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Types of Sales Jobs TM 1 -2 (Fig. 1 -2) Driver sales person Sales Types of Sales Jobs TM 1 -2 (Fig. 1 -2) Driver sales person Sales maintenance Inside order-taker Outside order-taker Missionary sales person Sales support Sales engineer/consultant Consultative sales person: tangible products Sales development Consultative sales person: services and other intangible products

Selected Activities of Salespeople TM 1 -3 (Fig. 1 -3) Selected Activities of Salespeople TM 1 -3 (Fig. 1 -3)

Sales Jobs are Different than Other Jobs TM 1 -4 • Salespeople are largely Sales Jobs are Different than Other Jobs TM 1 -4 • Salespeople are largely responsible for implementing a firm’s marketing strategies in the field. • Salespeople represent their company to customers. • Salespeople represent their customers to their company. • Salespeople operate with little or no direct supervision. • Salespeople are alone a large part of the time. • A sales person needs more tact and social intelligence than other employees on the same level in the organization. • Sales people are among the few employees authorized to spend company funds. • Sales jobs frequently require considerable travel and time away from home and family. • Salespeople are responsible for revenue generation.

TM 1 -6 a Managing is a distinct activity which requires a unique set TM 1 -6 a Managing is a distinct activity which requires a unique set of skills, knowledge, and attitudes

TM 1 -6 b Some skills are the same; many are different • motivating TM 1 -6 b Some skills are the same; many are different • motivating • planning • training • delegating • recruiting • administration

The Executive Ladder in Personal Selling TM 1 -7 (FIG. 1 -6) President Vice The Executive Ladder in Personal Selling TM 1 -7 (FIG. 1 -6) President Vice president of sales National sales manager Regional/divisional sales manager District sales manager Sales supervisor Sales person Staff assistants available for advice and support at any step along the ladder

TM 1 -8 FIG. 1 -7 The Executive Ladder in Team Selling President Vice TM 1 -8 FIG. 1 -7 The Executive Ladder in Team Selling President Vice president of marketing Distribution logistics specialist Client-team leader Customer sales/service representative Product engineer

TM 1 -9 Promotional Mix: Product Life Cycle, Type of Business and Product Life-Cycle TM 1 -9 Promotional Mix: Product Life Cycle, Type of Business and Product Life-Cycle Introduction Manufacturers Industrial Personal selling Consumer Advertising Wholesalers All Products Durable Personal selling Growth Decline Personal selling Advertising Personal selling Sales promotion Advertising Sales promotion Personal selling Sales promotion Nondurable Advertising Maturity Personal selling Advertising Personal selling Sales promotion Retailers Sales promotion

A Company’s Complete Marketing System: A Framework of Internal Sources Operating within a Set A Company’s Complete Marketing System: A Framework of Internal Sources Operating within a Set of External Forces TM 2 -1 (Fig. 2 -1) Macroenvironmental forces: Demography Economic conditions Sociocultural factors Political-legal factors Technology Competition Company’s marketing mix: Suppliers Marketing intermediaries Product planning Price structure Distribution system Promotional activities Marketing intermediaries Nonmarketing resources in the firm: Production Financial Personnel Public image Research and Development Location The market

Company Organization Chart Embracing the Concept of Marketing Management TM 2 -2 (Fig. 2 Company Organization Chart Embracing the Concept of Marketing Management TM 2 -2 (Fig. 2 -3) President Production Manager Marketing Manager of Marketing Planning and Facilitating Staff Services Advertising Sales promotion Marketing research Sales training Sales analysis and control (sales statistics) Sales budgeting Sales forecasting Planning for channels, territories, and quotas Product planning Inventory control Production scheduling Physical distribution Financial Manager Personnel Manager Chief Sales Force Manager Management of field sales organization Management of sales office activities including customer service and product service

TM 2 -3 Strategic Planning for the Total Company top Organization’s mission Broad goals TM 2 -3 Strategic Planning for the Total Company top Organization’s mission Broad goals down Strategy and tactics to achieve goals

Relationship Between Objectives, Strategies and Tactics Set Goals Formulate Strategies Develop Tactics TM 2 Relationship Between Objectives, Strategies and Tactics Set Goals Formulate Strategies Develop Tactics TM 2 -4 (Fig. 2 -4)

TM 2 -5 Relationship Marketing • Long-term commitment • Understanding customer expectations • Building TM 2 -5 Relationship Marketing • Long-term commitment • Understanding customer expectations • Building service partnerships • Empowering employees • Total quality management

TM 2 -6 Company Strategy-Marketing Goals and Strategy Company Goals Marketing Earn 20% ROI TM 2 -6 Company Strategy-Marketing Goals and Strategy Company Goals Marketing Earn 20% ROI Strategy Increase marketing share 10% Goals Increase market share 10% Strategy Increase share of customer business

TM 2 -7 Marketing Strategy-Sales Force Goals, Strategy and Tactics Marketing Goals Increase market TM 2 -7 Marketing Strategy-Sales Force Goals, Strategy and Tactics Marketing Goals Increase market share 10% Strategy Increase share of customer business Sales Force Goals Increase share of customer business Strategy Build long-term customer relations Tactics Develop sales teams Provide bonuses for greater customer share

TM 2 -8 (FIG. 2 -5) Multiple relationship strategies High Partnership Commitment to the TM 2 -8 (FIG. 2 -5) Multiple relationship strategies High Partnership Commitment to the customer Relationship oriented Transaction oriented Low Cost of serving the customer High

TM 3 -1 FIG. 3 -1 Salesperson’s Average Time Allocation* (5. 3 hrs) 18% TM 3 -1 FIG. 3 -1 Salesperson’s Average Time Allocation* (5. 3 hrs) 18% (8. 5 hrs) 18% (7. 2 hrs) 15% (11. 6 hrs) 25% (14. 3 hrs) 31% *SOURCE: Christem P. Herde, Dartnell’s 29 th Sales Force Compensation Survey 1996 -1997, (The Dartnell Press: Chicago, IL), p. 177.

TM 3 -2 THE EIGHT STEPS OF THE SALES PROCESS Follow-up Gaining Commitment Meeting TM 3 -2 THE EIGHT STEPS OF THE SALES PROCESS Follow-up Gaining Commitment Meeting objections Presentation Need Assessment Approach Preapproach Prospecting

Lead Conversion Ratio: Inquiry to Decision 12 Months After Inquiring Plan to buy 25% Lead Conversion Ratio: Inquiry to Decision 12 Months After Inquiring Plan to buy 25% No longer in market 30% TM 3 -3 FIG. 3 -2 Purchased 45% *SOURCE: Bob Donath, James K. Obermayer, Carolyn K. Dixon, and Richard A. Crocker, “When Your Prospect Calls, ” Marketing Management, Vol. 3, No. 2, 1994.

TM 3 -4 (FIG. 3 -3) The Value of Inquiry Follow-Up Share of buyer’s TM 3 -4 (FIG. 3 -3) The Value of Inquiry Follow-Up Share of buyer’s business if followed up 83% Share of buyer’s business if not followed up 40% Source: Bob Donath, James K. Obermayer, Carolyn K. Dixon, and Richard A. Crocker, “When Your Prospect Calls, ” Marketing Management, Vol. 3, No. 2, 1994

Buying Center Members Type of influence Job position TM 3 -5 Influence description User Buying Center Members Type of influence Job position TM 3 -5 Influence description User Production line workers and their supervisors Use the product in the production process Influencer Engineers, research & development specialists Write specifications; supply information Gatekeepers Purchasing agents, receptionists, secretaries, research assistants Limit access to others and control the flow of information to others Deciders Purchasing agents (small or reorder items), management Make actual choice between suppliers Buyers Purchasing agents Formally give the order to a supplier; arrange terms of sale

NEED ASSESSMENT TM 3 -6 • Situational questions How often do you change the NEED ASSESSMENT TM 3 -6 • Situational questions How often do you change the cutting oil in your drill presses? In addition to the hospital administrator, who else has an influence on the decision? • Problem discovery questions Have you experienced any delays in getting repair parts? In which part of the production process is quality control the most important. • Problem Impact questions How do these delays in getting parts affect your production costs? What impact do the quality consistency problems have on your production costs? • Solution value question If your inventories could be reduced by 20%, how much would that save you? If your rejection rate on final inspection was reduced to under one percent, how much would that save you? • Confirmatory questions So, you wold be interested in an inventory control system that reduced your inventories by 20%? If I can provide evidence to you that our products would lower your rejection rate to under one percent, would you be interested?

Presentation of Product, Features, Benefits, Advantages Product Features Benefits TM 3 -7 Advantages Camera Presentation of Product, Features, Benefits, Advantages Product Features Benefits TM 3 -7 Advantages Camera Telephoto lens Take pictures from longer distances. Able to capture images of animals or people from a distance. Bicycle Attached water bottle holder Can hold a water bottle. Don’t get dehydrated. Don’t have to stop for water. Feel more refreshed. Drill Press Multiple drill bits attached Can change bits without shutting down the machine. Saves time. Saves money. Motor Oil Rust inhibitor Oil and engine have longer life. Saves money.

TM 4 -1 Characteristics of a Good Organizational Design Market orientation Effective informal organization TM 4 -1 Characteristics of a Good Organizational Design Market orientation Effective informal organization Activities organized Organizational Design Balanced and coordinated activities Authority and responsibility aligned Stable, but flexible Responsible span of control

Geographical Organization TM 4 -2 (Fig. 45) Chief Marketing Executive Advertising Manager Sales Promotion Geographical Organization TM 4 -2 (Fig. 45) Chief Marketing Executive Advertising Manager Sales Promotion Manager General Sales Manager Marketing Research Manager Western Regional Sales Manager Eastern Regional Sales Manager 4 District Sales Managers Salespeople each with own territory Sales Analyst

Sales Organization with Product Specialized Sales Force Advertising Manager TM 4 -3 (Fig. 46) Sales Organization with Product Specialized Sales Force Advertising Manager TM 4 -3 (Fig. 46) Chief Marketing Executive Marketing Research Manager General Sales Manager Sales Promotion Manager Customer Relations Manager Sales Manager Product A Sales Manager Product B Sales Manager Product C Salespeople Product A Salespeopl e Product B Salespeople Product C

Sales Organization Specialized by Type of Customers TM 4 -4 (Fig. 4 -8) Chief Sales Organization Specialized by Type of Customers TM 4 -4 (Fig. 4 -8) Chief Marketing Executive Advertising Manager Sales Promotion Manager General Sales Manager Director of Marketing Research Sales Manager Transportati on Industry Sales Manager Steel Industry Sales Manager Petroleum Industry Salespeopl e Salespeople

TM 4 -5 The Relationship Between a Sales Team and a Buying Center Selling TM 4 -5 The Relationship Between a Sales Team and a Buying Center Selling firm Sales Team Buying firm Salesperson Exchange processes Purchasing agent Organizational buying center Marketing Sales Manufacturing R&D Engineering Physical distribution Information Problem Solving Negotiation Purchasing Manufacturing R&D Friendship, trust Product/services Payment Reciprocity Engineering Marketing

Uses of Telemarketing TM 4 -6 • Identify prospective customers • Screening, qualifying leads Uses of Telemarketing TM 4 -6 • Identify prospective customers • Screening, qualifying leads • Sales solicitation: small customers, re-orders • Order processing • Product service support • Account management • Customer relations

RECRUITING AND SELECTION PROBLEMS TM 5 -1 • Lack of resources • Lack of RECRUITING AND SELECTION PROBLEMS TM 5 -1 • Lack of resources • Lack of job specification and qualifications • Qualifications not objectively established • Lack of managerial training • Personal prejudices • Search for managerial talent

TM 5 -2 KEY LAWS AND REGULATIONS AFFECTING A SALES FORCE • Civil Rights TM 5 -2 KEY LAWS AND REGULATIONS AFFECTING A SALES FORCE • Civil Rights Act of 1964 • Federal Contract Compliance, Executive Orders • Age Discrimination in Employment Act (1967) • Fair Employment Opportunity Act (1972) • Rehabilitation Act of 1973 • Vietnam Era Veterans Readjustment Act (1974) • Uniform Guidelines on Employment Selection Procedures (1978) • Americans with Disabilities Act (1990)

TM 5 -3 (Fig. 5. 2) Sales Force Staffing Process Plan for Recruiting & TM 5 -3 (Fig. 5. 2) Sales Force Staffing Process Plan for Recruiting & Selection Establish Responsibility for Recruiting, Selection and Assimilation Determine Number of People Wanted Conduct Job Analysis Prepare Job Description Determine Hiring Qualifications Recruit Applicants Select Applicants Design a System For Measuring Applicants Measure Applicants Against Hiring Qualifications Hire The People Assimilate New People Into Sales Force Make Selection Decisions

TM 5 -4 Workload Analysis Number of reps needed = Market workload: Customer class TM 5 -4 Workload Analysis Number of reps needed = Market workload: Customer class Total workload in market Workload one rep can handle Number of x accounts Calls Total = per year calls A 400 20 8, 000 B 600 10 6, 000 14, 000 One rep’s workload: Calls/day x Selling days/week x Working weeks/year = Annual workload 5 x 50 = 14, 000 Number of reps needed = 1250 = 112 reps 1250

TM 5 -5 (Fig. 4 -3) Determining the Number of Salespeople Needed Strategic Plans TM 5 -5 (Fig. 4 -3) Determining the Number of Salespeople Needed Strategic Plans - New Eliminated/ + Promotions + Retirements + Terminations/ = Total new territories combined resignations reps needed territories Expansion MN and RI 2 promotions 2 retirements 1 termination Total new into Texas. Territories expected reps needed 4 - 1 + 2 + 1 = 8

TM 5 -6 CONTENT OF THE JOB DESCRIPTION • Title • The nature of TM 5 -6 CONTENT OF THE JOB DESCRIPTION • Title • The nature of the product or service to be sold • Type of customers to be called on, frequency of calls, and types of personnel to be contacted • Specific tasks and responsibilities to be carried out • Organizational relationships • Mental and physical demands of the job • Environmental pressures and constraints that might affect the job

RECRUITING FOR THE TEAM • Willingness to share • Cooperative • Trusting • Empathetic RECRUITING FOR THE TEAM • Willingness to share • Cooperative • Trusting • Empathetic • Accepting of others • Receptive to others ideas • Selflessness • Leadership skills TM 5 -7

RECRUITING SOURCES OF SALES REPRESENTATIVES Source Comment Referrals: TM 5 -8 Candidates and position RECRUITING SOURCES OF SALES REPRESENTATIVES Source Comment Referrals: TM 5 -8 Candidates and position are known to person making referral. Within company: Office and factory employees Company employees know the company and its products. Sales force leads Current salespeople know their job requirements and can possibly identify candidates who could be a good job match. Other Companies: Competitors know the customers and are familiar with your products. Customers know your products and your company. Suppliers know your company and your products. Educational institutions Primarily used when recruiting inexperienced people. Students are usually actively involved in a job search, and this provides an efficient place to screen large numbers of available candidates. Advertisements Produces the greatest number of candidates, but the average quality is sometimes lower. Employment agencies The agency is often more costly than other methods, but it will do a large part of the initial screening. Voluntary applicants These applicants are interested in your firm and probably possess a high degree of self-confidence, self-reliance, and initiative. Part-time workers These workers are easy to contact, readily available, and can work flexible hours. This is a good source for in-home selling.

TM 5 -9 (Fig. 5 -8) Recruiting Evaluation Matrix Evaluation Criteria Recruiting sources Within TM 5 -9 (Fig. 5 -8) Recruiting Evaluation Matrix Evaluation Criteria Recruiting sources Within company: Sales force Other departments Other companies: Competitors Customers Noncompetitors Educational institutions Advertisements Employment agencies Voluntary applicants Women Minorities Consistent with strategic Number planning? recruits hired Percent retained Rep’s perafter 3 Cost Frequency formance years after 2 yrs. of use

TM 6 -1 Salesperson Selection Tools References and credit reports Application blanks Psychological tests TM 6 -1 Salesperson Selection Tools References and credit reports Application blanks Psychological tests Organizational Design Personal interviews Assessment Centers

TM 6 -2 Application Blank Information Personal Experience Physical Environmental Name Work Address & TM 6 -2 Application Blank Information Personal Experience Physical Environmental Name Work Address & Phone Education Ability to perform job-related physical activities Membership in social and service organizations Health Reason for seeking particular job Personal goals References Outside interests

TM 6 -4 Suggestions for Improving Interviewing Effectiveness • Have specific job specifications and TM 6 -4 Suggestions for Improving Interviewing Effectiveness • Have specific job specifications and qualifications clearly in mind • Establish specific interviewing objectives • Provide some degree of structure (guidelines, probing questions) • Allow adequate time • Be very familiar with application or resume information • Use standardized rating sheets after each interview • Use multiple interviews • Provide training and practice for the interviewers • Remember, the interview is an opportunity to learn more about the candidate as well as to sell your company

Selection and Hiring are Not Synonymous COMPANY A DISLIKES ANN TM 7 -1 ANN Selection and Hiring are Not Synonymous COMPANY A DISLIKES ANN TM 7 -1 ANN DISLIKES COMPANY A NO OFFER EXTENDED COMPANY B LIKES ANN DISLIKES COMPANY B OFFER EXTENDED, BUT NOT ACCEPTED COMPANY A LIKES ANN LIKES COMPANY C OFFER EXTENDED & ACCEPTED

Details of the Job TM 7 -2 (Fig. 7 -2) Office practices Paycheck Company Details of the Job TM 7 -2 (Fig. 7 -2) Office practices Paycheck Company eating facilities Expense account For the new sales representative: Details of the job

TM 8 -1 Phases of Developing and Conducting Sales Force Training Establish program objectives TM 8 -1 Phases of Developing and Conducting Sales Force Training Establish program objectives Identify who should be trained Training assessment Identify training needs and specific goals How much training is needed? Who should do the training? When should the training take place? Where should training be done? Program design Content of training Teaching methods used in training program Determine how training will be reinforced What outcomes will be evaluated? What measures will be used? Reinforcement Evaluation

Objectives of Sales Training Programs TM 8 -2 (Fig. 8 -3) Increased Sales Productivity Objectives of Sales Training Programs TM 8 -2 (Fig. 8 -3) Increased Sales Productivity Improved Self. Management Lower turnover Sales training program objectives Improve customer relations Improved communication Improve morale

Examples of Specific Training Objectives TM 8 -3 Company orientation and Understand company goals Examples of Specific Training Objectives TM 8 -3 Company orientation and Understand company goals and objectives administrative skills: Understand company selling philosophy Understand organizational structure Understand company policies and procedures Improve call reports Improve call patterns Improve time management Knowledge: Existing products - features, benefits, and applications New products - features, benefits, and applications Industry trends Competitive products - features, benefits, and applications Specific customer applications and problems Promotional programs Selling skills: Improve pre-call planning Improve prospecting methods Improve strategy selection Improve presentation skills Improve closing techniques Improve understanding of and handling objectives Improve customer sensitivity

Who Should Train Sales People? TM 8 -4 Source Advantages Disadvantages Line executive Greater Who Should Train Sales People? TM 8 -4 Source Advantages Disadvantages Line executive Greater credibility Lack of time Clearer expectations Lack of teaching ability More thorough evaluation of candidates Staff trainer Additional expense More resources Lack of authority Better training skills Outside specialist Greater time Less credibility Greater specialization and expertise Additional expense Program content is not specific to company’s needs

TM 8 -5 Training Content and Methods Matrix Lectures Discussion Demonstration learning Company knowledge TM 8 -5 Training Content and Methods Matrix Lectures Discussion Demonstration learning Company knowledge * * Product knowledge * * Market/Industry knowledge * * * * Selling skills Time Management Programmed Interactive simulation Audio On-the-Job Videos cassettes Role Playing * * Bus. T. V. * * * * * *

MOTIVATION IS THE CHOICE OF AN INDIVIDUAL TO 1. Initiate action on a certain MOTIVATION IS THE CHOICE OF AN INDIVIDUAL TO 1. Initiate action on a certain task … choice; 2. Expend a certain amount of effort on that task … intensity; 3. Persist in expending effort over a period of time … persistence. The amount of effort the sales person desires to expend on each activity associated with the job. TM 9 -1

TM 9 -2 (Fig. 9 -2) Motivational Conditions Are the rewards worth the effort? TM 9 -2 (Fig. 9 -2) Motivational Conditions Are the rewards worth the effort? NO YES Does better YES performance lead to greater rewards? NO Does more effort YES lead to better performance? NO The same or less effort GREATER EFFORT

Es ne teem ed s Se lf- ac t ne uali ed za s Es ne teem ed s Se lf- ac t ne uali ed za s tio n Maslow’s Hierarchy of Needs and Possible Sales Managers’ Actions Fulfilled through: Self-development, challenge. Managerial actions: Provide/offer advanced training, assignments to special projects, more responsibility and authority. Ph ys i ne olo ed gic s al Sa ne fety ed s Fulfilled through: Status, recognition. Managerial actions: Recognize sales rep achievements personally and publicly through title changes, commendation l letters, promotions. ia oc ds Fulfilled through: Affiliation, friendship, acceptance. S ee n Managerial actions: Use team selling, hold social functions, distribute employee newsletters, hold sales meetings, mentoring. Fulfilled through: Job security, safety, income security. Managerial actions: Provide safe work environment, set mutually agreed-upon performance standards, communicate job performance expectations and consequences of failure to perform. Fulfilled through: Food, shelter, clothing, health care. Managerial actions: Provide/offer adequate income and good benefits package. TM 9 -3 (Fig. 9 -3)

TM 9 -4 Herzberg’s Motivation-Hygiene Theory HYGIENE FACTORS MOTIVATION FACTORS • pay • recognition TM 9 -4 Herzberg’s Motivation-Hygiene Theory HYGIENE FACTORS MOTIVATION FACTORS • pay • recognition • company policies • responsibility • supervision conditions • challenge • work • growth opportunities

TM 9 -5 (Fig. 9 -5) Salespeople’s Perceived Reasons for Failure and Their Motivational TM 9 -5 (Fig. 9 -5) Salespeople’s Perceived Reasons for Failure and Their Motivational Impact Motivational impact Perceived reasons Positive Negative Ability Seek help; get Become frustrated additional training; and discouraged; ask for supervisor’s give up assistance; increase effort Effort Work harder; make more calls; work longer hours No change in behavior Strategy Change selling strategy; adapt the presentation No change in behavior Task difficulty Work harder; change strategies; or seek help Become frustrated and discouraged; give up Luck No change in behavior Avoid the situation

CAREER STAGES TM 9 -6 EXPLORATION • Primary concern is finding a suitable occupation CAREER STAGES TM 9 -6 EXPLORATION • Primary concern is finding a suitable occupation • Underdeveloped skills and knowledge • Many drop out or are terminated • Low expectancy instrumentality, high valence for personal growth ESTABLISHMENT • Primary concern is improving skills and performance • Lack of promotion may cause disengagement or quitting • New commitments make pay important • High expectancy instrumentality, high valence for promotion and pay MAINTENANCE • Primary concern is maintaining position, status, and performance • Have highest sales volumes and percentage of quota and pay • High valence for recognitions, respect, and pay • Low valence for promotion DISENGAGEMENT • Primary concern is preparing for retirement and/or developing outside interest • Low valence for higher order and lower order rewards • Low instrumentality

TM 9 -7 Sales Contest Design Elements Promote & Publicize Sales Contest Design Equally TM 9 -7 Sales Contest Design Elements Promote & Publicize Sales Contest Design Equally Attainable Goals Attractive Variety of Prizes

CAUSES OF PLATEAUING • • • No clear career path Not managed adequately Bored CAUSES OF PLATEAUING • • • No clear career path Not managed adequately Bored Burned out Economic needs met Discouraged with company Overlooked for promotion Lack of ability Avoiding risk of management job Reluctance to be transferred TM 9 -8

TM 10 -1 (Fig. 10 -1) What a Good Sales Compensation Plan should Do TM 10 -1 (Fig. 10 -1) What a Good Sales Compensation Plan should Do Efforts Results + = Rewards Motivate the sales person Security and incentive Control Sales representatives’ activities Treat customers properly Good sales compensation plan Fair Simple Attract and keep good people Economical yet competitive Flexible and Stable

Potential Conflicts in Compensation Plan Design TM 10 -2 Characteristics of Plan 1. Reward Potential Conflicts in Compensation Plan Design TM 10 -2 Characteristics of Plan 1. Reward results 1 2 3 4 5 6 7 8 9 10 11 __ 2. Reward efforts C __ 3. Provide steady income C __ __ 4. Provide incentive __ C C __ 5. Fair C C 6. Flexible __ C C __ __ __ 7. Simple C __ __ C C 8. Economical __ C C __ 9. Competitive __ C C __ __ __ 10. Controls and directs C __ __ __ C C __ 11. Consistent with company objectives C C __ __ 12. Stable __ C C = Potential for conflict C C C __ __ C C __ 12

TM 10 -3 Steps in designing a sales compensation plan Review job description Establish TM 10 -3 Steps in designing a sales compensation plan Review job description Establish level of compensation Pretest and install plan Identify plan’s objectives Develop the method of compensation Include job elements controllable by sales force and measurable Decide on indirect monetary compensation

TM 10 -4 Fig. 10 -4 Building Blocks for a Sales Compensation Plan Others TM 10 -4 Fig. 10 -4 Building Blocks for a Sales Compensation Plan Others Company Car Profit Sharing Pension Bonus Drawing Account Salary SECURITY Moving Expenses Insurance Commission Paid Vacation INCENTIVES BENEFITS Other Business Expenses Travel EXPENSES

TM 10 -5 Methods of Compensation Method Advantage Straight salary Provides security and stability TM 10 -5 Methods of Compensation Method Advantage Straight salary Provides security and stability for reps Better for directing and controlling sales activities Disadvantage Best Used Direct incentive is easily lost if not administered properly For products that require a lot of presale and/or post-sale service For building long-term customer relationships Represents a fixed cost Ensures proper treatment of customers Provides a strong incentive Difficult to direct and supervise sales people When a strong incentive is needed to attain sales Sales people have more freedom Customers’ best interests may be ignored For products that require little presale and/or post-sale service Acts as a screening method Straight commission When supervision is available for new recruits Requires supervision to For new territories direct, control, and evaluate For missionary sales Sales people’s earnings may fluctuate widely The sale is a one-time sale Adequate field supervision is not available Company is in a weak financial position Company uses part-time or independent sales people Bonus Added incentive Added cost Can be used for specific activities - flexible May be seen as inequitable if not administered properly To encourage above-normal performance of specific activities

TM 10 -6 Possible Combination Compensation Plans COMMISSION BONUS SALARY TM 10 -6 Possible Combination Compensation Plans COMMISSION BONUS SALARY

Drawing Account Examples TM 10 -7 Non-Guaranteed Plan Month Draw Sales Volume Commission Earned Drawing Account Examples TM 10 -7 Non-Guaranteed Plan Month Draw Sales Volume Commission Earned End-of-Month Payment to Rep January $1, 800 $40, 000 $4, 000 $2, 200 ($4, 000 - $1, 800 = $2, 200) February $1, 800 $15, 000 $1, 500 $0 (rep owes $300) March $1, 800 $30, 000 $3, 000 $900 (computed as follows) Commission = $3, 000 Less draw - 1, 800 Less February debt Net - 300 $ 900 Guaranteed Plan Month Draw Sales Volume Commission Earned End-of-Month Payment to Rep January $1, 800 $40, 000 $4, 000 $2, 200 ($4, 000 - $1, 800 = $2, 200) February $1, 800 $15, 000 $1, 500 $0 (rep owes $0) March $1, 800 $30, 000 $3, 000 $1, 200 ($3, 000 - $1, 800 = $1, 200)

TM 10 -8 COMPENSATING CROSS-FUNCTIONAL TEAMS • Shared reward • Role-reward congruence • Team-member TM 10 -8 COMPENSATING CROSS-FUNCTIONAL TEAMS • Shared reward • Role-reward congruence • Team-member input • Peer evaluations

Factors Influencing Sales Force Expenses Transportation Meals Communication Office supplies TM 11 -1 Entertainment Factors Influencing Sales Force Expenses Transportation Meals Communication Office supplies TM 11 -1 Entertainment Expenses Gifts Lodging

TM 11 -2 Characteristics of a Sound Expense Plan • No net gain or TM 11 -2 Characteristics of a Sound Expense Plan • No net gain or loss • Equitable treatment • No curtailment of beneficial activities • Simple and economical • Avoidance of disputes • Company control of expenses and elimination of padding

TM 11 -3 Salesperson Expense Options Method Reimbursement Advantages Disadvantages Salespeople pay their own TM 11 -3 Salesperson Expense Options Method Reimbursement Advantages Disadvantages Salespeople pay their own expenses None Simple, no costs Reps may not spend enough on customers Unlimited payment plan All legitimate business expenses Flexible and fair, allows for territory differences Encourages excessive spending Limited payment plan Specific amounts Limited and predictable allowed expenses e. g. $80/day - lodging $45/day - food $0. 26/mile - transportation Inflexible Possibility for switching expenses between categories Sales may resent Flat allowance $700 per week Limited and predictable expenses Inflexible Sales may resent

Factors Influencing Automobile Ownership Decision: Company Owned, Company Leased, or Salesperson Owned Maintenance Special Factors Influencing Automobile Ownership Decision: Company Owned, Company Leased, or Salesperson Owned Maintenance Special design Size of sales force Control Mileage Operating Personal preference Investment Administrative problems TM 11 -4

TM 11 -5 Automobile Allowance Plans Method Example Flat amount $400 /month Fixed mileage TM 11 -5 Automobile Allowance Plans Method Example Flat amount $400 /month Fixed mileage rate $. 28/mile Graduate mileage rate $. 25/mile, first 15, 000 miles $. 15/mile, second 15, 000 miles Combination flat and mileage rate $200/month + $. 16/mile

TM 11 -6 Other Methods of Expense Control • Training and enforcement • Credit TM 11 -6 Other Methods of Expense Control • Training and enforcement • Credit cards • Expense bank account • Change in nature of entertainment • Telemarketing • Careful travel planning

TM 12 -1 (Fig. 12 -1) Leadership Effectiveness Personal characteristics Managerial behaviors Managerial skills TM 12 -1 (Fig. 12 -1) Leadership Effectiveness Personal characteristics Managerial behaviors Managerial skills SITUATION Leadership effectiveness

TM 12 -2 (Fig. 12 -2) Leadership Behaviors and Styles RELATIONSHIP-ORIENTED Supporting Coaching Mentoring TM 12 -2 (Fig. 12 -2) Leadership Behaviors and Styles RELATIONSHIP-ORIENTED Supporting Coaching Mentoring Team building Representing TASK-ORIENTED Persuading Recognizing Rewarding Conflict management Planning Problem solving Informing Delegating Clarifying Monitoring

low task and high relationship low task and low relationship high task and high low task and high relationship low task and low relationship high task and high relationship high task and low relationship Low Relationship behavior High Basic Leadership Styles TM 12 -3 (Fig. 12 -3) Low Task behavior High

TM 12 -4 Charismatic Leadership Words and actions which transform the basic values, beliefs, TM 12 -4 Charismatic Leadership Words and actions which transform the basic values, beliefs, and attitudes of employees in such a way that they are willing to perform beyond the standards levels expected by the organization. • Articulate a vision • Challenge the status quo • Provide a role model

Reasons for Supervision TM 12 -5 Training Sales assistance Improved morale Reasons for Supervision Reasons for Supervision TM 12 -5 Training Sales assistance Improved morale Reasons for Supervision Better performance Enforcement

Amount of Supervision Needed TM 12 -6 Performance High Optimal Under Over Low Amount Amount of Supervision Needed TM 12 -6 Performance High Optimal Under Over Low Amount of Supervision High

(Fig. 13 -1) Factors Shaping Sales Force Morale Personal characteristics Corporate Culture Individual perceptions (Fig. 13 -1) Factors Shaping Sales Force Morale Personal characteristics Corporate Culture Individual perceptions and beliefs Organizational and work climate Satisfaction with The job/individual morale SOCIAL INTERACTION Sales force morale Effects of morale

Dimensions of Job Satisfaction Performance Nature of the job (Fig. 13 -2) Pay Promotions Dimensions of Job Satisfaction Performance Nature of the job (Fig. 13 -2) Pay Promotions Company and management Dimensions of job satisfaction Co-workers Recognition and status Security and benefits Working conditions Supervision

TM 13 -3 Effects of Sales Force Morale Low Morale High Morale Excessive turnover TM 13 -3 Effects of Sales Force Morale Low Morale High Morale Excessive turnover Organizational commitment Unsatisfactory performance Citizenship behavior Increased expenses Improved performance Increased complaint behavior Development of outside interest Disloyalty Unionization

Morale Building Process Integrate interests: match the person with the job Foster open and Morale Building Process Integrate interests: match the person with the job Foster open and frequent communication Develop a strong corporate culture and a supportive organizational climate TM 13 -4

Sales Forecasting Methods Forecasting Advantages Disadvantages TM 14 -1 Best Used Executive opinion Quick, Sales Forecasting Methods Forecasting Advantages Disadvantages TM 14 -1 Best Used Executive opinion Quick, easy, and simple Subjective Lacks analytical rigor For new products Sales force composite Relatively simple Sales people are sometimes overly optimistic When reps are of a high caliber Sales people may sandbag (estimate low) in order to look better When each rep has a small number of customers Usually fairly accurate Involves those people who are responsible for the results Time consuming Survey of buyers intentions Forecast is done by those who will buy the product, so accuracy is good Time consuming For new products Cost When there a small number of customers Customer may not be cooperative Trend projections: moving Objective and inexpensive No consideration for major average exponential product or market changes regression analysis Use smoothing historical data factors are Require some statistical analysis For established products Analysis of market factors Unforeseen changes When market factors are stable and predictable Time consuming For new products which do not require large investments Objective When market predictable For aggregate company forecasts Fairly accurate Fairly simple Test markets Very accurate Cost

Sales Forecast Trend Projection Using Least Squares Method Time Period TM 14 -2 (Fig. Sales Forecast Trend Projection Using Least Squares Method Time Period TM 14 -2 (Fig. 14 -8) Sales ($millions) Year (x) (y) 1996 1 7. 2 1997 2 9. 6 1998 3 12. 8 1999 4 16. 3 2000 5 21. 9 2001 6 26. 0 2002 7 27. 9 2003 8 30. 0 2004 9 32. 1 2005 10 33. 3 N = 10 _ x = 55 x = 5. 5 ( x) 2 = 3025 b= a = N x y - x y N( x 2 ) - ( x)2 y - bx y = a + bx = = = _ y = 217. 1 y = 21. 7 xy = 1452. 7 10(1452. 7) - (55)(217. 1) = 3. 13 21. 7 - 3. 13(5. 5) = 4. 48 + 3. 13(x) = Forecasted Sales 10(385) - 3025 Forecast for 2006 (10 -yr base) would be 4. 48 + 3. 13(11) = $38. 9 million Forecast for 2006 (4 -year base) would be $35. 4 million (calculation not shown)

TM 14 -3 (Fig. 14 -7) Projection of Sales Trend by Least Squares Method TM 14 -3 (Fig. 14 -7) Projection of Sales Trend by Least Squares Method • 40 2006 forecast 10 -year base Y 35 30 • 25 • 2006 forecast 4 -year base • 20 • 15 10 • • 5 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

TM 14 -4 Market Factor Forecast: Dryever Diapers Next Year Projected population, ages 0 TM 14 -4 Market Factor Forecast: Dryever Diapers Next Year Projected population, ages 0 -18 months Percentage using diapers Number using diapers Average daily diapers per child Diapers daily, ages 0 -18 months 4, 850, 000 100 4, 850, 000 2. 55 12, 367, 500 Second Year 4, 800, 000 100 4, 800, 000 2. 55 12, 240, 000 Projected population, ages 19 -30 months Percentage using diapers Number using diapers Average daily diapers per child Diapers daily, ages 19 -30 months 3, 300, 000 80 2, 640, 000 2. 19 5, 781, 600 3, 200, 000 80 2, 560, 000 2. 19 5, 606, 400 Projected population, ages 31 -42 months Percentage using diapers Number using diapers Average daily diapers per child Diapers daily, ages 31 -42 months 3, 500, 000 40 1, 400, 000 1. 10 1, 540, 000 3, 300, 000 40 1, 320, 000 1. 10 1, 452, 000 Total daily diapers, all ages Percentage disposable diapers Number disposables daily Dryever market share percentage Expected daily sales (units) Wholesale price per diaper Annual sales forecast in dollars 19, 689, 100 95 18, 704, 645 20 3, 740, 929 0. 07 95, 580, 736 19, 298, 400 95 18, 298, 400 20 3, 666, 696 0. 07 93, 684, 083

Procedure for Designing Sales Territories Select a Control Unit Assign Salespeople to Territories Determine Procedure for Designing Sales Territories Select a Control Unit Assign Salespeople to Territories Determine Location and Potential of Customers Set Up Territorial Coverage Plans TM 15 -1 (Fig. 15 -1) Determine Basic Territories Evaluate Effectiveness of Design

Territory Size and Workload Factors Workload Factor TM 15 -2 Territory Size Increase/Decrease Nature Territory Size and Workload Factors Workload Factor TM 15 -2 Territory Size Increase/Decrease Nature of Job: Lots of presale and post-sale activity Decreases Nature of product: A frequently purchased product A limited repeat-sale Decreases Increases Market development stage: New market--fewer accounts Established market--more accounts Increases Decreases Market coverage Selective coverage Extensive coverage Increases Decreases Competition: Intensive Limited Decreases (unless market is oversaturated: Increases

Buildup Method of Territorial Design TM 15 -3 (Fig. 15 -3) Management must determine: Buildup Method of Territorial Design TM 15 -3 (Fig. 15 -3) Management must determine: Desirable call patterns: Call frequency per account per year Total calls needed in each control group Workload capacity: Total calls possible per rep per year = number of daily calls x days selling Tentatively set territorial boundary lines by combining control units until total calls needed = total calls possible Modify territories as needed

Territory Design: Build-Up Method Worksheet Illinois Customer class Call frequency Control Units Iowa Calls Territory Design: Build-Up Method Worksheet Illinois Customer class Call frequency Control Units Iowa Calls Accounts per year TM 15 -4 Kentucky Calls Accounts per year A 2 per month 10 240 7 168 5 120 B 1 per month 30 360 17 204 10 120 C 1 every 2 months 68 408 55 330 27 162 108 1, 008 79 702 34 402 1, 008 + 491 or 402 70% Iowa or 100% Kentucky Distribution of one rep’s calls year (1, 500)* Possible control combinations Alternative territories 100% Illinois + 100% Kentucky 100% Illinois + 70% Iowa *6 calls/day x 5 = 30 calls/week x 50 = 1, 500 calls/year

Breakdown Method of Territorial Design TM 15 -5 (Fig. 15 -5) Management must determine Breakdown Method of Territorial Design TM 15 -5 (Fig. 15 -5) Management must determine Company sales potential Sales potential in each control unit Sales volume expected from each sales person Tentatively set territorial boundary lines by combining control units total sales potential = total sales volume expected Modify territories as needed

TM 15 -6 Territory Design: Break-Down Method Worksheet Company sales potential = $200, 000 TM 15 -6 Territory Design: Break-Down Method Worksheet Company sales potential = $200, 000 Targeted volume rep Number of reps needed = $ 10, 000 = Company sales potential = $200, 000 = 20 Targeted volume/rep Territory volume as = $ 10, 000 Targeted volume/rep = $ 10, 000 Company sales potential $200, 000 = 5% Each territory should comprise 5% of sales potential or $10, 000 Combine adjacent control units until each sales potential of $10, 000

TM 16 -1 Functions of Budgeting Sales budget Planning of performance Coordination of performance TM 16 -1 Functions of Budgeting Sales budget Planning of performance Coordination of performance Evaluation of performance

Sales Budget, 1998 Colorado Ski Company TM 16 -2 a Sales Budget, 1998 Colorado Ski Company TM 16 -2 a

Sales Budget, 1998 Colorado Ski Company TM 16 -2 b Sales Budget, 1998 Colorado Ski Company TM 16 -2 b

Flow of Information from Sales Budget to Other Budgets TM 16 -3 (Fig. 16 Flow of Information from Sales Budget to Other Budgets TM 16 -3 (Fig. 16 -1) Sales budget Sales department expense budgets (advertising, selling costs, administration) Administrative expense budgets Cash budget Production department budgets Profit and loss budget Revenues Expenses

Purposes of Sales Quotas TM 16 -4 (Fig. 16 -2) Indicate strong/weak spots in Purposes of Sales Quotas TM 16 -4 (Fig. 16 -2) Indicate strong/weak spots in selling structure Evaluate sales contest results Control selling expenses Furnish sales force goals/ incentives Sales quotas are used. . . Improve compensation plan effectiveness Control sales force activities Evaluate sales force productivity

TM 16 -5 Examples of Various Quota Base Quota Sales volume, product line A TM 16 -5 Examples of Various Quota Base Quota Sales volume, product line A $200, 000 110 Gross margin, product line B 30, 000 25, 000 83 Product demonstrations Actual 120 Percent of Quota Attained 135 117 Orders from new accounts 15 Expense quota Combination of all the above using equal weights 17 50, 000 113 45, 000 -10 or 110 106. 6 For the expense based quota, the objective is to come in below quota rather than above, or 10% below quota can be interpreted as attaining 110% of the goal.

TM 17 -1 Bases for Analyzing Sales Volume and Profit Total sales volume Total TM 17 -1 Bases for Analyzing Sales Volume and Profit Total sales volume Total gross margin District sales volume By product By customer group Territory volume District gross margin Territory gross margin By customer group By product

TM 18 -1 (Fig. 18 -5) Income and Expense Statement, by Sales Region, Colorado TM 18 -1 (Fig. 18 -5) Income and Expense Statement, by Sales Region, Colorado Ski Company, 1998 ($000). Total Net sales Less cost of goods sold Gross margin Less operating expenses: Personal selling Advertising Warehouse/shipping Order processing Administration Total operating expenses Net profit (loss) as percentage of sales Eastern Midwestern Western $27, 000 18, 900 8, 100 $9, 000 6, 300 2, 700 $4, 500 3, 150 1, 350 $13, 500 9, 450 4, 050 3, 847 1, 220 480 240 513 6, 300 1, 070 420 190 79 171 1, 930 802 220 125 56 171 1, 374 1, 975 580 165 105 171 2, 996 $1, 800 $ 770 ($ 24) 6. 7% 8. 6% (0. 53%) $ 1, 054 7. 8%

Income and Expense Statement, by Sales Region, Colorado Ski Company, 1998 ($000), using contribution-margin Income and Expense Statement, by Sales Region, Colorado Ski Company, 1998 ($000), using contribution-margin approach TM 18 -2 Mid- Total Net sales Less cost of goods sold Gross margin Less direct operating expenses: Personal selling Advertising Warehouse/shipping Order processing Total direct operating expenses Contribution margin Less indirect operating expenses: Personal selling Advertising Warehouse/shipping Order processing Administration Total indirect expenses Net profit (loss) Eastern $27, 000 18, 900 8, 100 $9, 000 6, 300 2, 700 $4, 500 3, 150 1, 350 $13, 500 9, 450 4, 050 3, 082 732 160 130 4, 104 $ 3, 996 845 254 64 43 1, 206 $1, 494 595 127 42 30 794 $ 556 1, 642 351 54 57 2, 104 $1, 946 765 488 320 110 513 $ 2, 196 $ 1, 800 western Western

Ways to Increase Order Size and Reduce Small Order Marketing Costs TM 18 -3 Ways to Increase Order Size and Reduce Small Order Marketing Costs TM 18 -3 (Fig. 18 -8)

TM 18 -4 Return on Assets Managed (ROAM) Sales Cost of goods sold Gross TM 18 -4 Return on Assets Managed (ROAM) Sales Cost of goods sold Gross margin Salaries Commission Travel District office expense $ 10, 000 7, 000 3, 000 150, 000 Total direct expenses Contribution margin 150, 000 $ 1, 450, 000 Accounts receivable Inventories 850, 000 150, 000 400, 000 2, 200, 000 2, 000 Total assets $ 4, 200, 000 Asset turnover = Contribution margin Sales volume = 1, 450, 000 10, 000 = Profit on sales % = 14. 5% Sales volume Accounts receivable + Inventories ROAM = Profit on sales % x Asset turnover = 1, 450, 000 10, 000 x = 14. 5% x = x $10, 000 $ 4, 200, 000 = 2. 38 = 34. 5% 10, 000 4, 200, 000 2. 38 100

Procedures for Evaluating Sales People TM 19 -1 (Fig. 19 -1) 1. Establish basic Procedures for Evaluating Sales People TM 19 -1 (Fig. 19 -1) 1. Establish basic policies 2. Select evaluation bases 3. Set performance standards 4. Compare performances to standards 5. Discuss results with sales people

Output Factors Used as Evaluation Bases • Sales volume In dollars and in units Output Factors Used as Evaluation Bases • Sales volume In dollars and in units By products and customers (or customer groups) By mail, telephone, and personal sales calls TM 19 -2 (Fig. 19 -2) • Sales volume as a percentage of: Quota Market potential (that is market share) • Gross margin by product line, customer group, and order size • Orders Number of orders Average size (dollar volume) of order Batting average of canceled orders • Accounts Percentage of accounts sold Number of new accounts Number of lost accounts Number of accounts with overdue payment

Input Factors Used as Evaluation Bases TM 19 -3 (Fig. 19 -3) • Calls Input Factors Used as Evaluation Bases TM 19 -3 (Fig. 19 -3) • Calls per day (call rate) • Days worked • Direct selling expense • As percentage of sales volume As percentage of quota • Nonselling activities Advertising displays set up Letters written to prospects Telephone calls made to prospects Number of meetings held with dealers and/or distributors Number of service calls made Collections made Number of customer complaints received

TM 19 -4 Evaluation Bases Possible Bases of Comparisons To Target/ Base OUTPUT INPUT TM 19 -4 Evaluation Bases Possible Bases of Comparisons To Target/ Base OUTPUT INPUT Historical Goal Sales volume * * Orders * To Share Others * Gross margin Market * Source * Company records * * * Company records Calls/day * * Sales force call reports Days worked * * Sales force call reports * * Selling time * * Sales force call reports Selling expense * * Company records Activities * * Sales force call reports Knowledge * * Sales manager Resourcefulness * * Sales manager Customer relations * * Sales manager/customer Attitude * * Sales manager/customer Sales presentation skills

TM 19 -5 Basic Performance Equations Calls Sales = Days worked x x Days TM 19 -5 Basic Performance Equations Calls Sales = Days worked x x Days worked Orders Call x Sales Orders Sales = Days worked x Call rate x Batting average x Average order Example: Sales = 250 x 4 x. 5 x 1000 Sales = 1000 x. 5 x 1000 Sales = $50, 000

TM 20 -1 Illegal Sales Practices • Granting price concessions that are not justified TM 20 -1 Illegal Sales Practices • Granting price concessions that are not justified or that are not necessary to meet competition • Making false claims about your product and the services that accompany your product • Representing a product to be new when it is rebuilt or second-hand • Misleading customers into thinking they are getting a bargain when this is not the case • Bribing customers’ employees in order to acquire or hold an account • Using bribery or espionage to learn a competitor’s trade secrets