TM 1-2

(Fig. 1-2)
Types of Sales Jobs
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
 TM 1-3 (Fig. 1-3)
Selected Activities of Salespeople
Generate Sales: Provide service to Territory Professional Company
customers: management: development: service:
 Precall planning  Provide  Gather and  Participate in:  Train new
 Prospecting management/ analyze  Sales sales-
 Make sales technical information meetings people
presentations consulting on customers,  Profes-  Perform
 Overcome  Oversee competitors' sionals civic
objections installations and general associations duties
 Close by asking repairs market  Training
for the orders  Check inventory developments programs
 Arrange for levels  Disseminate
delivery  Stock shelves information to
 Entertain  Provide appropriate
 Arrange for merchandising personnel
credit/financing assistance: within
 Collect  Co-op salespersons'
payments advertising, company
 Participate in point-of-  Develop sales
trade shows purchase strategies and
 Displays, plans,
brochures forecasts, and
 Oversee product budgets
and equipment
testing
 Train wholesalers'
and retailer's
salespeople
 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.
 SalesManagement
Sales Management Responsibilities
Responsibilities TM 1-5
TM 1-5
(Fig. 1-5)
(Figure 1-5)

Strategic
planning

Organizing the
Performance
sales force
evaluation Communication
Coordination
Integration

Motivation and Recruiting

supervision Selection
Training and Assimilation
development 2
 TM 1-6a

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

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 president of sales

National sales manager

Regional/divisional sales manager

District sales manager

Sales supervisor
Staff assistants
available for advice and
Sales person support at any step
along the ladder
TM 1-8
The Executive Ladder in
FIG. 1-7
Team Selling President

Vice president
of marketing

Distribution
Client-team Product
logistics
leader engineer
specialist

Customer
sales/service
representative
 TM 1-9

Promotional Mix: Product Life Cycle, Type of Business and Product

Product Manufacturers Wholesalers Retailers

Life-Cycle Industrial Consumer All Products Durable Nondurable

Personal selling Advertising Personal selling Personal selling Advertising

Introduction
Personal selling Advertising Sales promotion

Personal selling Advertising Personal selling Personal selling Advertising

Growth Personal selling Sales promotion Sales promotion
Sales promotion Advertising

Personal selling Sales promotion Personal selling Personal selling Advertising

Maturity
Advertising Sales promotion Sales promotion Sales promotion

Personal selling Sales promotion Personal selling Personal selling Sales promotion
Decline
Sales promotion Sales promotion
A Company’s Complete Marketing System:
A Framework of Internal Sources TM 2-1
(Fig. 2-1)
Operating within a Set of External Forces

Macroenvironmental
forces:
Demography
Economic conditions
Sociocultural factors
Political-legal factors
Technology
Competition

Company’s marketing mix:

Product planning
Marketing inter- Price structure Marketing inter-
Suppliers mediaries mediaries The market
Distribution system
Promotional activities

Nonmarketing resources in the firm:

Production Public image

Financial Research and
Personnel Development
Location
Company Organization Chart Embracing the TM 2-2
(Fig. 2-3)
Concept of Marketing Management

President

Production Marketing Financial Personnel

Manager Manager Manager Manager

Manager of Marketing Chief Sales

Planning and Facilitating Staff Force Manager
Services
Management of field
Advertising Sales budgeting sales organization
Sales promotion Sales forecasting
Marketing research Planning for channels, Management of sales office
Sales training territories, and quotas activities including
Sales analysis and Product planning customer service and
control (sales Inventory control product service
statistics) Production scheduling
Physical distribution
 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, TM 2-4

Strategies and Tactics (Fig. 2-4)

Set Goals

Formulate
Strategies

Develop Tactics
 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

Strategy Goals
Increase marketing share 10% 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
share 10%
Sales Force

Strategy
Increase share of customer business
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
Multiple relationship strategies (FIG. 2-5)

High

Partnership

Commitment Relationship
to the
customer oriented

Transaction
oriented

Low
Low Cost of serving the High
customer
TM 3-1
FIG. 3-1
Salesperson’s Average Time Allocation*

(5.3 hrs) Waiting/Travel

18% (8.5 hrs)
18% Administrative
(7.2 hrs) Tasks
15% Selling Over the
Phone
(11.6 hrs) (14.3 hrs) Selling Face-to-
25% 31% Face
Service Calls

*SOURCE: Christem P. Herde, Dartnell’s 29th 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 objections
Presentation
Need Assessment
Approach
Preapproach
Prospecting
 TM 3-3
Lead Conversion Ratio: Inquiry to FIG. 3-2

Decision 12 Months After Inquiring

Plan to Purchased
buy 25% Purchased
No longer in
45% market
No longer
Plan to buy
in market
30%

*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
business if
not followed
up 40%
Share of buyer’s
business if
followed up 83%

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
User Production line workers and
their supervisors
Influencer Engineers, research &
development specialists
Gatekeepers Purchasing agents, reception-
ists, secretaries, research
assistants
Deciders Purchasing agents (small or
reorder items), management
Buyers Purchasing agents
TM 3-5
Influence description
Use the product in the
production process
Write specifications; supply
information
Limit access to others and
control the flow of
information to others
Make actual choice between
suppliers
Formally give the order to
a supplier; arrange terms
of sale
 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 TM 3-7

Product Features Benefits Advantages

Camera Telephoto lens Take pictures Able to capture

from longer images of animals
distances. or people from a
distance.
Bicycle Attached water Can hold a water Don’t get dehydrated.
bottle holder bottle. Don’t have to stop
for water.
Feel more refreshed.
Drill Press Multiple drill Can change bits Saves time.
bits attached without shutting Saves money.
down the machine.
Motor Oil Rust inhibitor Oil and engine Saves money.
have longer life.
 TM 4-1

Characteristics of a Good Organizational Design

Market
orientation
Effective
Activities
informal
organized
organization

Organizational Design
Balanced and
Authority and
coordinated
responsibility
activities
aligned
Stable, but Responsible
flexible span of control
Geographical Organization
TM 4-2
(Fig. 4-5)

Chief Marketing Executive

Sales General Marketing

Advertising Sales
Promotion Sales Research
Manager Analyst
Manager Manager Manager

Western Regional Eastern Regional

Sales Manager Sales Manager

4 District Sales 4 District Sales

Managers Managers

Salespeople each Salespeople each

with own territory with own territory
Sales Organization with
Product Specialized Sales
TM 4-3
Force (Fig. 4-6)

Chief Marketing Executive

Marketing General Sales Customer

Advertising
Research Sales Promotion Relations
Manager
Manager Manager Manager Manager

Sales Manager Sales Manager Sales Manager

Product A Product B Product C

Salespeople Salespeople Salespeople

Product A Product B Product C
Sales Organization
Specialized by Type of TM 4-4
Customers (Fig. 4-8)

Chief Marketing Executive

Sales General Director of

Advertising
Promotion Sales Marketing
Manager
Manager Manager Research

Sales Manager Sales Manager Sales Manager

Transportation Steel Industry Petroleum
Industry Industry

Salespeople Salespeople Salespeople

 TM 4-5

The Relationship Between a Sales Team and a Buying Center

Selling firm Buying firm

Sales Team Exchange Purchasing Organizational
Salesperson
processes agent buying center

Marketing

Sales Purchasing
Information
Manufacturing Problem Solving Manufacturing
Negotiation
R&D R&D
Friendship,trust
Engineering Engineering
Product/services
Physical
distribution Marketing
Payment
Reciprocity
 TM 4-6
Uses of Telemarketing

• Identify prospective customers

• Screening, qualifying leads

• Sales solicitation: small customers, re-orders

• Order processing

• Product service support

• Account management

• Customer relations
 TM 5-1
RECRUITING AND SELECTION
PROBLEMS

• 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 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 & Selection

Establish Responsibility Determine
Conduct Job Prepare Job Determine Hiring
for Recruiting, Selection Number of
People Wanted Analysis Description Qualifications
and Assimilation

Recruit Applicants

Select Applicants
Design a System Measure Applicants
Make Selection
For Measuring Against Hiring
Decisions
Applicants Qualifications

Hire The People

Assimilate New People

Into Sales Force
 TM 5-4

Workload Analysis

Number of reps needed Total workload in market

= Workload one rep can handle
Market workload:
Customer Number of Calls Total
x =
class accounts 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 5 x 50 = 1250

14,000
Number of reps needed = = 112 reps
1250
 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 expected expected reps needed

4 - 1 + 2 + 2 + 1 = 8
 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
 TM 5-7
RECRUITING FOR THE TEAM
• Willingness to share

• Cooperative

• Trusting

• Empathetic

• Accepting of others

• Receptive to others ideas

• Selflessness

• Leadership skills
 RECRUITING SOURCES OF SALES REPRESENTATIVES TM 5-8

Source Comment

Referrals: Candidates and position are known to person making referral.

Within company:
Office and factory employees
Sales force leads
Other Companies:
Competitors
Customers
Suppliers
Educational institutions
Advertisements
Employment agencies
Voluntary applicants
Part-time workers
Company employees know the company and its products.
Current salespeople know their job requirements and can possibly identify
candidates who could be a good job match.
Competitors know the customers and are familiar with your products.
Customers know your products and your company.
Suppliers know your company and your products.
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.
Produces the greatest number of candidates, but the average quality is
sometimes lower.
The agency is often more costly than other methods, but it will do a large part
of the initial screening.
These applicants are interested in your firm and probably possess a high
degree of self-confidence, self-reliance, and initiative.
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
Consistent Percent
with retained Rep’s per-
Recruiting strategic Number Number after 3 Cost Frequency formance
sources planning? recruits hired years of use after 2 yrs.
Within company:
Sales force
Other departments
Other companies:
Competitors
Customers
Noncompetitors
Educational institutions
Advertisements
Employment agencies
Voluntary applicants
Women
Minorities
 TM 6-1

Salesperson Selection Tools

References and
credit reports

Application Psychological
blanks tests

Organizational
Design

Personal Assessment
interviews Centers
 TM 6-2

Application Blank Information

Personal Experience Physical Environmental

Name Work Ability to perform Membership in
job-related social and service
Address & Phone Education physical activities organizations
Health Outside interests
Reason for seeking
particular job
Personal goals
References
 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
 TM 7-1
Selection and Hiring are Not Synonymous

COMPANY A DISLIKES ANN ANN DISLIKES COMPANY A

NO OFFER EXTENDED

COMPANY B LIKES ANN ANN DISLIKES COMPANY B

OFFER EXTENDED, BUT NOT ACCEPTED

COMPANY A LIKES ANN ANN LIKES COMPANY C

OFFER EXTENDED & ACCEPTED

Details of the Job TM 7-2
(Fig. 7-2)

Office Paycheck
practices

Company eating Expense

facilities account

For the new sales

representative:
Details of the job
 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?

Program design
Where should training be done?

Content of training

Teaching methods used in training program

Reinforcement
Determine how training will be reinforced

What outcomes will be evaluated? Evaluation

What measures will be used?
Objectives of Sales
TM 8-2
Training Programs (Fig. 8-3)
Increased
Sales
Productivity

Improved
Self- Lower
Management turnover

Sales training
program
objectives

Improve
customer Improve
relations morale
Improved
communica-
tion
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
 TM 8-4
Who Should Train Sales People?

Source Advantages Disadvantages

Line executive Greater credibility Lack of time
Clearer expectations Lack of teaching
ability
More thorough
evaluation of candidates

Staff trainer Greater time Additional expense

More resources Lack of authority
Better training skills Less credibility

Outside specialist Greater specialization Additional expense

and expertise
Program content is
not specific to
company’s needs
 TM 8-5

Training Content and Methods Matrix

Lectures Discussion Demonstra- Programmed Interactive Audio On-the-Job Videos Bus. T.V. Role
tion learning simulation cassettes Playing

Company
knowledge
* * * *

Product
knowledge * * * * * * * * *

Market/Indus-
try knowledge * * * * * * * *

Selling skills
* * * * * * * * * *

Time Manage-
ment * * * * * *
 TM 9-1
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 9-2
(Fig. 9-2)

Motivational Conditions

Are the Does better

YES YES Does more effort YES
rewards performance
lead to better
GREATER
worth the lead to greater EFFORT
rewards? performance?
effort?

NO NO NO

The same or less effort

Maslow’s Hierarchy of Needs and Possible TM 9-3
Sales Managers’ Actions (Fig. 9-3)

Fulfilled through:
Self-development,
challenge.
Managerial actions:
Provide/offer advanced
training, assignments to special
projects, more responsibility and
authority.
Fulfilled through: Status, recognition.
Managerial actions: Recognize sales rep achievements
personally and publicly through title changes, commendation
letters, promotions.
Fulfilled through: Affiliation, friendship, acceptance.
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 9-4

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

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 No change in behavior

more calls; work
longer hours

Strategy Change selling No change in behavior

strategy; adapt the
presentation

Task difficulty Work harder; Become frustrated

change strategies; and discouraged;
or seek help give up

Luck No change in behavior Avoid the situation

 TM 9-6
CAREER STAGES
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 Attractive
Attainable Variety of
Goals Prizes
 TM 9-8
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 10-1
(Fig. 10-1)

What a Good Sales Compensation Plan should Do

Efforts + Control Treat Attract and keep

Results = Sales representatives’ customers good people
activities properly
Rewards

Motivate the Economical yet

sales person Good sales compensation plan competitive

Security and Flexible

incentive Fair Simple and Stable
 Potential Conflicts in TM 10-2
Compensation Plan Design
Characteristics of Plan
Characteristics of Plan 1 2 3 4 5 6 7 8 9 10 11 12
1. Reward results __

2. Reward efforts C __

3. Provide steady income C __ __

4. Provide incentive __ C C __
5. Fair C C C C __
6. Flexible __ C C __ __ __
7. Simple C __ __ C C C __
8. Economical __ C C __ C __ C __
9. Competitive __ C C __ __ __ C C __
10. Controls and directs C __ __ C C C __ __ __ __
11. Consistent with company objectives C C C C __ __ C __ __ __ __
12. Stable C C __ C C C __ C __ C C __
C = Potential for conflict
 TM 10-3

Steps in designing a sales compensation plan

Include job elements

Review job Identify plan’s controllable by sales force
description objectives and measurable

Decide on indirect
Establish level of Develop the method monetary
compensation of compensation compensation

Pretest and
install plan
 TM 10-4
Fig. 10-4

Building Blocks for a Sales Compensation Plan

Others

Company Car

Profit Sharing Pension

Bonus Moving Expenses

Drawing Account Insurance Other Business

Expenses
Salary Commission Paid Vacation Travel

SECURITY INCENTIVES BENEFITS EXPENSES

 TM 10-5
Methods of Compensation

Method Advantage Disadvantage Best Used

Straight Provides security and Direct incentive is easily For products that require a lot of presale
salary stability for reps lost if not administered and/or post-sale service
properly
Better for directing and For building long-term customer relationships
controlling sales Represents a fixed cost
When supervision is available for new recruits
activities
Requires supervision to
For new territories
Ensures proper direct, control, and evaluate
treatment of customers For missionary sales

Straight Provides a strong Difficult to direct and When a strong incentive is needed to attain
commission incentive supervise sales people sales
Sales people have Customers’ best interests For products that require little presale and/or
more freedom may be ignored post-sale service
Acts as a screening Sales people’s earnings The sale is a one-time sale
method may fluctuate widely
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 To encourage above-normal performance of

specific activities
Can be used for specific May be seen as
activities - flexible inequitable if not
administered properly
 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 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 - 300
Net $ 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 input
• Peer evaluations
 TM 11-1
Factors Influencing Sales Force Expenses

Office
supplies
Transportation Entertainment

Meals Expenses Gifts

Communication
Lodging
 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 None Simple, no costs Reps may not spend
their own expenses enough on customers
Unlimited All legitimate Flexible and fair, Encourages excessive
payment plan business expenses allows for territory spending
differences
Limited Specific amounts Limited and predictable Inflexible
payment plan allowed expenses
e.g. Possibility for
$80/day - lodging switching expenses
$45/day - food between categories
$0.26/mile - transportation
Sales may resent

Flat allowance $700 per week Limited and predictable Inflexible

expenses
Sales may resent
 TM 11-4

Factors Influencing Automobile Ownership

Decision: Company Owned, Company Leased, or
Salesperson Owned

Maintenance Special design

Size of Control
sales force

Mileage
Operating

Personal
Investment
preference
Administrative
problems
 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 $200/month + $.16/mile
mileage rate
 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 Leadership
behaviors
effectiveness
Managerial
skills SITUATION
 TM 12-2
(Fig. 12-2)

Leadership Behaviors and Styles

RELATIONSHIP-ORIENTED TASK-ORIENTED

Planning
Supporting
Persuading Problem solving
Coaching
Recognizing Informing
Mentoring
Rewarding Delegating
Team building
Conflict management Clarifying
Representing
Monitoring
 TM 12-3

Basic Leadership Styles (Fig. 12-3)

low task high task

and and
high relationship high relationship

low task high task

and and
low relationship low relationship
Low

Low Task behavior High

 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
 TM 12-5
Reasons for Supervision

Training
Improved Sales
morale assistance

Reasons for
Supervision

Better
performance Enforcement
 TM 12-6
Amount of Supervision Needed

High
Performance

Optimal

Under Over
Low
Low High
Amount of Supervision
 (Fig. 13-1)

Factors Shaping Sales Force Morale

Personal characteristics

Corporate
Culture
Individual Satisfaction with Effects
perceptions The job/individual of
and beliefs morale morale

Organizational
and work
climate SOCIAL INTERACTION

Sales force morale

 Dimensions of Job Satisfaction (Fig. 13-2)

Nature of
Performance Pay
the job

Promotions
Company
and
management Dimensions
of Recognition
job and status
satisfaction

Co-workers
Security
and benefits

Working
conditions Supervision
 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 TM 13-4

Integrate Foster open

interests: and frequent
match the communica-
person with tion
the job

Develop a strong
corporate culture and
a supportive
organizational
climate
 TM 14-1
Sales Forecasting Methods
Forecasting Advantages Disadvantages Best Used
Executive opinion Quick, easy, and simple Subjective For new products
Lacks analytical rigor
Sales force composite Relatively simple Sales people are sometimes When reps are of a
overly optimistic high caliber
Usually fairly accurate
Sales people may sandbag When each rep has a
Involves those people who (estimate low) in order to small number of
are responsible for the results look better customers

Time consuming
Survey of buyers Forecast is done by those who Time consuming For new products
intentions will buy the product, so
accuracy is good Cost When there are a small
number of customers
Customer may not be
cooperative
Trend projections: moving Objective and inexpensive No consideration for major For established products
average exponential product or market changes
regression analysis Use smoothing historical data When market
factors are Require some statistical predictable
analysis For aggregate company
forecasts
Analysis of market factors Objective Unforeseen changes When market factors are
stable and predictable
Fairly accurate
Fairly simple
Test markets Very accurate Time consuming For new products which
do not require large
Cost investments
 TM 14-2 (Fig. 14-8)
Sales Forecast Trend Projection Using Least Squares Method
Time Period 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  _y = 217.1
x = 5.5 y = 21.7
(x) 2 = 3025 xy = 1452.7
N x y - x y 10(1452.7) - (55)(217.1)
b= = = 3.13
N(x2 ) - (x)2 10(385) - 3025
a = y - bx = 21.7 - 3.13(5.5) = 4.48
y = a + bx = 4.48 + 3.13(x) = Forecasted Sales
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

40 •
2006 forecast
10-year base Y
35 •
•
30 • •
• 2006 forecast
4-year base
25 •
•
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 Second Year
Projected population, ages 0-18 months 4,850,000 4,800,000
Percentage using diapers 100 100
Number using diapers 4,850,000 4,800,000
Average daily diapers per child 2.55 2.55
Diapers daily, ages 0-18 months 12,367,500 12,240,000

Projected population, ages 19-30 months 3,300,000 3,200,000

Percentage using diapers 80 80
Number using diapers 2,640,000 2,560,000
Average daily diapers per child 2.19 2.19
Diapers daily, ages 19-30 months 5,781,600 5,606,400

Projected population, ages 31-42 months 3,500,000 3,300,000

Percentage using diapers 40 40
Number using diapers 1,400,000 1,320,000
Average daily diapers per child 1.10 1.10
Diapers daily, ages 31-42 months 1,540,000 1,452,000

Total daily diapers, all ages 19,689,100 19,298,400

Percentage disposable diapers 95 95
Number disposables daily 18,704,645 18,298,400
Dryever market share percentage 20 20
Expected daily sales (units) 3,740,929 3,666,696
Wholesale price per diaper 0.07 0.07
Annual sales forecast in dollars 95,580,736 93,684,083
Procedure for Designing Sales Territories TM 15-1
(Fig. 15-1)

Select a Determine Location Determine

Control Unit and Potential of Basic
Customers Territories

Assign Set Up Evaluate

Salespeople to Territorial Effectiveness
Territories Coverage of Design
Plans
 TM 15-2
Territory Size and Workload Factors

Workload Factor Territory Size

Increase/Decrease
Nature of Job:
Lots of presale and post-sale activity Decreases
Nature of product:
A frequently purchased product Decreases
A limited repeat-sale Increases
Market development stage:
New market--fewer accounts Increases
Established market--more accounts Decreases
Market coverage
Selective coverage Increases
Extensive coverage Decreases
Competition:
Intensive Decreases
(unless market is
oversaturated:
Limited Increases
 TM 15-3
Buildup Method of Territorial Design (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 TM 15-4

Control Units
Illinois Iowa Kentucky
Customer Call Calls Calls Calls
class frequency Accounts per year Accounts per year 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

Distribution of one rep’s calls 1,008 + 491 or 402

year (1,500)*
Possible control combinations 100% 70% or 100%
Illinois Iowa Kentucky

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

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 = $200,000,000

Targeted volume rep = $ 10,000,000

Number of reps needed = Company sales potential = $200,000,000 = 20
Targeted volume/rep $ 10,000,000

Territory volume as = Targeted volume/rep = $ 10,000,000 = 5%

Company sales potential $200,000,000

Each territory should comprise 5% of sales potential or $10,000,000

Combine adjacent control units until each sales potential of $10,000,000
 TM 16-1

Functions of Budgeting

Sales
budget

Planning of Coordination of Evaluation of

performance performance performance
 TM 16-2a
Sales Budget, 1998 Colorado Ski Company
Sales Rep Joe Joe Joe Gus Gus
PRODUCTS Customer A. Customer B1 TOTAL Customer A Customer B
Skis:
Ski $45 1 400 1 140 2 540 1 360 1 120
Ski $60 390 260 650 240 210
Ski $80 210 420 630 190 290
Total skis 2 000 1 820 3 820 1 790 1 620
Ski Accessories
Ski Poles $100 400 600 1 000 300 400
Ski Poles $200 300 400 700 200 300
Boots $30 80 180 260 10 40
Boots $50 50 140 190 20 50
Boots $70 30 100 130 20 70
Laces 1 200 3 200 4 400 1 750 2 000
Bindings 250 300 550 200 270
Safety Straps 300 900 1 200 100 500
Wax 4 800 7 500 12 300 4 600 5 600
Mittens $3 1 200 2 400 3 600 800 1 400
Mittens $5 1 400 1 800 3 200 900 1 000
Goggles $1 1 500 2 800 4 300 750 1 500

Ski Pants:
Pants $10Men's 1 100 800 1 900 800 600
Pants $10Women's 1 400 1 500 2 900 950 800
Pants $20 Men's 900 1 100 2 000 610 750
Pants $20 Women's 1 500 1 100 2 600 800 970
Total Pants 4 900 4 500 9 400 3 160 3 120
Parkas:
Parkas $8 2 500 1 700 4 200 1 800 1 200
Parkas $15 3 200 2 200 5 400 900 1 000
Total Parkas 5 700 3 900 9 600 2 700 2 200
Sales Budget, 1998 Colorado Ski Company TM 16-2b

Joe Paula Paula Paula Totals Totals Dollars

Total Customer Customer Customer A Customer B Total
A. B TOTAL Volume

480 1 290 1 080 2 370 4 050 3 340 7 390 339 940

450 260 140 400 890 610 1 500 90 000
480 220 180 400 620 890 1 510 121 200
3 410 1 770 1 400 3 170 5 560 4 840 10 400 551 400

700 150 250 400 850 1 250 2 100 816 800

500 100 200 300 600 900 1 500 15 000
50 20 30 50 110 250 360 10 800
70 20 50 70 90 240 330 16 500
90 20 50 70 70 220 290 20 300
3 750 800 1 200 2 000 3 750 6 400 10 150 6 280
470 75 110 185 525 680 1 205 19 280
600 50 300 350 450 1 700 2 150 1 400
10 200 3 000 3 700 6 700 12 400 16 800 29 200 29 880
2 200 700 1 300 2 000 2 700 5 100 7 800 23 400
1 200 600 800 1 400 2 900 3 600 6 500 32 500
2 250 650 1 500 2 150 2 900 5 800 8 700 34 800
226 940

1 400 500 400 900 21 400 1 800 4 200 84 000

1 750 700 600 1 300 3 050 2 900 5 950 119 000
1 360 450 500 950 1 960 2 350 4 310 172 400
1 770 540 600 1 140 2 840 2 670 5 510 220 400
6 280 2 190 2 100 4 290 10 250 9 720 19 970 595 800

3 000 1 200 800 2 000 5 500 3 700 9 200 147 200

3 750 1 600 1 000 2 600 7 100 4 650 11 750 352 500
6 750 2 800 1 800 4 600 12 800 8 350 20 950 499 700

TOTAL DOLLAR VOLUME 1 873 580

 TM 16-3 (Fig.
Flow of Information from Sales Budget to Other Budgets 16-1)

Sales budget

Sales department expense

Administrative Production department
budgets (advertising, selling
expense budgets budgets
costs, administration)

Cash budget Profit and loss

budget

Revenues Revenues

Expenses Expenses
Purposes of Sales Quotas TM 16-4
(Fig. 16-2)

Indicate
strong/weak
spots in selling
structure
Evaluate Furnish sales
sales force goals/
contest incentives
results

Sales
quotas
Control are used Control
selling ... sales force
expenses activities

Improve Evaluate
compensation sales force
plan productivity
effectiveness
 TM 16-5
Examples of Various Quota Bases
Quota Base Quota Actual Percent of Quota
Attained
Sales volume,
product line A $200,000 $200,000 110
Gross margin,
product line B 30,000 25,000 83
Product
demonstrations 120 135 117
Orders from new
accounts 15 17 113
Expense quota 50,000 45,000 -10 or
110
Combination of all
the above using
equal weights 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 gross margin

District sales volume District gross margin

Territory volume Territory gross margin

By customer group By product By customer group By product

 TM 18-1
(Fig. 18-5)
Income and Expense Statement, by Sales
Region, Colorado Ski Company, 1998 ($000).

Mid-
Total Eastern western Western

Net sales $27,000 $9,000 $4,500 $13,500

Less cost of goods sold 18,900 6,300 3,150 9,450
Gross margin 8,100 2,700 1,350 4,050
Less operating expenses:
Personal selling 3,847 1,070 802 1,975
Advertising 1,220 420 220 580
Warehouse/shipping 480 190 125 165
Order processing 240 79 56 105
Administration 513 171 171 171
Total operating expenses 6,300 1,930 1,374 2,996
Net profit (loss) $1,800 $ 770 ($ 24) $ 1,054
Net profit (loss)
as percentage of sales 6.7% 8.6% (0.53%) 7.8%
 Income and Expense Statement, by Sales
TM 18-2
Region, Colorado Ski Company, 1998 ($000),
using contribution-margin approach
Mid-
Total Eastern western Western
Net sales $27,000 $9,000 $4,500 $13,500
Less cost of goods sold 18,900 6,300 3,150 9,450
Gross margin 8,100 2,700 1,350 4,050
Less direct operating expenses:
Personal selling 3,082 845 595 1,642
Advertising 732 254 127 351
Warehouse/shipping 160 64 42 54
Order processing 130 43 30 57
Total direct operating expenses 4,104 1,206 794 2,104
Contribution margin $ 3,996 $1,494 $ 556 $1,946
Less indirect operating expenses:
Personal selling 765
Advertising 488
Warehouse/shipping 320
Order processing 110
Administration 513
Total indirect expenses $ 2,196
Net profit (loss) $ 1,800
Ways to Increase Order Size and Reduce Small Order Marketing Costs TM 18-3
(Fig. 18-8)

 Educate customers who buy from several different suppliers. Stress the
advantages of purchasing from one supplier.

 For customers who purchase large total quantities in frequent small orders, stress
the advantages of ordering once a month instead of once a week. Point out that the
buyer eliminates all handling, billing, and accounting expenses connected with
three of the four orders. Note further that the buyer writes only one check and one
purchase order. In addition, stress that there will be only one bill to process and
one shipment to put into inventory instead of three or four.

 Educate the sales force as well as customers. In fact, it may be necessary to

change the compensation plan to discourage acceptance of smaller orders.

 Substitute direct mail or telephone selling for sales calls or unprofitable or small-
order accounts; or continue to call on these accounts, but less frequently.

 Shift an account to a wholesaler or some other type of middleman rather than

dealing directly, even by mail or telephone.

 Drop a mass-distribution policy and adopt a selective one. This new policy may
actually increase sales because sales reps can spend more time with profitable
accounts.

 Establish a minimum-order size.

 Establish a minimum charge or a service charge to combat small orders.

Return on Assets Managed (ROAM) TM 18-4

Sales $ 10,000,000
Cost of goods sold 7,000,000
Gross margin 3,000,000
Salaries 150,000
Commission 850,000
Travel 150,000
District office expense 400,000
Total direct expenses 150,000
Contribution margin $ 1,450,000
Accounts receivable 2,200,000
Inventories 2,000,000
Total assets $ 4,200,000

Contribution margin 1,450,000

Profit on sales % = Sales volume = 10,000,000 x 100

= 14.5%

Sales volume $10,000,000

Asset turnover = Accounts receivable + Inventories = $ 4,200,000

ROAM = Profit on sales % x Asset turnover

= 2.38

= 1,450,000 x 10,000,000
10,000,000 4,200,000

= 14.5% x 2.38 = 34.5%

 TM 19-1
(Fig. 19-1)
Procedures for Evaluating Sales People

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
TM 19-2
(Fig. 19-2)
• Sales volume
In dollars and in units
By products and customers (or customer groups)
By mail, telephone, and personal sales calls
• 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
 TM 19-3
Input Factors Used as Evaluation Bases (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/ Market To
Base OUTPUT INPUT Historical Goal Share Others Source

Sales volume * * * * * Company records

Gross margin * * * * Company records

Orders * * * * 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

Sales presentation * * Sales manager

skills

Resourcefulness * * Sales manager

Customer relations * * Sales manager/customer

Attitude * * Sales manager/customer

 TM 19-5

Basic Performance Equations

Calls Orders Sales

Sales = Days worked x x x
Days worked Call 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 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