SALESFORCE DECISIONS

Company Products & Services

SALESFORCE DECISIONS

CONTENTS

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 industry 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 industry 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.

 

	SALESFORCE INTERACTION
	Customer Prospecting
	Customer Communications
	Customer Servicing
	Selling
	Information Gathering & Usage

H78      Grid Definition

SALES FORCE SIZE DECISIONS

Salesmen are among the most productive and expensive assets the industry 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.

	SALESFORCE STRUCTURE
	Territory Value Structured
	Workload Structured
	Territory Structured
	Product Structured
	Customer Structured

  H79      Grid Definition

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
   (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.

iii. 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.

	SALESFORCE EMPLOYMENT
	Recruitment Procedures
	Applicant Vetting & Selection Procedures
	Salesforce Training
	Salesforce Compensation
	Compensation & Incentivization Development

H80      Grid Definition

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,

where,

    Z  =  present value of the future income from a new customer
    S  =  Sigma
    m  =  gross margin on sales
    Q_t  =  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:

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, Q_jt should generally be set above his sales in the year just ending. S_j,t-1 ;  that is,

        Q_jt > S_j,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 S_Pjt  and his sales in the year just ending; that is,

        Q_jt ~ (S_Pjt - S_j,t-1)

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

        Q_jt ~ E_j


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

        Q_jt = S_j,t-1 + E_j (S_Pjt - S_j,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.

	SALESFORCE SUPERVISION
	Direction: Customer Call Norms
	Direction: Prospect Development
	Motivation: Organization
	Motivation: Sales Quotas
	Motivation: Incentives

  H81      Grid Definition

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.

F_H - FIN_MKTG.HTM  HISTORIC MARKETING DATA 

Market Forecast : Median Scenario

F0M - FINAMKTG.HTM  FORECAST MARKETING DATA 

I0M - FINBMKTG.HTM  FORECAST MARKETING RATIOS 

 Financial Definitions

	SALESFORCE EVALUATION
	Sales Information Monitoring
	Sales Performance Reporting
	Sales Evaluation: Personal Comparisons
	Sales Evaluation: Sales Period Comparisons
	Sales Evaluation: Qualitative Comparisons

  H82

	SALESFORCE COSTS
	Sales Personnel Costs : Fixed
	Sales Personnel Costs : Variable
	Sales Personnel Expenses
	Sales Overhead Expenses
	Sales Material Costs

  H83      Grid Definition

HISTORIC FINANCIAL DATA

SALESFORCE DECISIONS FINANCIAL ISSUES

F_H - FIN_HIST.HTM   HISTORIC FINANCIAL DATA

 Financial Definitions

SALESFORCE DECISIONS FINANCIAL SCENARIOS

FINANCIAL DATA FORECAST

 

SALESFORCE DECISIONS BASED BALANCE SHEET FORECASTS

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

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 Scenario

- 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 industry 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.

Base Forecast : Median Market Scenario

F0M|     MEDIAN  FORECAST : Financials

G0M|     MEDIAN  FORECAST : Margins & Ratios

Marketing Expenditure

F01|     MARKETING EXPENDITURE : Financials

G01|     MARKETING EXPENDITURE : Margins & Ratios

Export Sales Improvement

F11|     EXPORT SALES IMPROVEMENT : Financials

G11|     EXPORT SALES IMPROVEMENT : Margins & Ratios

Personnel + Staff Improvement

F12|     PERSONNEL + STAFF IMPROVEMENT : Financials

G12|     PERSONNEL + STAFF IMPROVEMENT : Margins & Ratios

Fixed Marketing Cost Objectives

F25|     FIXED MARKETING COST OBJECTIVES : Financials

G25|     FIXED MARKETING COST OBJECTIVES : Margins & Ratios

Variable Marketing Cost Objectives

F26|     VARIABLE MARKETING COST OBJECTIVES : Financials

G26|     VARIABLE MARKETING COST OBJECTIVES : Margins & Ratios

Selling Cost Objectives

F30|     SELLING COST OBJECTIVES : Financials

G30|     SELLING COST OBJECTIVES : Margins & Ratios

Sales Cost Improvement

F37|     SALES COST IMPROVEMENT : Financials

G37|     SALES COST IMPROVEMENT : Margins & Ratios

Promotional Expenditure

F40|     PROMOTIONAL EXPENDITURE : Financials

G40|     PROMOTIONAL EXPENDITURE : Margins & Ratios

Sales Personnel + Staff Improvement

F48|     SALES PERSONNEL + STAFF IMPROVEMENT : Financials

G48|     SALES PERSONNEL + STAFF IMPROVEMENT : Margins & Ratios

Sales & Marketing Cost Scenarios

F54|     SALES & MARKETING COST SCENARIOS : Financials

G54|     SALES & MARKETING COST SCENARIOS : Margins & Ratios

FIN_DEFI.HTM Financial Definitions

INDEX

 
ADVERTISING COSTS, 40
ADVERTISING COSTS FORECAST, 42
AFTER-SALES COSTS, 40
AFTER-SALES COSTS FORECAST, 42
Allocating, 2
Applicant Vetting & Selection Procedures, 23
APPLICANT-RATING PROCEDURES, 17
Awards and Acclamation, 32

Balance Sheet Base Forecast : Median Market Scenario, 60
Balance Sheet Export Sales Improvement, 68
Balance Sheet Fixed Marketing Cost Objectives, 76
Balance Sheet Historic, 54
Balance Sheet Marketing Expenditure, 64
Balance Sheet Personnel + Staff Improvement, 72
Balance Sheet Promotional Expenditure, 92
Balance Sheet Sales Cost Improvement, 88
Balance Sheet Sales Personnel + Staff Improvement, 96
Balance Sheet Sales & Marketing Cost Scenarios, 100
Balance Sheet Selling Cost Objectives, 84
Balance Sheet Variable Marketing Cost Objectives, 80
Basic compensation, 32
Bonus Payments, 32
Build good will, 1
BUYER-SELLER RELATIONSHIP, 2

Call frequencies, 8
Calls a salesman, 8
Channel of distribution, 10
Circular territory, 15
Clover leaf pattern territory, 15
COMBINATION SALARY AND COMMISSION, 22
Communicating, 2
Company or Product Group, 10
Compensation, 1
Compensation & Incentivisation Development, 23
Complaints procedures, 32
COMPLEX SALES-FORCE STRUCTURES, 10
Control, 19
Costs & Margins Historic, 55
Creative sale, 1
CURRENT-TO-PAST-SALES COMPARISONS, 39
Customer Communications, 3
Customer Prospecting, 3
Customer Servicing, 3
Customer Structured, 11
CUSTOMER-STRUCTURED SALES FORCE, 10

Deliver the product, 1
DEVELOPING CUSTOMER CALL NORMS, 27
DEVELOPING PROSPECT CALL NORMS, 28
DIRECTING SALESMEN, 27
Direction: Customer Call Norms, 33Š
Direction: Prospect Development, 33
DISTRIBUTION + HANDLING COSTS, 40
DISTRIBUTION + HANDLING COSTS FORECAST, 42

Economy, 19
EFFECTIVENESS OF SALES INCENTIVES, 32
ELEMENTS OF COMPENSATION, 20
Employee Suggestions, 32

Fairness, 19
Feed-forward, 37
Financial data definitions, 105
Financial forecast notes, 44, 58
Financial Ratios Base Forecast : Median Market, 62
Financial Ratios Export Sales Improvement, 70
Financial Ratios Fixed Marketing Cost Objectives, 78
Financial Ratios Marketing Expenditure, 66
Financial Ratios Personnel + Staff Improvement, 74
Financial Ratios Promotional Expenditure, 94
Financial Ratios Sales Cost Improvement, 90
Financial Ratios Sales Personnel + Staff Improvement, 98
Financial Ratios Sales & Marketing Cost Scenarios, 102
Financial Ratios Selling Cost Objectives, 86
Financial Ratios Variable Marketing Cost Objective, 82
Financial Ratios & Margins Historic, 56
FORMAL EVALUATION OF PERFORMANCE, 38
Friendly and Informal Supervision, 32
Fringe Benefits, 32

HISTORIC FINANCIAL DATA, 53
HISTORIC MARKETING COST RATIOS & MARGINS, 41
HISTORIC MARKETING COSTS & MARGINS, 40
Holidays, 32
Human nature, 30

In the field, 1
Income regularity, 19
Information gathering, 2
Information Gathering & Usage, 3

LEVEL OF COMPENSATION, 20

Maintaining accounts, 1
MARKETING COSTS, 41
MARKETING COSTS FORECAST, 42
MARKETING FACTORS FORECAST, 43
MARKETING MARGINS + RATIOS FORECAST, 43
MARKETING OPERATIONAL RATIOS, 41
MARKETING OPERATIONAL RATIOS FORECAST, 43
MARKETING RATIO, 41
MARKETING RATIOS FORECAST, 43
MOTIVATING SALESMEN, 30
Motivation: Incentives, 33
Motivation: Organization, 33
Motivation: Sales Quotas, 33

Nature of the job, 30
Number of accounts, 8
Number of salesmen, 8

Operational Costs Base Forecast : Median Market, 61
Operational Costs Export Sales Improvement, 69Š
Operational Costs Fixed Marketing Cost Objectives, 77
Operational Costs Marketing Expenditure, 65
Operational Costs Personnel + Staff Improvement, 73
Operational Costs Promotional Expenditure, 93
Operational Costs Sales Cost Improvement, 89
Operational Costs Sales Personnel + Staff Improvement, 97
Operational Costs Sales & Marketing Cost Scenarios, 101
Operational Costs Selling Cost Objectives, 85
Operational Costs Variable Marketing Cost Objectives, 81
Operational Margins Base Forecast : Median Market, 63
Operational Margins Export Sales Improvement, 71
Operational Margins Fixed Marketing Cost Objective, 79
Operational Margins Marketing Expenditure, 67
Operational Margins Personnel + Staff Improvement, 75
Operational Margins Promotional Expenditure, 95
Operational Margins Sales Cost Improvement, 91
Operational Margins Sales Personnel + Staff Improvement, 99
Operational Margins Sales & Marketing Cost Scenario, 103
Operational Margins Selling Cost Objectives, 87
Operational Margins Variable Marketing Cost Objectives, 83
Operational Ratios & Margins Historic, 57
Order-taker, 1
ORGANIZATIONAL CLIMATE, 30

Personal problems, 30
Personal selling, 1
POSITIVE INCENTIVES, 32
Product Structured, 11
PRODUCT-STRUCTURED SALES FORCE, 9
PROFIT RATIOS, 41
PROFIT RATIOS FORECAST, 43
Profit Sharing, 32
Prospecting, 2

QUALITATIVE APPRAISAL OF SALESMEN, 39

RECRUITMENT PROCEDURES, 17, 23
Report on local business and economic conditions, 38
Report on lost business, 38
Report on new business secured, 38
Reward for above-average performance, 19

Sales Contests, 32
Sales Conventions, 32
SALES COSTS, 40
SALES COSTS FORECAST, 42
Sales counter situation, 1
Sales Evaluation: Personal Comparisons, 45
Sales Evaluation: Qualitative Comparisons, 45
Sales Evaluation: Sales Period Comparisons, 45
SALES FORCE COMPENSATION, 19
SALES FORCE DECISIONS, 1
SALES FORCE DESIGN, 9
SALES FORCE EVALUATION, 37
SALES FORCE SELECTION, 16
SALES FORCE SIZE DECISIONS, 7
SALES FORCE SUPERVISION, 27
SALES FORCE TRAINING, 18
Sales Information Monitoring, 45
Sales Material Costs, 49
Sales Overhead Expenses, 49
Sales Performance Reporting, 45
Sales Personnel Costs : Fixed, 49
Sales Personnel Costs : Variable, 49
Sales Personnel Expenses, 49
SALES QUOTAS, 30
SALES TASKS, 2
Salesforce Compensation, 23
SALESFORCE COSTS, 49
SALESFORCE DECISIONS FINANCIAL SCENARIOS FORECASTS, 59
SALESFORCE EMPLOYMENT, 23
SALESFORCE EVALUATION, 45
SALESFORCE INTERACTION, 3
SALESFORCE STRUCTURE, 11
SALESFORCE SUPERVISION, 33
Salesforce Training, 23
SALESMAN PRODUCTIVITY APPROACH, 7
SALESMAN WORKLOAD APPROACH, 8
SALESMAN-TO-SALESMAN COMPARISONS, 38
Salesmen, 1
SALESMEN SELECTION, 16
SALES-FORCE STRUCTURE, 9
Scientific planning of quotas and territories, 32
Selling, 2, 3
Servicing, 2
Simplicity, 19
Size classes, 8
Size of Customers, 10
SOURCES OF INFORMATION, 37
STRAIGHT COMMISSION, 21
STRAIGHT SALARY, 21
STRUCTURE OF COMPENSATION, 22

Technical knowledge, 1
TERRITORIAL DESIGN, 10
TERRITORIAL-STRUCTURED SALES FORCE, 9
TERRITORY SHAPE, 15
TERRITORY SIZE, 15
Territory Structured, 11
Territory Value Structured, 11
TOTAL MARKETING COSTS, 40
TOTAL MARKETING COSTS FORECAST, 42
Total workload, 8
Training programmes, 1
Type of industry, 10

Wedge-shaped territory, 15
WHAT MAKES A GOOD SALESMAN?, 16
Workload Structured, 11

CONTENTS

Allocating
Applicant Vetting & Selection Procedures
APPLICANT-RATING PROCEDURES
Awards and Acclamation
Base Forecast : Median Market Scenario
Basic compensation
Bonus Payments
build good will
BUYER-SELLER RELATIONSHIP
call frequencies
calls a salesman
Channel of distribution
circular territory
clover leaf pattern territory
COMBINATION SALARY AND COMMISSION
Communicating
Company or Product Group
Compensation & Incentivisation Development
Compensation
Complaints procedures
COMPLEX SALES-FORCE STRUCTURES
Control
creative sale
CURRENT-TO-PAST-SALES COMPARISONS
Customer Communications
Customer Prospecting
Customer Servicing
Customer Structured
CUSTOMER-STRUCTURED SALES FORCE
deliver the product
DEVELOPING CUSTOMER CALL NORMS
DEVELOPING PROSPECT CALL NORMS
DIRECTING SALESMEN
Direction: Customer Call Norms
Direction: Prospect Development
Economy
EFFECTIVENESS OF SALES INCENTIVES
ELEMENTS OF COMPENSATION
Employee Suggestions
Export Sales Improvement
Fairness
feedforward Workload Structured
Fixed Marketing Cost Objectives
FORMAL EVALUATION OF PERFORMANCE
Friendly and Informal Supervision
Fringe Benefits
HISTORIC FINANCIAL DATA
Holidays
Human nature
in the field
Income regularity
Information Gathering & Usage
Information gathering
LEVEL OF COMPENSATION
maintaining accounts
Market Forecast : Median Scenario
Marketing Expenditure
MOTIVATING SALESMEN
Motivation: Incentives
Motivation: Organization
Motivation: Sales Quotas
nature of the job
number of accounts
number of salesmen
order-taker
ORGANIZATIONAL CLIMATE
Personal problems
Personal selling
Personnel + Staff Improvement
POSITIVE INCENTIVES
Product Structured
PRODUCT-STRUCTURED SALES FORCE
Profit Sharing
Promotional Expenditure
Prospecting
QUALITATIVE APPRAISAL OF SALESMEN
RECRUITMENT PROCEDURES
Recruitment Procedures
Report on local business and economic conditions
Report on lost business
Report on new business secured
Reward for above-average performance
Sales & Marketing Cost Scenarios
Sales Contests
Sales Conventions
Sales Cost Improvement
sales counter situation
Sales Evaluation: Personal Comparisons
Sales Evaluation: Qualitative Comparisons
Sales Evaluation: Sales Period Comparisons
SALES FORCE COMPENSATION
SALES FORCE DECISIONS
SALES FORCE DESIGN
SALES FORCE EVALUATION
SALES FORCE SELECTION
SALES FORCE SIZE DECISIONS
SALES FORCE SUPERVISION
SALES FORCE TRAINING
Sales Information Monitoring
Sales Material Costs
Sales Overhead Expenses
Sales Performance Reporting
Sales Personnel + Staff Improvement
Sales Personnel Costs : Fixed
Sales Personnel Costs : Variable
Sales Personnel Expenses
SALES QUOTAS
SALES TASKS
SALES-FORCE STRUCTURE
Salesforce Compensation
SALESFORCE COSTS
SALESFORCE DECISIONS FINANCIAL SCENARIOS FORECASTS
SALESFORCE EMPLOYMENT
SALESFORCE EVALUATION
SALESFORCE INTERACTION
SALESFORCE STRUCTURE
SALESFORCE SUPERVISION
Salesforce Training
SALESMAN PRODUCTIVITY APPROACH
SALESMAN WORKLOAD APPROACH
SALESMAN-TO-SALESMAN COMPARISONS
SALESMEN SELECTION
Salesmen
Scientific planning of quotas and territories
Selling Cost Objectives
Selling
Selling
Servicing
Simplicity
size classes
Size of Customers
SOURCES OF INFORMATION
STRAIGHT COMMISSION
STRAIGHT SALARY
STRUCTURE OF COMPENSATION
technical knowledge
TERRITORIAL DESIGN
TERRITORIAL-STRUCTURED SALES FORCE
TERRITORY SHAPE
TERRITORY SIZE
Territory Structured
Territory Value Structured
total workload
training programmes
Type of industry
Variable Marketing Cost Objectives
wedge-shaped territory
WHAT MAKES A GOOD SALESMAN?

SALES FORCE DECISIONS
BUYER-SELLER RELATIONSHIP
SALES TASKS
Prospecting
Communicating
Selling
Servicing
Information gathering
Allocating
SALES FORCE SIZE DECISIONS
SALESMAN PRODUCTIVITY APPROACH
SALESMAN WORKLOAD APPROACH
SALES FORCE DESIGN
SALES-FORCE STRUCTURE
TERRITORIAL-STRUCTURED SALES FORCE
PRODUCT-STRUCTURED SALES FORCE
CUSTOMER-STRUCTURED SALES FORCE
COMPLEX SALES-FORCE STRUCTURES
TERRITORIAL DESIGN
TERRITORY SIZE
TERRITORY SHAPE
SALES FORCE SELECTION
SALESMEN SELECTION
WHAT MAKES A GOOD SALESMAN?
RECRUITMENT PROCEDURES
APPLICANT-RATING PROCEDURES
SALES FORCE TRAINING
SALES FORCE COMPENSATION
Income regularity
Reward for above-average performance
Fairness
Control
Economy
Simplicity
LEVEL OF COMPENSATION
ELEMENTS OF COMPENSATION
STRAIGHT SALARY
STRAIGHT COMMISSION
COMBINATION SALARY AND COMMISSION
STRUCTURE OF COMPENSATION
SALES FORCE SUPERVISION
DIRECTING SALESMEN
DEVELOPING CUSTOMER CALL NORMS
DEVELOPING PROSPECT CALL NORMS
MOTIVATING SALESMEN
ORGANIZATIONAL CLIMATE
SALES QUOTAS
POSITIVE INCENTIVES
EFFECTIVENESS OF SALES INCENTIVES
SALES FORCE EVALUATION
SOURCES OF INFORMATION
Report on new business secured
Report on lost business
Report on local business and economic conditions
FORMAL EVALUATION OF PERFORMANCE
SALESMAN-TO-SALESMAN COMPARISONS
CURRENT-TO-PAST-SALES COMPARISONS
QUALITATIVE APPRAISAL OF SALESMEN
HISTORIC FINANCIAL DATA
SALESFORCE DECISIONS FINANCIAL SCENARIOS FORECASTS
SALESFORCE INTERACTION
Customer Prospecting
Customer Communications
Selling
Customer Servicing
Information Gathering & Usage
SALESFORCE STRUCTURE
Territory Value Structured
Workload Structured
Territory Structured
Product Structured
Customer Structured
SALESFORCE EMPLOYMENT
Recruitment Procedures
Applicant Vetting & Selection Procedures
Salesforce Training
Salesforce Compensation
Compensation & Incentivisation Development
SALESFORCE SUPERVISION
Direction: Customer Call Norms
Direction: Prospect Development
Motivation: Organization
Motivation: Sales Quotas
Motivation: Incentives
Market Forecast : Median Scenario
SALESFORCE EVALUATION
Sales Information Monitoring
Sales Performance Reporting
Sales Evaluation: Personal Comparisons
Sales Evaluation: Sales Period Comparisons
Sales Evaluation: Qualitative Comparisons
SALESFORCE COSTS
Sales Personnel Costs : Fixed
Sales Personnel Costs : Variable
Sales Personnel Expenses
Sales Overhead Expenses
Sales Material Costs
Base Forecast : Median Market Scenario
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