A large number of variables influence the approach of the marketing function to the problem of selling, including the state of technology, the economic environment, the social structure, the climate of the age (political, institutional, religious and educational), available communication media, skills which managers apply and so on. Yet personal selling is by far the major promotional method used to increase profitable sales by offering want satisfactions to markets and customers.
In many companies personal selling is the largest single operating expense, often equating up to 15 per cent of the net sales. According to a survey of 400 Presidents of large corporations selected randomly from Dun and Bradstreet Directory, selling force management is the most important element in the marketing mix.
This monograph aims to put sales management into the context of the marketing function as it is today. Some of the major problems faced by a sales manager are:
(1) Defining the role of a sales person
(2) Determining the sales message
(3) Allocating the personal selling effort
(4) Developing a sales organisation to include recruiting, selection, training
of sales people and other related staff
(5) Methods of controlling and co-ordinating the sales team
(6) Evaluating and improving sales team performance.
THE ROLES OF SALES PEOPLE
One of the most critical factors in developing effective personal selling is to have a clear understanding of the roles of a sales person. Since policies regarding recruitment, selection, training, supervision and control depend on the actual nature of the sales person’s role, a failure to define this role can lead to confusion and conflicting policies. Moreover, the marketing mix of a company may vary from time to time, and is dependent on the marketing policies and external environmental factors, and these will create confusion unless the sales person’s role is defined clearly. With regard to allocating personal selling effort, a failure to define the sales person’s role will lead to poor performance, with the sales person themselves not knowing exactly what their tasks and responsibilities are.
In varying degrees of importance, most sales people in fact perform three basic roles. The first role is in the generating of sales. Their primary task is to obtain orders. They may inform and influence future buyers and eventually obtain future sales from them. Their second role is that of a source of information, a feedback link between the market and the company. Their reports are useful, even vital, for future product development, sales forecasting, pricing decisions and in assessing competitors’ strategies.
Their third role can be described as a form of service such as delivery of goods, stocking of retail shelves, acquiring credit information, performing repair services and even performing promotional activities such as demonstrations and giving out free samples. Sales people may also perform:
(1) Individual, personal communication with the prospective buyers facilitating a response to the needs, motives and behaviour of these customers
(2) Direct pin-pointed efforts to specific target sales economising on advertising
(3) Prospecting, communicating and evaluating potential buyers and providing feed-back to the firm
(4) Servicing, consulting and rendering financial and/or technical assistance.
The Nature of the Selling Task
Of course, it cannot be emphasised too much that the selling job varies according to the product being sold, the level in the channel where selling is taking place and the strategy of the individual firm involved. It is imperative that the requirements of each situation are correctly assessed in order to prevent inadequate or irrelevant training, which may lead to the wrong approach and ultimately the loss of the order. The task of the sales person in relation to the customer covers a multitude of different job aspects including:
(1) Locating and/or meeting prospective customers
(2) Discovering customer needs and attitudes
(3) Recommending a product package to fill the needs of the customer
(4) Developing the sales presentation aimed at informing the customer of product attributes and persuading him to buy the recommended package
(5) Closing the sale
(6) Following up to ensure total satisfaction, thus minimising post-purchase anxiety or cognitive dissonance
Clearly the selling technique differs from one type of selling position to the next, so it is important to identify the classification in which your sales person’s job will fall, and to gear the training to the specific needs of that task. Increasingly marketing permeates the total organisation, and is less of a functional area per se. Some sales people deal in specialised selling where product knowledge is of the essence; others have their job organised around markets rather than products so they are “generalists”.
One of the great difficulties of organising sales training programmes is that management rarely defines the precise nature of the selling task. However, once the job has been coherently and systematically outlined, within a marketing plan, then the training of sales people can be devised.
The sales training programme will relate and include:
(1) Sales person job description
(2) Basic functions
(3) Requirements of product knowledge
(4) Promotion functions
(5) Contacts development
(6) Planning and control of a territory
(7) Personnel relationships
Sales Management of Consumer vs. Industrial Goods
A good product, price and distribution plan is only half the story. The customer must know what he can buy, where he can buy it, how much it will cost, how long delivery will take and so on, so communication about the product is of paramount importance. Basically there are four areas of communication in marketing:
(1) The product itself
(2) Advertising and promotion
(3) Word of mouth among customers and potential customers
(4) Sales People
Of the four, personal selling is the only two-way communication channel and it is therefore a unique form of passing on information for the following reasons:
(1) Adaptation of the selling strategy to individual buyer needs
(2) Immediate, direct supply of information
(3) Instant demonstration of the goods
(4) The pressure of one-to-one selling
(5) Confidence building between customer and sales people for future orders through follow-up service
(6) Direct feedback from the customer to the company on product performance and advertising effectiveness
(7) Feedback about competitors’ activities
Obviously the sales person must be an expert in each of the aforementioned areas, which is where sales training becomes invaluable. However, although the advantages of personal selling are manifold, a sales persons efforts merely form part of a carefully planned and co-ordinated effort by all facets of the promotion mix, in order to build a well balanced and effective marketing plan.
Just as the approaches and procedures in consumer and industrial marketing differ, so the role of the sales team in each varies. Although advertising is important in industrial marketing and personal selling in consumer marketing, the emphasis is essentially reversed.
Robinson and Stidsen presented the promotional mix as related to the marketing of consumer and industrial goods. In reality, the sales team in consumer operations is used mainly to collect weekly orders from dealers and to see that the display technique and stock held are satisfactory.
Industrial selling is, however, a much more exacting proposition, demanding technical expertise and counselling skills, so that the sales person can deal with customers queries and problems concerning product failure, optimum utilisation of the product and indeed the particular product which will suit his needs.
SALES TEAM SIZE AND DESIGN
The sales team size is particularly important for companies that depend on personal selling as a primary marketing instrument. These firms have two important decisions to make:
(1) How much to spend on the personal selling effort, or basically how many sales people to employ
(2) How to deploy these sales people effectively in the company’s market area Combining together, these two problems become one of optimising the number of sales people.
When changing the size of a sales team, it is important to note that:
(1) It should measure as accurately as possible market penetration and profit performance against predicted goals
(2) It should identify problem territories so that corrective action can be taken to improve performance
(3) It should have the necessary adaptability to re-evaluate the selling effort on, ideally, a continuous basis
(4) It should establish the optimum sales team although for economic efficiency this should not be the only criterion
Lodish’s approach comes closest to satisfying the above requirements. In his article he criticises the common approach to sales team allocation: allocating calls in proportion to sales or potential, minimising travel time, defining territories by call frequencies and adding sales people when they can be afforded. He terms this as “precisely wrong” and instead he describes a computer based approach (defined as “vaguely right”) which uses both hard and judgemental data to define the optimum interrelationship of territory size, number of calls and sales team size which is based on maximising profit contribution to fixed costs by equating territory and marginal profit values.
This method allows some leeway and the beauty of the system is that data can be updated continuously from information supplied by the sales manager and his sales people; for example, if both think that there is a chance of up rating a customer, then they must decide by how much this may be – for instance a 30 per cent chance of obtaining a $100,000 prospect is considered as $30,000 when compared with business from a current account. They must then consider an increase in calls and feed that information into the model.
The approach is more quickly adaptable as a simply “basic” computer language is used, by which the sales person (or their manager) can sit at a terminal and type in the information required in a “conversational mode”. The analysis can be printed out in a matter of minutes and a decision concerning call frequency etc. might be taken immediately.
Territories can be redesigned in this process so as to equate marginal profit values and also if it is worthwhile to add or delete people from the sales team. At the time Lodish’s paper was published (1974) twelve companies were already using the method, the results proving favourable. Call policies for each territory generated by the computer were from two per cent to 50 per cent more profitable than the previous policies, the mean anticipated profit improvement being nine per cent. This method if used correctly and effectively can:
(1) Provide a way of looking at the problem that takes into account realistic goals of profitability in terms of sales volume and, more importantly, investment
(2) Relate the objectives of one important part of the marketing mix to the total financial and productive capacity of the firm
(3) When applied to the individual case, give management both a target and a map of an area in business management that has previously had few rules to guide it
(4) Be simple and direct enough in approach to appeal to practical management people and as such should help them to apply judgement more soundly.
HOW TO DESIGN SALES TERRITORIES
In many cases the way in which sales regions and territories are typically selected is very much a hit and miss affair. In most cases management simply does not realise the extent to which inequality between area size and sales team size exists and, consequently, does little to correct it. Montgomery and Urban have commented that:
“In spite of the fact that it is the largest single item in the marketing budgets of most firms, personal calling continues to be an elusive and poorly understood element of the marketing programme. Only a small number of analytical or management science efforts have been reported during the past fifteen years”
It would seem that, ideally, methods of sales peoples optimisation should be reasonably accurate in their original assumptions so that discrepancies consequent upon implementation are minimised. Talley’s method is an approach based on equalising the workload of sales people rather than optimising territory sales potential. The basic approach of this method is to allocate calls in proportion to sales or potential.
The method consists of following a procedure of steps:
(1) Customers are grouped into size classes according to the annual sales volume that the company has with them
(2) The desirable call frequencies are established for each class
(3) The number of accounts in each class are then multiplied by the corresponding call frequency to arrive at a total work load for the country in sales calls per year
(4) The average number of calls a sales person can make in a year is then determined
(5) Dividing the total annual calls required by the average annual calls made per sales people gives the number of sales people needed.
If the average salesperson could make 1,000 per year of this type of call the company would need 60 full time sales people. The basis drawback to this is that because the call frequency is set, it could stop the customers in category “B” becoming “A” accounts due to the sales person not cultivating the client. In fact this is one of my main criticisms of any rigid or inflexible method of optimising the number of sales people on how their territory is organised; many methods appear to view the sales person as a fixed entity in the marketing mix, not as a thinking person with experience and initiative of their own.
After all they are the primary contact with the customer and as their relationship with the customer builds up, they should know the potential and how much of their time should be spent in cultivating it. They should certainly never be tied rigidly to some rational or logistical plan worked out from assumed data with which there could be serious flaws due to incorrect assumptions.
STRUCTURING A PROFITABLE SALES TEAM
A profitable sales team must share several characteristics. It must be controllable, the maximum potential profits from each sales team should be calculable and the overall number of sales people – of each type, e.g. independent representatives, direct sales team, etc, must be decided rationally.
A rational approach for structuring a profitable sales team has been developed by Fogg and Rokus. This method has two advantages:
(1) It focuses on profit, not cost
(2) It accounts for all sales controlled factors influencing profitability
This approach gives the sales manager reasonable assurance that they have reached the correct decision by forcing them to think about the factors affecting sales team profitability. The method involves a great deal of time and money to execute, uses a computer program and would need to be repeated occasionally, say every two to four months or when the market conditions changed significantly. There does not appear to be any way in which feedback could be used on a continuous basis in order to change the system. Therefore, one of the main criticisms levelled against this method is that it is too rigid for any marketing area requiring continuous adaptability and appraisal. Often the fortunes of business can change from month to month. Adaptability is a key to enable sales and marketing managers to for example, establish a new sales team for new products, and/or to combine and restructure sales teams when companies are being merged.
The inextricable link between selection, motivation and training activities as a complete approach to sales team management need not be emphasised. A good training programme is wasted if the right candidates with definite selling potential are not singled out during the selection process. Because of the competitive constraints imposed on sales people, there is a relatively high “drop-out” rate during the selection process. This would seem to support the view that some are suited to selling whilst others are not.
Just as a sound selection technique is important, so “after-sales service”, in the form of follow-up training programmes and carefully planned incentive schemes, enhances initial training sessions and ensures that the money was well spent. It is possible that by putting more resources into improved selection and incentive schemes it would be possible to reduce training costs and staff turn-over, which in this particular area have been found to be particularly high.
The Need for Effective Training
The role of the sales person is quite unique, for they cover a lot of ground which might otherwise be left uncovered. It is imperative that they should be good at their job in order to maximise the benefit to the firm and to secure the sales persons continued employment. Hence training must assume the responsibility of furnishing the sales person with all the information and know-how that they will need in order to excel. But why is the sales person so important that they merit specialised training sessions?
In many cases the sales person is the only communication link between the company and the customer, therefore it is in the company’s own interests to provide them with as much promotional backing, product information service, training and help in installation, as they need. Their job is to sell but they cannot do their best if they are left solely to their own devices. Markham defines the role of the modern-day sales person in the following way:
“They are the company’s public relations people, projecting the image of that company. They are the market research people, feeding back vital information to head office. They are the company problem solver, sorting out delivery and service problems, and acting as an unpaid management consultant to their customers.”
Undoubtedly, an effective sales team is an indispensable asset to any marketing oriented company.
Yet another very important reason why sales people should be experts in their job is explained by the 20/80 Law (Pareto Curve). It has been estimated that 20 per cent of a company’s customers will account for 80 per cent of that company’s turnover. Since the customers are so valuable to the firm incompetence cannot be tolerated, for not only might it result in one lost order but also the total loss of any future revenue from that customer.
Sales people, then, are vitally important in a variety of different situations and to a diversity of company types. So why is it that some firms choose to rely more on advertising? The answer lies mainly with the cost. It was estimated in the Advertising Quarterly in 1968 that 494 million was spent on consumer advertising in that year compared to 200 million on industrial advertising. With an average cost of 6,000 pa (1968) per salesperson, and a total of 150,000 sales people, the total cost to British Industry was estimated to be 900 million which was nearly three per cent of GNP at the time. With so much being spent on sales people, even in 1968, industry appears to have recognised the importance of sales people, but does it draw the maximum benefit from the investments?
All are agreed that much of the money is wasted every year, not only in Britain but throughout the world. The cost of operating a sales team is the single, most important
marketing expenditure incurred by most firms, yet there are multitudinous examples of waste. From attitude surveys in the United States the following comments can be singled out: “Some of the sales people are so bad that they read the presentation to me. I’m no dummy, I can read too, you know”; “They don’t know anything about billing procedures”; “They don’t seem to know much except how to call the office and ask them”.
Generally the following criticisms were found to be common:
(1) Sales people do not know the needs of our business
(2) They do not know their own products
(3) Their sales presentations are poor and incomplete
(4) Seldom do they use visual aids
(5) They are careless with the claims they make
(6) They do not sell with conviction and enthusiasm
(7) They do not follow through
The demand for good sales people is very high, but a person with these abilities is generally hard to find. Personal salesmanship is an integral part of the vast majority of business enterprises, and the need is definitely for improvement rather than curtailment. If each sales person was better at their job, most companies could cut back on their sales team. If so, is training the answer? Since the problem is basically not to minimise the cost to the company but to maximise the effectiveness of the sales team, the answer must lie in improved training techniques along with a more selective system of recruitment and motivation schemes built into the job to ensure that the sales person gives the job their best at all times.
Goals of Training
In the broadest sense, the basic aim of marketing sales education is to promote, maintain and develop company business by improving the effectiveness of sales people. However, the aims of training plans must be carefully geared to the marketing objectives of the firm and to the socio-economic environment in which the firm finds itself. In general the objectives of most training programmes should read as follows:
(1) To enable the sales person to understand the product, its uses and, more specifically, the importance of their product to a prospective buyer. This is becoming increasingly important with the advent of specialised selling.
(2) To facilitate early acceptance and better communication between buyer and selling agent through a deeper understanding of the communication channels. In this way the sales people can present their product from an angle which is personally tailored.
(3) To enable the sales person to understand the basic decision-making model, so they can identify the decision-maker immediately. An adapted form of this model will allow the sales person to pinpoint crucial areas in the communication process: for a new trainee, to expedite the emotional transition of the sales person to a more marketing oriented approach; for an old hand, to keep them up-to-date with new products, selling techniques and the industry in which they operate.
(4) To integrate advertising and promotional efforts.
(5) To introduce new products.
(6) To reduce sales team turnover.
It is necessary to map out a list of objectives for each particular job, to ensure that the sales person receives training which is relevant to their task.
Gradually management is becoming aware of the importance of effective sales training as a guide to success in a job which is, after all, one of the most vital to the sales management function. Yet scepticism concerning the actual value of training, as it is today, still persists both from the management side and from that of the sales people themselves.
All training programmes agree that learning is the key to a sales meeting, and Bieber
suggests the following axioms to guide any would-be trainer:
(1) The learner must be the focal point of the training
(2) If the learner is confronted with a problem they will learn more
(3) Involvement on the part of the learner is imperative
(4) Learning is behaviour modified by experience
But the basic retention principles must also be borne in mind when selecting a method of teaching; i.e. that you retain 10 per cent of what you read, 20 per cent of what you see, 30 per cent of what you hear, 60 per cent of what you hear and see, 70 per cent of what you talk about and 90 per cent of what you do.
Whatever the principles used, the training officer must recognise the importance of follow-through training to ensure that the information has been absorbed (repeat reinforcement technique), to provide the sales person with new product information or to keep them informed of new techniques in selling. Also commitment from the learner is of paramount importance. In order to ensure participation, a relaxed atmosphere is usually recommended as well as the use of small groups, although this differs from one company to another. The approach to the session must be geared to the needs of the sales person in order to maximise commitment.
The essence of an effective sales training programme is to help a sales person to know themselves, how they react, to know others and how they might react. Their training must be tailored to their own needs, their personality, attitudes, etc. Yet all too often courses are of such a general nature that real needs are rarely catered for. For example, if the sales people are old and experienced, it is advisable to stress their professionalism which will, in turn, spark their interest in being real professionals. For the young trainee, however, encouragement and confidence building are the order of the day.
An equation has been conceived, showing the interrelation of certain factors which lead to success:
Sales persons own style Satisfaction
Needed knowledge = Success
Sharpened skills Profit
As long as the three training principles of preparation, learner involvement and follow-through are borne in mind then the programme is on the way to success.
Psychological theories around which training programmes may be devised are multifarious. Initially the stimulus-response theory was popular; i.e. that certain stimuli would lead to an anticipated response and hence to a sale. This was the beginning of the “canned sales talk” era, where a script containing the correct stimuli was used. This has been almost totally abandoned now because of its inability to accommodate the buyer who responded in a different way to that expected. Secondly, the need theory has directed programmes for a while, but this concentrates on finding out the needs of the customer and can be counterproductive when the salesperson devotes all his time to this. Thirdly, high pressure selling, showing the extrovert forcing his personality on unsuspecting clients was at one time, and for some firms still is, the favourite principle. Fourthly, the AIDA sequence has received much acclaim partly because of its simplistic, common sense approach and partly because of its wide application. AIDA stands for Attention, Interest, Desire and Action. For example, confirming a world that is taken for granted arouses attention. The sales person producing slight modifications in that world creates interest. The client begins to desire the product because he has become a party to a negotiated reality in which that product has a definite place and he acts in so far as no alternative reality intervenes.
Once the basic approach has been decided upon then the next step is the design of the training course, and the methods available today can be broken up into two groups: classroom and non-classroom methods. Non-classroom methods include:
(1) On the job training with experienced sales people
(2) On the job training with outside experts
(3) Training by mail
(4) Setting up project teams in the field to investigate the problems in the sales persons own organisation, using the tutor as a catalyst.
On the job training has been popular for a long while mainly because it is immediate and directly relevant to what the sales person is doing. Also it does not entail taking them off the road which is a very costly business. More and more interest is being shown in training in the field, in order to escape the artificialities of classroom training. The value of classroom type training programme design is becoming more and more doubtful, especially when role-playing and model-building sessions ultimately prove themselves to be far removed from the reality of the sales field. Its value lies principally for new recruits, to build their confidence.
Closed circuit television can be a useful aid in allowing the student to observe and evaluate himself or herself in action.
Even the use of auto-tutors presents certain problems, e.g. the initial cost of programmed material is high, and where no experienced tutor is available to assist students individually, those who would like to discuss various points are frustrated. It has advantages, however, for conveying technical information about, say, a new range of products, where there are too few people in the company with sufficient knowledge to teach on the job or the information needs to be imparted to the sales people very speedily. It should always be followed by discussion sessions with an expert on the subject matter covered.
METHODS FOR SUPERVISING SALES PEOPLE
The first step in any method of sales team supervision must be to consider what the sales team is trying to achieve. The role of the sales team must be placed in context, in the broad marketing mix alongside such factors as advertising, pricing, product development and methods of distribution.
Every sales manager considers his job of paramount importance, and that the sales team they develop and control is both complex and unique. Consequently, they are suspicious of any generalised method of approach to their sales supervision job. This is understandable because the resource they control, the sales team, consists of people in relationships with customers. Thus the sales team is about people interacting with people. Consequently the issues involved appear, at ground level, to be very complex indeed. However, social sciences suggest broadly similar issues and problems in all such interactions, and consequently a systematic approach to these issues would ensure that all the factors are considered.
Such an approach is offered by the operational research system of a simplifying model. The strategy begins with a definition of the role of personal selling in the marketing mix. Objectives for personal selling are established in the form of descriptions of the sales peoples responsibilities for communications (promotion),customer service (including technical service, delivery etc), and market information. This analysis leads to a preliminary estimate of the number of sales people required, given the opportunities in the market that is the market potential. The statement of sales objectives leads to an estimate of the sales budget required which must also consider the availability of financial resources and other company constraints. The simultaneous evaluation of market opportunities and company constraints leads to decisions about sales team size and sales budget. These decisions specify the total level of selling effort available.
Lack of supervision by sales managers can lead to problems, just as can constant “over the shoulder” direction. Many sales people need frequent encouragement and praise and often require close supervision especially when involved in difficult or unpleasant activities, e.g. suggestion selling. The sales manager has a major interest in helping the sales people to better manage their time which is spent in three major activities; travelling, waiting and selling. In many jobs, they end up spending about one third of their time in each activity. Their travelling time and waiting time is not entirely unproductive, however, and can be used to plan future activities and report on past activities. The question remains, however, whether sales people need as much as two thirds of their working day for planning and reporting. The answer is generally no. Therefore company efforts to assist sales people in reducing travelling and waiting time are generally desirable.
The major methods of supervising sales people are:
(1) Call Norms
Developing and supervising certain “call norms”, i.e. the number of calls the salesperson must make per year &/or the length of each call. The success of this type of control and supervision depends on the correct assessment of sales response to the number of calls. Some quantitative methods for optimising this number have been developed, involving mainly regression analysis and operational research techniques. While call norms are desirable for particular types of accounts and “average” types of sales people, one should refer to them merely as guide-lines rather than as requirements. This can be done through optimum use of sales time.
(2) Customer Types and Product Groups Norms
Instead of allocating sales effort either by customer types or by product line, the two are combined. Each sales person is presented with a two dimensional grid which he completes.
A sales person will probably allocate his sales time based on the highest profit he could bring in and on the most profitable product. This method “forces” the sales person when filling in the grid to seriously consider their chances of selling to the various customers. Instead of allocating their sales time by “feeling” and intuition, it provides them with a target or some sort of plan to carry out their sales effort. This method also takes into account the changing market environment, i.e. that certain customers will not increase sales orders any further in the future and that certain customers will buy larger amounts if the number of calls increase further. Every time the whole procedure is repeated, the sales person has to think whether their customers will change their orders for the coming period, and with some experience they may be able to forecast their buying patterns relatively accurately.
(3) Supervision for New Accounts
The identification of active and prospective calls is very important. If left alone many sales people tend to spend most of their time in the offices of present customers who are better known quantities. The sales people 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 person receives a bonus for new accounts, they assume the risks during the courting period. In addition to the problem of how much time sales people spend in cultivating prospects, there is the problem of which prospect to cultivate. This problem is especially acute in situations where there are more prospects than time available for developing them. Somehow they must be ranked, and sales people should concentrate on the prospects at the top of the list.Working out a value can do this for the Return On Time Invested (ROTI) for each account. The first step in this process is to find the value of a person’s time, the usual unit used is the hour. There are two methods of calculating this, on a cost basis and on a break-even sales volume basis.
The second approach, which is more useful for account classification, involves calculating the sales volume that must be produced to cover costs. In order to calculate break-even sales volume, the gross margin on sales must be known. Thus, the break-even volume equals direct costs divided by the percentage gross margin on sales, hence the break-even volume per hour equals the cost per hour divided by the gross margin percentage. This tells the person how much he must sell per hour to cover his costs. Finally, the return on time invested can be obtained from the gross margin divided by the cost of time invested. A ROTI value greater than one is profitable; less than one is unprofitable.
Thus by working out ROTI values for accounts, they can be systematically classified into Grade A – high ROTI value, Grade B – medium ROTI value, Grade C – low ROTI value, and the sales persons time allocated accordingly. To summarise in symbols:
CPCH = DC BEV = DC ROTI = GM BEV/CHe= CPCH
CH GMP CTI GMP
ROTI >1 Profitable; ROTI<1 Unprofitable.
where CPCH = Cost per Call Hour
DC = Direct Costs
CH = Call Hours
BEV = Break-even Volume
BEV/CHr = Break-even Volume per Call Hour
GMP = Gross Margin Percentage
GM = Gross Margin Cash on Sales Obtained
CTI = Cost of Time Invested
ROTI = Return on Time Invested
On this basis the number of accounts per person can be allocated.
ORGANISATIONAL STRUCTURE FOR SALES TEAM MANAGEMENT
An efficient sales team organisational structure is really a function of the selling strategy adopted by the firm. It may be structured according to geographical terrain, to products or product groups, or according to types of customers or types of sales functions.
The strategy begins with a definition of the role of personal selling in the marketing mix, as discussed above. This analysis leads to a preliminary estimate of the number of sales people required. The statement of sales objectives, coupled with consideration of availability of financial resources and other constraints leads to an estimate of the sales budget required. These decisions specify the total level of selling effort available.
The next step in the decision process for the sales manager is to develop the basic control units from which they plan to organise and control sales efforts. They must decide the basis for these units, (Geographic, product, customer or function) as well as the span of control to be used. Using some estimates of market potential and expected revenues, they must allocate sales effort to control units. Here they must consider the individual sales persons workload, the average number of calls a person can perform and how this sales team should be organised. Basically, there are four types of sales team structures:
In this type of organisation a person is responsible for selling all the company’s products in a clearly defined territory. The territorially structured (or geographical) organisation is the traditional and most widely used form of sales organisation. In this type of organisation, a person would report either to a regional sales manager or, in a larger company, to district sales managers. The major benefit of territorial organisation is the ease in travel time and economies in expenses.
Organisation by Products
A product-organised sales team is one in which a person is selling only a few specific products. This specialisation of sales team by products is effective when the products are highly complex, or where there is such a great variety of unrelated products are highly complex, or where there is such a great variety of unrelated products that it becomes impossible for a person to deal with all of them. Organisation by products is sometimes deemed necessary by industrial firms whose products require specialised technical or applications knowledge. The extra travelling and costs of expenses are then regarded as a sound investment in a more effective sales team.
A potential drawback is that several different sales people from one firm may be calling on the same customer; and opportunities for a sale in another product range may sometimes be missed. In a product oriented sales organisation, the sales manager for a specific product is called product manager (or brand manager). They often have only a staff function, i.e. usually they do not have any line authority over the sales team and can only persuade and advise. This has led to controversial discussion of the responsibilities and functions of sales managers recently. This form of organisation is widely used by both consumer goods and industrial goods manufacturers.
Organisation by Customers
A customer-structured sales team is one in which different types of sales teams are created to serve the different types of customers. These customers may be the large multinationals, wholesalers, retailers, small corner shops, government agencies and ministries, and even totally different industries. This type of sales team organisation should lead to a better understanding of the needs and problems of the various customer categories. It enables sales people to learn in detail about the priorities, decision processes, preferred styles of relationship, communication channels etc, of their sector of the market. The drawbacks are that this structure often leads to much larger sales territories than a geographical structure would require, and consequently expenses are higher and travelling time longer.
Organisation by Functions
This is a relatively new type of organisation of the sales team. Among those advocating the organisation of sales activities on a functional basis there are two approaches:
(1) Developmental organisation, i.e. organisation of the sales team aiming
to create new accounts
(2) Maintenance organisation, aiming to service existing accounts
Various combinations of the basic structures discussed above are common, the purpose being to group activities in the manner that will best contribute to achieving the corporate objectives. Combinations or mixed organisations are particularly common among firms attempting to preserve a fundamentally product oriented structure but also to give individual markets specialised treatment. The larger the sales team, the more feasible it becomes to specialise according to multiple principles.
METHODS OF COMPARING SALES GOALS AND PERFORMANCE
The major benefit of comparing sales goals and sales peoples performance is that it enables the firm to monitor progress towards objectives and to note deviations from expected results. In the short term, deviations could call for different tactics to be implemented, but in the long run they might suggest that a reappraisal of the objectives be required. Objectives may have to be reappraised for three reasons: firstly, the original sales team goals may have been unrealistic. Objectives should make sales people strive for excellence, but should not be unattainable. Secondly, the objectives may have been sound but the plan or its execution faulty, thus managers and sales people must reappraise their plan, strategy and tactics. Thirdly, uncontrollable factors may have changed the operating environment, consequently goals and strategies must be reappraised in the light of the new operating environment. An additional major benefit of the appraisal process is that it allows the sales manager to give constructive criticism to the person on agreed criteria. Additionally, by the nature of this appraisal as a two way process, it means the sales manager can receive feedback from the sales people as to the state of the market-place.
Hengel has suggested a method of comparing sales goals and performance using the MBO (Management by Objectives) technique to ensure that all factors are considered. This can be applied by the sales manager before a review session and used as a basis from which common goals can be determined. Hengel suggests that this method has several uses:
(1) For the performance improvement and as a planning device
(2) As a basis from which to design a training programme
(3) As a performance measuring device
(4) As a tool for assessing the performance of coaching and counselling
The major other tools used to evaluate overall sales performance are:
(1) Sales analysis
(2) Market share analysis
(3) Market cost analysis
In every company there tend to be variations in sales performance between sales territories, products, sales people and customers. Only a detailed sales analysis, by geographical areas, by products, by customers, by sales people &/or by the method of sale, might expose the problem areas.
Sales analysis alone has a major deficiency – it does not tell the firm how it is doing vis-a-vis its competition. A market share analysis is therefore often required which would indicate how well the firm and the sales people are doing. Differences in market share among various sales territories might indicate causes of disparities in performance.
While sales analysis relates to variations from sales plans or quotas, and market share analysis compares performance with that of competitors, costs analysis has increased in importance lately because of rapidly rising distribution costs. Accordingly, firms concentrate their attention on distribution and (sales) cost control in order to achieve higher profitability. The types of costs relevant to sales cost analysis are:
(1) “Natural” costs, i.e. those typically found in accounting records and referring to the nature of expenditure, for example telephone, care expenses, etc.
(2) Functional costs, which refer to costs classified by the purpose of the activity, e.g. costs attributable to contacting particular customers.
(3) Direct costs, i.e. those attributable to a particular territory, for example salaries, commissions earned, etc.
(4) Indirect costs, e.g. sales office expenses, billing etc.
There are certain problems involved in analysing and allocating sales costs. However, despite the cost and time involved, investigating firms sales performance via a cost analysis approach might lead to an opportunity to identify areas for corrective actions, e.g. unprofitable territories, customers and products, or inefficient sections of the sales team.
Quantitative and Descriptive Bases of Evaluating Sales team Performance
Unlike many jobs in which quantitative measures of effectiveness are difficult or impossible to develop – and there is over-reliance on subjective, qualitative judgements – the sales person’s job permits objective, quantitative performance measures. On the other hand, some firms use a performance evaluation based solely on subjective and qualitative judgement by an evaluator, even for sales people.
Since the sales job is multidimensional, both the descriptive and quantitative methods are best used in combination in order to appraise the overall job of selling performed by individual sales people (Table 1). The most common objective measure is also the simplest: sales volume produced. Thereby, the sales person who consistently makes the most sales is the best one.
However, this yardstick alone is seldom a sufficient measure except for certain jobs in which sales people are expected to find their own customers without territorial restraint, as in insurance, mutual funds and real estate sales. Almost all the other method taken on their own have their deficiency and limitations, for example, call rate is a measure of the number of calls made per day, not necessarily of effectiveness; average number of orders per workday tells very little about the size of orders etc.
The deficiency of the descriptive bases is that different evaluators can rate the same person very differently. Some sales managers tend to rate most of their subordinates on the high side, while others are more critical of them. This hinders the comparability of the ratings: that is, differences in ratings may reflect not valid differences in performance, on which promotions and raises should depend, but only differences in the persons doing the rating.
In general, quantitative inputs provide better measures of sales performance. But some qualitative inputs are desirable – the supervisor’s evaluation of co-operation, willingness to accept responsibility, and desire for advancement and self-improvement. These are best used as supplementary input for material that cannot readily be measured by quantitative means.
Performance appraisal should be accompanied by an evaluation interview in which the sales manager discusses with each sales person the strengths and weaknesses of his or her performance. In organisations where the sales team is spread widely, this is the best chance for the manager to communicate on a face to face basis. Here is an ideal time to stress the desired directions for future selling efforts: for example if there is particular company wide emphasis on improving the profitability of sales, then the appraisal instruments should give special emphasis to the gross margin or profitability of the sales made. An evaluation interview is a good time to discuss with the sales people not only their performance to date, but the goals and objectives they should have for the following year. This then becomes the first step toward management by objectives; future evaluations can be structured around how well the planned and agreed-upon objectives have been met.
By having performance evaluated against certain prescribed objectives, standards and against other employees, people with managerial potential can more easily be identified. The sales manager should not only be alerted to deviations on the negative side, that is, performance that does not meet goals. Deviations that exceed expectations may highlight significant opportunities that are just emerging, so that plans and goals should be adjusted upward. For example, if one territory is selling a certain product in volume far exceeding that of other territories, this performance suggests a possible new use or new market that should be explored and that might well be developed in other territories.
STYLES OF SALES TEAM MANAGEMENT
No other activity or function of a business firm is more important to its viability than the sales function. Without the revenue produced by a company’s sales team there would be no profits to support the other functional or staff people. While the business management function has five basic characteristics (planning, organising, staffing, directing and controlling), sales team management is generally unique in its particular characteristics, which are:
(1) Sales generation
(2) Public countenance of the company, i.e the members of the sales team being the representatives of the company are the firm’s point of exposure – in terms of their honesty, personality and effectiveness – to firms, customers and the general public
(3) Independence of sales job, requires from the sales team managers a proper mix of control and supervision in order not to negatively affect sales people motivation, initiative and creativity
The sales team manager can be characterised as being under a great deal of pressure to produce. Since his performance is so easily measured, it becomes immediately evident to superiors if results do not correspond to expectations. Furthermore, promotions, pay rises, bonuses, commission arrangements and other compensation plans, coupled with accountability of their performance, create subtle pressure for the sales managers to produce the maximum. Because of these reasons, sales team managers do generally focus their attention and effort on monitoring sales peoples performance. However, as sales team management is a multidimensional function, they must consider not just performance goals, but also plans of operation, the number of sales people per control unit and the allocation of a number of accounts per sales person. Having allocated sales effort, the manager must consider the call strategy to be used with specific customers or types of customers.
Call strategy involves time allocation to new versus current accounts, call norms and call scheduling. The final step in the sales strategy decision process is the evaluation and control of sales performance. Data on current performance are compared to standards and variations between desired and actual results and elements of selling strategy are also compared. In this sense evaluation and control are used as negative feedback to optimise and adjust out of line elements in the sales system. Having arrived at a sales team strategy the sales manager must now consider how it can be implemented, that is how to motivate and control their staff so that they can perform to the best of their ability.
Likert has suggested two methods of supervision of a sales team to lead to the possible implementation of the sales strategy selected. This approach is very similar to the two extremes of McGregor’s Theory X and Theory Y.
The approaches Likert identifies are the traditional approach, which is the hierarchical “boss and worker relationship”, and in comparison the “newer system” based on a supportive relationship between the manager and the person. Likert suggests that the major difference between these two styles is that leadership and other processes of the organisation must be such as to ensure a maximum probability that in all interactions, and all relationships with the organisation, each member will in the light of his background values and expectations, view the experience as supportive and as one which builds and maintains his sense of personal worth and importance. This approach is different from the traditional consideration of the person as “the person out on a limb far from the company structure” – in effect a lone wolf. However, with the constant psychological pressures and alienation of the person’s job such an approach can be both necessary and rewarding to the company in terms of results from the sales people.
Obviously, the style of sales team management depends very much on the sales manager. There are a number of qualities and characteristics that make a good sales manager. Although traditionally sales management has been a male profession the situation is now changing, particularly in the United States, where statistics indicate an increasing number of female sales managers employed in manufacturing firms. Sales managers tend to have short planning horizons. While they might be sympathetic to the values of analysis, experimentation and long range planning, ordinarily the sales manager is primarily result oriented. Most of the sales team managers having for several years very often themselves been sales people, know the importance of the direct relationships between the person and his customers and the unique aspect of the selling situation.
If a Sales team manager has:
* Well organised plan of operation
* High performance goals
* High technical competence
e.g. Direct hierarchical pressure for
results, including award contests
and other practices of traditional
Based on the principle of supportive
relationships. i.e. group methods of
supervision and other principles of new
THEIR ORGANISATION WILL DISPLAY
Less group loyalty
Lower performance goals
Greater conflict and less cooperation
Less technical assistance to peers
Greater feeling of unreasonable
Less favourable attitude to other
Greater group loyalty
High performance goals
More technical assistance to peers
Less feeling of unreasonable pressure
More favourable attitude to other
THEIR ORGANISATION WILL ATTAIN
Lower sales volume
Higher sales cost
Lower quality of business sold
Lower earnings by sales people
Higher sales volume
Lower sales cost
Higher quality of business sold
Higher earnings by sales people
Another important characteristic in the overall patterns and styles of sales team management is related to the problem of implementing change – if or when required. Sales team management is almost unique among the elements of the marketing programme in that its main variables and resources are the people involved – the sales team. As it is known, people interact with other people in a complex manner.