Sales Job Analysis, Recruitment and

Selection
 Salesforce Staffing
• It is one of the most challenging and important responsibilities / activities
of sales management
• Salesforce Staffing Process includes following stages:
• Planning
• Recruiting
• Selecting
• Hiring
• Socialisation
• We shall briefly discuss each of the above stages
 Planning Stage
• It consists of three steps:
• Establish responsibility for staffing process
• Decide number of salespeople needed
• Outline the type of salespeople needed
• Establish responsibility for staffing process
• Company management decides responsibilities for various stages
/ activities of staffing process
• Generally in a medium / large size company, middle and senior
levels H.R. and sales managers are responsible
• Proper coordination needed between sales, marketing, and HR
executives
 Planning Stage (Continued)
Decide the number of salespeople needed

• Steps followed by each territory sales manager to plan

requirement of sales people:
1) Decide optimum salesforce size (using methods discussed
earlier)
2) Add number of promotions, retirements, transfers out,
terminations, resignations expected from existing
salespeople
3) Subtract expected transfers into the territory and existing
salesforce
4) Make a total of new salespersons needed
• Territory sales managers submit their requirements to national
/ general sales manager, who calculates the total number of
new salespersons to be hired
 Outline Type of Salespeople Needed

The steps involved in the process are:

• Conducting a job analysis
• Preparing a job description
• Developing job qualifications / specifications
Conducting a Job Analysis
• It is done by a person from sales / H. R. department, or a
consultant. It consists of two tasks:
(1) Analyse environment in which the salesperson would work –
E.G. nature of customers, competitors, products.
(2) Determine duties and responsibilities of the salesperson.
Obtain information from sales managers, customers, etc.
 Preparing a Job Description

• It is a written document developed from the job analysis

• The detailed job description is a useful tool for recruiting,
selecting, training, compensating, and evaluating
salespeople
• Some of the points it generally covers are:
• Job title, reporting relationship, types of products /
services sold, types of customers, duties and
responsibilities, location and geographic area to be
covered
 Developing Job Qualifications / Specifications

• These are generally based on job description

• Job specifications / qualifications include education, sales
experience, skills, and personality traits
• Many studies done, but no generally accepted job qualifications for
selecting salespeople, due to many types of sales jobs
• Some methods used for developing job specifications are as under:
• Study job description. Useful for a new company
• Analyse personal histories of salespersons
• Ask customers
 Recruiting Salesforce

• Recruiting include activities to get individuals who will apply for the job
• The general purpose of recruitment is to get enough qualified candidates,
to enable company select the right persons
• H.R. and sales managers must update information on government
employment regulations
• Recruiting stage / process includes following activities:
• Finding the sources of sales recruits
• Evaluating and selecting recruiting sources
• Contacting candidates through the selected source
 Finding the Sources of Sales Recruits
• For identifying prospective candidates, firms use internal and
external sources. They include:

Internal Sources External Sources

• Employee referral
programmes
• Current employees
• Promotions and transfers
• Advertisements in
newspapers and journals /
magazines
• The Internet (job sites)
• Educational institutions
• Employment agencies
• Job fairs
• Other companies
 Evaluating and selecting Recruiting Sources

• Recruiting sources are evaluated based on the database built over number
of years
• Evaluating factors are:
• Performance rating of salespeople, after 2 years working
• Percentage of salespeople retained, after 2 years working
• Total cost of recruiting
• Selecting most effective source of recruiting at least cost
• For a new company, selection depends on cost
• Contacting candidates through the selected source is done by H. R.
department
 Selecting Salesforce

• Selection process consists of seven major selection steps / tools

• Companies differ in using selection tools, depending on expenditure
budget and time available
• Major selection tools / steps are:
• Screening resumes
• Application blank
• Initial interview
• Intensive interview
• Testing
• Reference check
• Physical examination
 Screening Resumes
• It is done when the company receives many resumes
• This step / tool not required, if somebody else like employment agency
does initial screening
• Initial screening of resumes are done by comparing with job
specifications
Application Blank
• Widely used, it is a methodical way of collecting relevant information
from the applicant
• Advantages of using application blank (also called “formal application
form”) are:
(1) Easy comparison of many applicants
(2) Useful for asking question during interview sessions
 Interviews

• Widely used selection tool

• A good predictor of the candidate’s performance
• Initial interviews are used for screening candidates
• Intensive interviews are conducted to get indepth view of candidates
• Interview structure / type of interviews:
• Structured / patterned / guided interviews
• Unstructured / non-directed / informal interviews
• Semi-structured interviews
• Behaviour and performance based interviews
• Stress interviews
• Purpose is to decide a candidate’s fitness for a job
 Testing

• Many firms use tests as a selection tool – EG P&G, IBM

• Purpose of testing: To find whether applicants have traits / characteristics that
lead to success in sales job
• Type of selection tests:
• Aptitude tests measure ability for selling and learning
• Intelligence tests find out mental intelligence or intelligence quotient (IQ)
• Interest tests find out level of interest in a sales career
• Knowledge tests measure knowledge of products, markets, etc
• Personality tests find out attitude or traits like empathy, self-confidence
• Tests must have reliability and validity
• Tests should be one of the selection tools and not the only tool
 Reference Checks
• They are important due to possibilities of resume frauds and false personal
information
• They are done by letters / e-mails, telephones, or personal visits
• Instead of candidate’s references, previous employers / customers to be included
for reference checks

Physical Examination
• Objective is to find a physical problem that may prevent job performance of an
applicant
• Most companies want their prospective employees to undergo physical
examination
• Increasing number of firms ask applicant to complete the health information form
without seeing a medical doctor
 Hiring Stage
• After completing selection process, a list of candidates to be hired is made
• In hiring stage, two activities are performed:
(1) The company making the job offer
(2) Persuading the applicant to accept it

Socialisation Stage
• It is the process through which new salespeople learn values, norms, attitudes,
and behaviour of people working in the firm
• Socialisation process starts before the new salesperson accepts the job offer and
continues until the person is assimilated into the company culture
• Assimilation is the second stage of socialisation process
• Companies have this process, in order to retain new salespeople
Sales Training – Need and Types
 Sales Training

• Proper training can prepare salespeople to meet with

customer expectations
• New salespeople spend a few weeks to several months in
training
• Companies view sales training important for protecting
their investments in their salesforce
• Sales Training Process consists of:
• Assessing sales training needs
• Designing and executing sales training programs
• Evaluating and reinforcing sales training programs
 Assessing Sales Training needs

• Sales training needs are assessed both for

• Newly hired sales trainees, and
• Experienced / existing salespeople
• Methods used for assessing training needs are:
• First level sales managers’ observation
• Survey of salesforce and field sales managers
• Customer survey
• Performance testing of salespersons
• Job description statements
• Salesforce audit (as a part of marketing audit)
 Designing and Executing
Sales Training Programme

• For this, sales manager takes five decisions, called:

ACMEE: Aim, Content, Methods, Execution, Evaluation
• First three words and organisational decisions relate to
designing of sales training
• Examples of Aims / Objectives of sales training:
• Increase sales, profits, or both
• Increase sales productivity
• Improve customer relations
• Prepare new salespeople for assignment to territories
 Content of Training Programme

• Content for new sales trainees is broader. It includes:

• Company knowledge
• Product knowledge
• Customer knowledge
• Competitor knowledge
• Selling skills / sales techniques
• Examples of specific content for experienced salespersons are:
• New product knowledge
• Introduce change in sales organisation
• Negotiating skills
• Content depends on the aims of training programme
e.g. Knowledge of commercial terms and conditions.
 Sales Training Methods

• Selection of suitable methods for a training programme

depends upon the topic and audience
• Training methods are grouped into five categories:
• Class room / Conference training
• Behavioural learning / Simulations
• Online training
• Absorption training
• On-the-job training
• We shall briefly review the training methods
 Class-Room / Conference Training Group

• The training methods in this group are: (1) lecture, (2) demonstration,
and (3) group discussion
• Lecture
• Used when more information is presented in a short time to a large
number of participants
• May lead to boredom due to less active participation
• Demonstration
• Used for giving product knowledge
• Group discussion
• Useful when participants include experienced and inexperienced
salespersons
• A panel discussion consists of a small group of people who discuss a
specific topic
 Behavioural Learning / Simulation Group
• This group consists of three training methods: (1) role playing, (2) case-
studies, and (3) business games
• Role playing
• Useful method for teaching sales technique / process
• Typically, one trainee plays the role of a salesperson and another trainee
acts as a buyer
• Case studies
• Beneficial for understanding consumer behaviour, and building problem
solving abilities
• Case teaching includes open discussion, group discussion and
presentation
• Business games
• Helpful in learning impact of decision making
• Generates enthusiasm and competitive spirit
 Online Training Group

• It includes (1) electronic performance support systems (EPSS), (2)

interactive multimedia training, (3) distance learning
• It takes 50 percent less time and costs 30-60 percent less, and more
convenient than other training methods
• Useful for getting basic knowledge like products and customers
• Electronic performance support system (EPSS) makes information
available immediately, in a personalised manner
• Interactive media training is used for retraining salespeople who can
repeat or skip material as desired
• Distance learning is a personal training method, which is interactive
 Absorption Training / Self Study Group

• It includes supplying audio cassettes, product manuals, books, articles, and CD-ROMs to
salespeople, who read (or absorb) these materials without feedback
• Useful for introducing basic materials or strengthening previous training

On-the-Job Training Group

• Most companies use this method as it places a sales trainee in a realistic sales situation
• Typically, a junior salesperson is assigned to a senior salesperson for some period of
time
• In mentoring, a junior / new employee gets information, advise and support from
mentors / experienced persons
• Job rotation is used to groom salespeople for management positions
 Selecting Training Method

• In addition to the topic and audience, selection of

appropriate method depends on active / passive learning
• People generally remember
• 10% of what they read
• 20% of what they hear
• 30% of what they see
• 50% of what they hear and see
• 70% of what they say, and
• 90% of what they say as they do a thing
 Organisational Decisions for Sales Training

• Organisational decisions, which are parts of designing sale training

programme, are:
• Who will be the trainees?
• Who will conduct the training?
• When should the training take place?
• How long should the training be?
• Where should the training be done?
• What will be the budgeted expenditure for the training?
 Execution of Sales Training Programme

• Usually sales trainer or sales training manager is responsible for

entire process of sales training
• Execution / implementation includes preparing time-table,
arranging internal / external trainers, making travel
arrangements of participants, arranging conference hall and
teaching aids, and so on
• A good practice to make a final check one / two days prior to
start of training programme
• Obtain feedback from the sales trainees at the end of the
programme
 Evaluation of Sales Training Programme
• It is done to improve training design and implementation, and to find if
expenditure was worthwhile
Framework for sales training evaluation:
Outcomes to measure What to measure How to measure When to measure
• Reactions / • Training objective • Questionnaires • After the training
Perceptions of • Was training •interviews
participants worthwhile?
• Learning – • Knowledge, skills, • Tests • After training
knowledge, skills, attitudes • Interviews • Before & after –
attitudes learnt training
• Behavioural change • Trainees’ change of • Self-assessment by • After training, over a
behaviour trainees period of one year
• Observation by
supervisors /
customers
• Results – • Sales, Profits • Company data • After training,
Performance; Benefits • Customer • Management Quarterly, Yearly
more than cost? satisfaction judgement
• Market survey
 Reinforce Sales Training

• Behaviour of most salespeople would not change unless there is

reinforcement to sales training
• In many companies reinforcement or follow-up trainings are not done
• Training methods used for reinforcement are:
• Refresher training consists of continuous training to overcome
deficiencies of experienced salespeople and retraining of salespeople
whose job requirements have changed
• Web-based or online methods to reinforce formal training sessions
• Senior salespeople or first line sales managers coaching new
salespersons
Sales Force Compensation &
Motivation
 Motivating the Salesforce
• Motivation is derived from Latin word “movere”, which means “to
move”
• Motivation is the effort the salesperson makes to complete various
activities of the sales job
• 10-15 percent salespeople are self-motivated
• Majority of salespeople are not adequately motivated
• Importance of motivating salespeople is recognised, because
financial performance of the company depends upon the
achievement of sales volume objective
 Motivational Theories
• Motivational theories or behavioural concepts that are relevant to
motivation of salespeople are:
• Maslow’s hierarchy of needs
• Hertzberg’s dual-factor
• Vroom’s expectancy
• Churchill, Ford, and Walker model of salesforce motivation, shown
hereunder:

Motivation Effort Performance Reward Satisfaction

 Selecting a Mix of Motivational Tools

• Sales manager should know each salesperson and

understand his / her specific needs
• For designing or selecting a mix of motivational tools, a
compromise between differing needs of customers,
salespeople, and the company management becomes
necessary
• Motivational tools are divided into (1) financial, and (2)
non-financial. These are shown in the next slide
 Motivational Tools in a Motivational Mix
Financial Non Financial
• Financial compensation plan • Promotion
• Salary • Sense of accomplishment
• Commission/Incentive • Personal growth
• Bonus opportunities
• Fringe benefits • Recognition
• Combination • Job security
• Sales contests • Sales meetings
• Sales training programmes
• Job enrichment
• Supervision
• Financial compensation is the most widely used tool of motivation,
as salespeople give highest value to it
 Compensating the Salesforce

• A good compensation plan should consider objectives from the

company’s and salespeople’s viewpoint
• Objectives of compensation plan from the company’s viewpoint
• To attract, retain, and motivate competent salespeople
• To control salespeople’s activities
• To be competitive, yet economical: It is difficult to balance these
two objectives
• To be flexible to adapt to new products, changing markets, and
differing territory sales potentials
 Objectives of Compensation Plan from Salesperson’s
Viewpoint

• To have both regular and incentive income

• Regular income by fixed salary to take care of living expenses
• Incentive income for above average performance
• To have a simple plan, for easy understanding
• This is in conflict with the objective of flexibility
• To have a fair payment plan
• Fair or just payment to all salespeople is ensured by selecting
measurable and controllable factors
 Designing an Effective Sales Compensation Plan

• Designing a new compensation plan or revising an existing plan

consists of the following steps:
• Examine job descriptions
• Set up specific objectives for salespeople
• Decide levels of pay / compensation
• Develop the compensation mix
• Decide indirect payment plan or fringe benefits
• Pretest, administer, and evaluate the plan
• We shall examine these steps briefly
 Examine Job Descriptions
• Separate job descriptions are required for different sales positions or jobs – E.G.
missionary salesperson, senior salesperson, key account executive
• Each job description should include responsibilities and key performance
standards, to decide how much to pay

Set up Specific Objectives for Salespeople

• These are derived from company’s sales and marketing objectives
• Salespeople should have some control on the objectives – E.G. number of sales
calls made
• Objectives should be measurable. E.G. sales volume, selling expenses
 Decide Levels of Pay / Compensation

• It means the average pay or money earned per year (or month)
• It is important to decide levels of pay for all sales positions
• It is decided based on the following factors:
• Levels of pay for similar positions in the industry
• Levels of pay for comparable jobs in the company
• Education, experience, and skills required to do sales job
• Cost of living in different metros and cities
• Annual average pay levels vary between industries, within the same industry,
and sometimes within the company
• Firms decide a range of average pay, instead of a specific pay
• Salespeople earn pay depending on their and company performance
 Develop the Compensation Mix

• Widely used elements of compensation mix are: (1) salaries, (2)

commissions, (3) bonuses, (4) fringe benefits (or perquisites)
• Expense allowances or reimbursements like travel, lodging, etc are not
included
• Basic types of compensation plans are:
• Straight salary
• Straight commission
• Combination of salary, commission, and / or bonus
• 68 percent companies use combination plan and balance 32 percent
firms use straight salary or straight commission
• We shall briefly examine above compensation plans
 Straight – Salary Plan
• Characteristics:
• 100 percent compensation is salary, which is a fixed component
• No concern for sales performance or salesperson’s efforts
• This plan is suitable for sales trainees, missionary salespeople, and when a company
wants to introduce a new product or enter a new territory
• Advantages:
• Salespeople get secured income to cover living expenses
• Salespeople willing to perform non-selling activities like payment collection, report
writing
• Simple to administer
• Disadvantages:
• No financial incentive to salespeople for more efforts and better performance. Hence,
superior performance may not be achieved
• May be a burden for new and loss-making firms
 Straight – Commission (or Commission Only) Plan

• Characteristics:
• It is opposite of straight-salary plan
• Most popular commission base is sales volume or profitability
• Commission rate is a percentage of sales or gross profit
• This plan is generally used by real estate, insurance, and direct-sales (or network
marketing) industries
• Advantages:
• Strong financial incentive attracts high performance, removes ineffective
salespeople and improves results
• Controls selling costs and requires less supervision
• Disadvantages:
• Focus is on sales and not on customer relationship
• Salespeople may pay less attention to non-selling activities
 Combination Plan

• Characteristics:
• Combines straight salary & straight commission plan
• Four types of combination plans used by companies:
1) Salary plus commission: suitable for getting improved sales and customer
service
2) Salary plus bonus: a bonus is a lumpsum, single payment, for achieving short-
term objectives. This plan is used for rewarding team performance
3) Salary plus commission plus bonus: suitable for increasing sales, controlling
salesforce activities, and achieving short-term goals. Also suitable for selling
seasonal products like fans
4) Commission plus bonus: Not popular. Used for team selling activities for selling
to major customers
 Combination Plan (Continued)

• Advantages:
• Flexible to reward and control salesforce activities
• Security for living costs and incentives for superior performance for
salespeople
• Rewards specific sales performance
• Different plans for different sales positions / jobs
• Disadvantages:
• Complex and difficult to administer
• May not achieve objectives if not properly planned, implemented and
understood
• Indirect payment plan, also called fringe benefits or perquisites, help in attracting
and retaining people, but have now come under government tax in India
 Pretest, Administer, and Evaluate Compensation Plan

• Pretesting the new / proposed Compensation Plan:

• Companies pretest a new (or proposed) plan, before adoption
• Either it is simulated on a computer, or pretested at one / more branches for 6-
12 months
• It should involve all concerned people
• Administering the new compensation plan
• Announce the plan in advance
• Explain the new plan and reasons for changing the previous plan
• Outsource administration if plans are changed frequently
• Evaluating the new compensation plan
• Find if objectives of the plan are achieved
• Some companies audit compensation plans
 Leading the Salesforce
• Leadership is the ability to influence people to achievement of objectives
• Leadership is necessary for a sales manager’s effectiveness
Leadership Styles
• Transactional leadership equates to supervision – relating to day-to-day operations
& control, and task-orientation
• Transformational leadership changes values and attitudes of followers, who perform
beyond expectations
• Situational leadership uses a style that fits the situation
Leadership skills
• Leadership skills required by an effective sales manager are: communication,
problem-solving, and interpersonal
 Sales Force
Supervision,
Sales Expenses,
Sales
Performance
Evaluation, Sales
Reports, Sales
Audit, Ethics
 Supervising Salespeople

• Supervising is directing and controlling day-to-day activities of salespeople

• It is a part of leadership
• Sales managers use a combination of methods to supervise salespeople
• Methods of supervision are classified into two categories – direct and indirect

Direct Supervisory Methods Indirect Supervisory Methods

• Telecommunications • Sales reports
• Sales meetings • Compensation plan
• Personal contacts • Sales analysis
• Coaching / Mentoring • Expense accounts
 Salesforce Expense Plans

• Salesforce expenses include travel, meals, lodging, telephone, and

customer entertainment
• Firms have salesforce expense plans to ensure proper spending
• Objectives / Criteria of effective expense plans are:
It should be
• Fair to the salesperson and company
• Simple and economical to administer
• Clear to prevent misunderstanding
• Reimbursed without much delay
• Allowing differences in expenses among different territories
 Salesforce Expense Plans (Continued)

Four types of salesforce expense plans

• Salespeople pay all expenses
Merits: Simple, less cost for company, salespeople get income tax
advantage
Demerits: Less control on salespeople’s activities; non-selling activities not
done properly
• Company pays all expenses / Unlimited payment plan
Merits: Good control on salespersons activities; no anxiety for sales people
on spending money
Demerits: Salespeople spend more and may make money unethically
 Salesforce Expense Plans (Continured)

• Company partially pays expenses / Limited payment plan

Merits: Useful in budget planning; less disputes; better control on
salesperson’s activities
Demerits: Needs more time to set expense limits and administer; Inflexible
plan, not liked by good salespeople
• Combination plan / Expense-quota plan
• Combines limited and unlimited plans
• Advantages of both plans
• Company has control on selling expenses; salespeople have flexibility
within total expense budget
 Salesforce Audit

• Salesforce or sales management audit is a part of marketing audit

• A marketing or salesforce audit is a comprehensive, systematic, diagnostic, and
prescriptive tool, to be used periodically
• Purpose. To assess adequacy of process, improve performance, recommend changes
• Evaluation process of salesforce audit. It has 3 stages. Company management should find
out:
• What happened by comparing actual performance with goals
• Why it happened by identifying factors contributing to negative variance. Difficult
and time consuming task
• What to do about it by taking corrective actions
 Evaluation of Effectiveness of Sales Organisation
• To know “what happened”, companies analyse their
sales, costs, profits, and productivity
• Effectiveness model of a sales organisation

Sales Analysis

Effectiveness Cost Analysis

of a
Sales
Organisation Profitability Analysis

Productivity Analysis

• We shall examine each of the above factors

 Sales Analysis
• Sales analysis of a company can be done in different ways:
• Different alternatives are shown in a framework below:

National and/or international levels sales organisation

Regional level
All levels
In Sales Branch /district level
Organisation Territory level
Individual level
Sales Analysis

Total sales of the company

By type of products
Different
By type of distribution channels
Type of
Sales By type of customer classifications
By size of orders

Comparisons with sales quotas / targets

Comparisons with previous periods
Different
Comparisons with industry / competitors
Type of Comparisons within sales organisations
Analysis
Comparisons with sales forecasts
 Sales Analysis (Continued)
• Sales analysis is done at all levels of the sales organisation
• Reasons
(1) For evaluation and control: sales analysis needed at different organisation levels like
regional, district, territory
(2) For identifying problems:
Use hierarchical sales analysis. E.G.
• Sales performance at national level below sales volume budget
• Find which regions have problems in achieving sales quotas
• Focus sales analysis of branches reporting to problematic regions
• Do sales analysis of territories under problematic branches
• Further analysis of problematic territories to be done by talking to salespeople,
customers, branch managers
• Corrective actions can then be taken to improve sales
• Extend hierarchical sales analysis to different type of sales
• Out of different type of analysis, comparisons with sales quotas are widely used
 Marketing Cost and Profitability Analysis

• Purpose: To measure profitability of company’s marketing units such as

territories, market segments, products, channels, & customers
• This information helps to decide which marketing units to be expanded,
reduced, or eliminated in future.
• Procedure
• State purpose of the analysis
• Identity major functional (or activity) expenses
• Convert natural accounting expenses into functional expenses
• Allocate functional expenses to marketing units
• Prepare profitability of marketing units, by using “full-cost approach”, or
“contribution approach”
 Purpose of the Analysis
• Before starting cost and profitability analysis, it is necessary to know for
which marketing units the analysis would be done
• This helps to classify costs into direct and indirect. E.G. Salesperson’s
salary is direct cost for territory analysis, but indirect cost for analysis of
products or segments
Identify Major Functional Expenses
• The company should prepare a list of major functions or activities with
respect to marketing expenses
• E.G. Personal selling expenses, order processing expenses, packing and
delivery expenses, warehousing and inventory expenses, administration
expenses
 Convert Natural Accounting Expenses into
Functional Expenses
• Natural or traditional expenses are to be converted to functional expenses,
for doing marketing cost analysis
• An example will make this point clear
Natural / Total Functional Expenses
Traditional Personal Adv. and Warehousing & Administration
Expenses Selling Sales Inventory
Promotion
Salaries 20,000,000 10,000,000 4,000,000 2,000,000 4,000,000
Rent 10,000,000 2,500,000 1,000,000 5,000,000 1,500,000
Travel 5,000,000 5,000,000 __ __ __
Adv. and 15,000,000 __ 15,000,000 __ __
Sales
Promotion
Total 50,000,000 17,500,000 20,000,000 7,000,000 5,500,000
Note: All figures are in Rupees
• A better method for allocating costs is activity-based costing (ABC),
which allocates costs based on cause of expenses
 Allocate Functional Expenses to Marketing Units
• Functional expenses are allocated to the marketing unit under study, depending
on several bases shown below, as examples

Function Bases of allocation of expenses

• Personal selling • Directly to sales territories
• Selling time given to each product and market
segment
• Sales calls x average time per call to customers &
channels
• Advertising and • Circulation of media to sales territories
sales promotion • Media space for each product & market segment
• Equal charges to customers & channels
• Administration • Equal charges for all marketing units

• Above allocations are done to find marketing costs and profitability of

marketing units
 Prepare Profitability of Marketing Units
• This is done by preparing profit & loss statements for the marketing units
under study
• Two approaches are available in allocating marketing costs for profitability
analysis: (1) Full-cost, (2) Contribution
• Full-cost approach: All marketing costs, both direct & indirect, are allocated
to the marketing unit
• Useful for long-term profitability studies of products and market
segments
• Contribution approach: Only direct marketing costs are allocated to the
marketing unit
• Useful for short-term decisions like profitability of branches / regions
 An Example of Profitability Analysis
SNo Particulars Full-cost Contribution Approach
Approach
Western Region Branch A Branch B Branch C

1 Sales 400 150 130 120

2 Cost of good sold 300 112.5 97.5 90
3 Gross margin (1-2) 100 37.5 32.5 30
4 Branch selling 12.7 4.5 4.2 4
expenses
5 W. Region direct 12.0 - - -
selling expenses
6 Contribution (3-4-5) 75.3 33.0 28.3 26.0
7 Allocated indirect 36.3 - - -
expenses
8 Net profit (6-7) 39.0 - - -
Note: All figures are in Rupees million
 Productivity Analysis

• Productivity is generally measured by ratio between output & input

• Some of the productivity ratios in sales management are:
• Sales per salesperson (used by many companies)
• Selling expenses per salesperson
• Sales calls per salesperson
• Improvement in productivity leads to increase in profitability
• Some of the methods used by firms to improve productivity
• Reducing salesforce size
• Hiring manufacturer’s reps. or agents on commission basis
• Using the internet, telemarketing, direct mail to reach customers
• Increasing sales volume substantially
 Evaluating & Controlling Performance of Salespeople

• Purposes / objectives / importance of performance evaluation of

salespeople are:
• Mainly to find how salespeople have performed
• This information is used for other purposes, such as:
• Improving salespersons’ performance, by identifying causes of
unsatisfactory performance
• Deciding salary increments and incentive payments
• Identifying salespeople for promotion
• Determining training needs
• Motivating salespeople through recognition and reward
• Understanding strengths and weaknesses of salespeople
 Procedure for Evaluating and Controlling
Salesforce Performance

The steps involved in the procedure are:

• Set policies on performance evaluation and control
• Decide bases of salespersons’ performance evaluation
• Establish performance standards
• Compare actual performance with the standards
• Review performance evaluation with salespeople
• Decide sales management actions and control
We shall describe above steps briefly
 Set Policies on Performance Evaluation & Control

Most companies establish basic policies. Examples are:

• Frequency of evaluation. Mostly once a year.
• Who conducts evaluation? Mainly immediate supervisor
• Assessment techniques to be used. E.G. Management by objectives
(MBO), 360-degree feedback
• Sources of information. Sales analysis, new business reports, lost
business reports, call plans, etc
• Bases of salesforce evaluation. (next slide)
• Conducting performance review sessions with salespeople
 Decide Bases for Salespersons’ Performance Evaluation

• A firm should decide which of the following bases / criteria it would use: (1)
result / outcome based, (2) efforts / behavioural based, or (3) both results &
efforts based
• A company selects performance bases or criteria from a list of alternatives,
some of them shown below:

Quantitative results / Quantitative efforts / Qualitative efforts /

outcome bases / criteria behavioural bases / criteria behavioural bases / criteria
• Sales volume • Customer calls • Personal skills
• In value / units  No. of calls per day  Selling skills
•Percentage of quota  No. of calls per  Planning ability
• by products & customer  Team player
segments • Non-selling activities • Personality & Attitudes
• Accounts / customers  overdue payments  Cooperation
 New accounts nos. collected  Enthusiasm
 Lost accounts nos.  No. of reports sent
 Establish Performance Standards

• Performance standards are also called sales goals, targets, sales quotas,
sales objectives
• Performance standards for quantitative results are related to the
company’s sales volume or market share goals
• Performance standards for efforts / behavioural criteria are difficult to
set
• For this, companies do “time and duty analysis” or use executive
judgement
• Performance standards should not be too high or too low
• After establishing standards, salespeople must be informed
 Compare Actual Performance with Standards

• Salesperson’s actual performance is measured and compared with the

performance standards
• For this, sales managers use different methods or forms:
• Graphic rating scales
• Ranking
• Behaviourally anchored rating scale (BARS)
• Management by Objectives (MBO)
• Descriptive statements
• Companies combine some of the above methods for an effective
evaluation system
 Review Performance Evaluation with Salespeople

• Performance review / appraisal session is conducted, after evaluation of the

salesperson’s performance
• Sales manager should first review high / good ratings, and then review other ratings
• Both should decide objectives / goals and action plan for future period
• After the review, sales manager should write about performance evaluation &
objectives for the future
• Guidelines for reviewing performance of salespersons
• First discuss performance standards / criteria / bases
• Ask the salesperson to review his performance
• Sales manager presents his views
• Establish mutual agreement on the performance
 Decide Sales Management Actions and Control

• Many companies combine this step with the previous step – i.e. performance
review
• During performance review meeting with salesperson, sales manager does the
following:
• Identifies the problem areas. E.G. Sales quotas not achieved
• Finds causes. E.G. less sales calls, poor market coverage, or superior
performance of competitors
• Decides sales management actions E.G. train salesperson, redesign
territories, or review company’s sales / marketing strategies
• If a salesperson’s performance is good, he / she should be rewarded and
recognised
 Business Ethics and Sales Management

• Sales managers and salespeople have ethical responsibilities

• Some of the ethical situations are:
• Relations with the company. EGs. Expense statements,
credit for damaged merchandise
• Relations with customers. EGs. Gifts, false information to
get business, customer entertainment
• Ethical guidelines
• A code of ethics developed by the company would be
effective if it is enforced by top management
 Social Responsibilities

• Corporate social responsibility means distinguishing right from wrong and doing
the right
• Social responsibility is the management’s responsibility to take decisions and
actions for welfare and interests of society and the company
• A company has following four responsibilities to its eight stakeholders:
Customers, Community, Creditors, Government, Owners, Managers, Employees,
and Suppliers, acronym: CCCGOMES
• Ethical responsibilities. Deal with fairness, equity, impartiality
• Legal responsibilities. Follow laws and regulations
• Economic responsibilities. Produce and market goods / services that society
wants, and make reasonable profits
• Voluntary responsibilities. Make social (EG philanthropic) contributions
 Legal Responsibilities and Sales Management

• Laws and regulations by local, state, or central governments have impact on

sales management
• Price discrimination. As per MRTP act, 1969, seller should not discriminate
prices among similar buyers (e.g. retailers)
• Price fixing. Under MRTP act, it is unlawful for suppliers to fix prices
• Consumer protection. As per Consumer Protection Act, 1986, it is illegal to
make false or misleading claims about products / services
• Bribes. Payment of money or giving gifts to gain a customer is illegal under
Indian Contracts Act 1872 and Sale of Goods act, 1930. Sales managers must
take responsibility that laws are not violated