections show each of the items listed below in terms of forecast data and covers a period of the next 6 years.

 

 

Financial Comparisons: Scenarios

 

Target Company

Base Reference Industry

 

MEDIAN  FORECAST : Financials

MEDIAN  FORECAST : Margins & Ratios

BEST  FORECAST : Financials

BEST  FORECAST : Margins & Ratios

WORST  FORECAST : Financials

WORST  FORECAST : Margins & Ratios

PRODUCT LAUNCH: Financials

PRODUCT LAUNCH: Margins & Ratios

MEDIAN  FORECAST : Financials

MEDIAN  FORECAST : Margins & Ratios

BEST  FORECAST : Financials

BEST  FORECAST : Margins & Ratios

WORST  FORECAST : Financials

WORST  FORECAST : Margins & Ratios

PRODUCT LAUNCH: Financials

PRODUCT LAUNCH: Margins & Ratios

 


THE TARGET COMPANY FORECASTS

MARKETING EXPENDITURE : Financials

MARKETING EXPENDITURE : Margins & Ratios

EXPORT SALES IMPROVEMENT: Financials

EXPORT SALES IMPROVEMENT: Margins & Ratios

PERSONNEL + STAFF IMPROVEMENT: Financials

PERSONNEL + STAFF IMPROVEMENT: Margins & Ratios

FIXED MARKETING Cost Objectives: Financials

FIXED MARKETING Cost Objectives: Margins & Ratios

VARIABLE MARKETING Cost Objectives: Financials

VARIABLE MARKETING Cost Objectives: Margins & Ratios

SELLING Cost Objectives: Financials

SELLING Cost Objectives: Margins & Ratios

SALES COST IMPROVEMENT: Financials

SALES COST IMPROVEMENT: Margins & Ratios

PROMOTIONAL EXPENDITURE : Financials

PROMOTIONAL EXPENDITURE : Margins & Ratios

SALES PERSONNEL + STAFF IMPROVEMENT: Financials

SALES PERSONNEL + STAFF IMPROVEMENT: Margins & Ratios

SALES & MARKETING COST Scenarios: Financials

SALES & MARKETING COST Scenarios: Margins & Ratios


FORECAST FINANCIAL SCENARIOS

MARKETING EXPENDITURE : Financials

MARKETING EXPENDITURE : Margins & Ratios

EXPORT SALES IMPROVEMENT: Financials

EXPORT SALES IMPROVEMENT: Margins & Ratios

PERSONNEL + STAFF IMPROVEMENT: Financials

PERSONNEL + STAFF IMPROVEMENT: Margins & Ratios

FIXED MARKETING Cost Objectives: Financials

FIXED MARKETING Cost Objectives: Margins & Ratios

VARIABLE MARKETING Cost Objectives: Financials

VARIABLE MARKETING Cost Objectives: Margins & Ratios

SELLING Cost Objectives: Financials

SELLING Cost Objectives: Margins & Ratios

SALES COST IMPROVEMENT: Financials

SALES COST IMPROVEMENT: Margins & Ratios

PROMOTIONAL EXPENDITURE : Financials

PROMOTIONAL EXPENDITURE : Margins & Ratios

SALES PERSONNEL + STAFF IMPROVEMENT: Financials

SALES PERSONNEL + STAFF IMPROVEMENT: Margins & Ratios

SALES & MARKETING COST Scenarios: Financials

SALES & MARKETING COST Scenarios: Margins & Ratios

 

 Financial Definitions

 

 

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