S13 Sales Management and Naukri.

com case
SDM-PGP (2011-12) Prof. Avinash Mulky

Generalised Route to Market

Customers and Prospects

Retailers Wholesalers Distributors
Indirect SF

Company Sales Force

Company SF

Value added resellers

Call Centres

Internet

Advertising

Sales Force Options

Non Sales Force Options

Company

Ensuring both efficiency and effectiveness

Marcom/ Salesforce Investment Efficiency

Awareness of company, brand, product Effectiveness

Conversion to Sales

The Selling World

EXTERNAL FORCES COMPANY SALES SYSTEM
Company Strategy Company business goals and objectives Mergers and acquisitions Product portfolio strategy Marketing Strategy Market segmentation Value proposition Sales process Route to Market strategy Sales Force Strategy and Operations Structure and allocation Size Skills Compensation Culture Activity Effectiveness Results Customer Company

Environment

Customers

Competition

Hunt for effectiveness

Source: Zoltners et al, 2008

The Selling World

COMPANY SALES SYSTEM
Company Strategy Marketing Strategy Sales Force Results Customer Company

EXTERNAL FORCES

Partner Sales Force

Source: Zoltners et al, 2008

Issues that companies face in sales

EXTERNAL FORCES
Buyer power is increasing New competitors are entering the market The industry is deregulating

Company Strategy We are launching a new technology We just went through a merger We are going through a major reorganization

Marketing Strategy We are focusing on new market segments We have implemented a new selling process We are implementing a new distribution strategy

Sales Force Strategy and Operations

Results Customer Company Customer satisfaction is going down Our sales targets are not being met Sales force costs are too high

We are losing good salespeople We spend too much time on administratio n and not enough on selling Some territories are too large, others are too small

Source: Zoltners et al, 2008

Issues that companies face in sales

Sales force size, structure and roles

Salespeople

Sales process

Customer Results

Company Results

Sales organization is poorly designed and too complex Sales roles and responsibilities are not clear The span of control for managers is too large

Sales people resist learning new methods Turnover is too high Salespersons dont take ownership of their problems We have only one star among every 15 salespersons

Calls per day are too low Salespersons only sell the products they are comfortable with Need to spend more time with high value customers Not enough time with key decision makers

Need to increase customer loyalty Customers are reducing number of suppliers Customer wants more handholding on this new line

Market share is down Volatile sales Linearity is very poor Lost two key orders this quarter Not enough orders in the pipeline

Source: Zoltners et al, 2008

Requirements and Influencers

Company factors R&D Marketing Service Channels Environment factors Market Competition Technology Regulation

Salesforce size, structure and roles

Salespeople

Sales process

Customer Results

Company Results

Structure and role definitions bring Product focus Market focus Efficiency Salesforce size and territory alignment allow Customer needs to be served Company profits to be maximised

Sales force has Product knowledge Market knowledge Selling skills Efficient time usage Motivation Sales management Recruits Trains Coaches Recognises Retains good people

Sales process Find enough prospects Prioritise, target Assess needs Develop solutions Communicate Negotiate Close Maintain, expand

Customer satisfaction Sustainable, profitable relations-both existing and new

Sales Market share Profit Short term Long term

Source: Zoltners et al, 2008

Framework # 1: Key decisions in Sales Management

Marketing strategy Sales force Strategy Sales force size Sales force operations Response function Sales process Supervision Compensation plan design Route to market strategy Selection

Territory Structure design

Compensation strategy

Allocation across products & markets Training, skills transmission Marketing sales interface

Control system

Source: Mantra et al (2010)

Marketing strategy Sales force Strategy Sales force size Sales force operations Response function Sales process Supervision Compensation plan design Go to market strategy Selection

HP-CSO

Naukri.com

Territory Structure design

Compensation strategy

Allocation across products & markets Training, skills transmission Marketing sales interface

Control system

Avaya

Source: Mantra et al (2010)

1. Sales effort drives sales

Sales Value 60 * 50 40 * 30 20 * 10 * * * * * * * * * * * * * * * * * * * * * * * * *

10

12

Calls per targeted account

2. Carryover exists
Sales Index 120 100 80 60 40 20 75-85% in Year 1 62-78% in Year 2

52-70% in Year 3

Yr 0 Yr 1 Time Yr 2 Yr 3

Another example of carryover

Sales due to 2006 effort Rs. 1000 Million

Sales due to 2007 effort Sales due to 2006 effort Pre 2006 Carryover Sales

Pre 2006 Carryover Sales

Rs. 1180 Million

2006 Sales

2007 Sales

Source: Adapted from Zoltners et al ( 2001)

Conditions that affect carryover

Factors leading to high carryover High switching costs Large purchase volumes/ long selling cycles High levels of maintenance and service activity Mature products Low levels of competitive noise Highly differentiated products Strong brand/company loyalty Many promotion vehicles

3. Sales force size impacts sales (and profitability)

Sales force Size Sales ( Rs.Mn) % Increase over last year Sales force Size Sales ( Rs.Mn) % Increase over last year

2006

100

1250

100

1250

2007

100

1500

20%

90

1440

15.2%

2008

100

1900

27%

90

1750

21.5%

4. Deployment to customer segments, products and selling activities is also important

30 25

Product Elasticities
Product D Rs. 29 lakhs

20

Sales

Product D 15 Product E Rs. 19 lakhs 10 Product E Product C 5 Product A Product B Product C Rs. 22 lakhs Product A Rs. 12 lakhs Product B Rs. 11 lakhs 20 30 40 50 60

10

Effort ( Sales person equivalents)

Source: Adapted from Zoltners et al ( 2001)

4. Deployment to customer segments, products and selling activities is important

Sales Force Time and effort

Allocation to customers

Allocation to products

Allocation to activities Prospecting vs selling Selling vs servicing

Methods of sizing the sales force

Intuitive methods Cost of sales method Last years revenue method Competitive parity method Market based methods Activity based approach Sales Response approach

Intuitive methods of Sales force sizing

Cost of sales method

No. of sales persons

Selling Expense % x Sales Forecast Average cost of a sales person

Last years revenue method

No. of sales persons

Forecasted sales Average revenues generated by a salesperson last year

Activity based approach

Define a list necessary sales activities for each segment
Refer to companys sales process

If process is simple and consistent across segments consider following concepts

Reach Frequency Duration of each call

Compute workloads Arrive at number of sale persons required

Activity based computation

Market segments Paints & Coatings 1600 20 Paper Carpet Adhesives Textiles Nonwovens

No. of accounts % reached Tasks ( hrs /year ) Precall planning Calling Post call activities Special situations Total hrs/yr/account Total hours / year Rep hours per year Reps required Total field force

900 18

330 12

650 35

850 10

100 65

5.8 13.6 6.6 2.9 28.9 9238 1490 6.2 24

11.5 21.5 11.0 8.4 52.4 8493 1490 5.7

30.3 35.5 36.9 29.0 131.7 5215 1490 3.5

7.6 16.6 6.8 5.0 36.0 8195 1490 5.5

5.4 15.8 5.7 4.7 31.6 2682 1490 1.8

6.9 12.6 6.3 4.2 29.8 1937 1490 1.3

Source: Zoltners et al ( 2001)

Sales Response estimation

Zero Effort 50% Current Current effort 150% Current Saturation levels of sales effort

Call frequency ( Calls / year)

12

50 or 100 as decided

Sales Estimate ( Rs. Million)