1. Discuss the importance of compensation and its influence on the sales force performance and productivity with suitable illustrations.
2. Explain the need and purpose of monitoring systems in an Enterprise where personal selling is extensively used in promoting the firm’s products.
3. What are the attributes of a good sales quota plan?
4. Discuss the commonly used methods of sales control. How should sales analysis be done for multi Product Company selling consumer durables through nationwide retail network?
Sales Management
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Sales Management
by Whitmore » Sat Mar 21, 2015 8:15 am
- Whitmore
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Sales Management
by Shattuck » Tue Mar 24, 2015 7:14 pm
3 a) Discuss the importance of compensation and its influence on the sales force performance and productivity with suitable illustrations.
COMPENSATION system usually mean the financial reward on organization gives its employees in return for their labour. While the term COMPENSATION system, not only includes material rewards, but also non-material rewards. The components of a COMPENSATION system consist of financial rewards(basic and performance pay) and employee benefits, which together comprise total remuneration. They also include non-financial rewards(recognition, promotion, praise, achievement responsibility and personal growth) and in many case a system of performance management. Pay arrangements are central to the cultural initiative as they are the most tangible expression of the working relationship between employer and employee.
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Compensation philosophy is the set of values and beliefs that an organization has in regards to compensation
decision-making. This often is combined with a set of guiding principles that further assist in compensation administration. The collection of decisions that the firm has
made over a period of time constitutes a compensation set of beliefs and values — a compensation philosophy —
regardless of whether or not the firm has actually committed those ideas to a formal document. Compensation strategy is
used to guide the design of specific compensation decisions.
Differences in compensation philosophies are widespread. Thus, some organizations believe in the widespread use of
incentive compensation, while others only apply incentive compensation to a very narrow group of employees who are
believed to affect the bottom line. Another illustration may be found in the examination of the behavior of firms who seek to apply compensation levels “at the midpoint.” These firms differ philosophically from those firms that seek to pay at the top of the market, thus enabling them to attract the highest caliber employees that they can find. Business settings often explain these differences. Some
firms are proportionally more generous to certain levels of exempt employees, while others believe in principles of
achieving widespread equity across all employees. The openness with which compensation decisions are made, and the
degree of stakeholder involvement in those decisions, is yet another example of philosophical differences that may exist
between organization.
Needless to say, compensation is a key issue for the high performance organization, as the employee and management
systems utilized by the organization must be reinforced through the rewards structure. Again, our experience is
telling in avoiding making compensation unduly controversial, thus adversely affecting the very heart of the high
performance system.
Compensation administration includes a collection of activities required to sustain the effectiveness of a compensation
strategy. Thus issues ranging from labor market surveying to performance management to skill certification and peer
review come under this umbrella. Involving stakeholders in compensation administration can reinforce the values and
beliefs underlying the compensation philosophy and strategy.
AS PART OF THE ALIGNING PROCESS, THE FOLLOWING
FACTORS ARE TAKEN INTO CONSIDERATION.
1.Employee Inputs and Preferences
• Perceptions of external pay equity
• Perceptions of internal pay equity
• Pay delivery beliefs
— Form(cash, gainsharing, benefits)
— Method(individual, small group, large group)
• Risk tolerance
• Trust in management
2.Business and Operating Inputs
• Operations and Manufacturing strategy
• Sales development strategy
• Percentage of compensation costs to total product/
service costs
• Percentage of compensation costs to controllable
product/service cost
• Existing markets/products
• Potential markets/products
• Anticipated volume
• Reinforce/enhance work design
• Maintain cultural change processes
• Other operating issues
3.Industry and Labor Market Practices
and Trends
• Availability and quality of work force
• Industry practices
• Retention of work force
• Retention of key contributors
• Wage/salary levels and movement
• Wage/salary delivery charges
4.Compensation Philosophy and Objectives
• How much emphasis should be placed on rewards to
drive organization
• What issues are to be driven by compensation as
opposed to management practices
• Market definition(exempt and non-exempt)
• Method of delivery
• Targeted position in labor market
• Targeted position in product market
• Relationship within total company
• Relationship to selection and retention
• Portion of pay guaranteed and at risk
• Percentage of workforce bonus eligible
5.Base Pay Delivery
• Method of delivery — Job-based vs. individual-based
• Number of levels
• Structure of levels
• Pricing strategies
• Adjustment method
• Weighting of individual performance
6.Organization Performance or Variable Pay
• Role in total compensation strategy
• Structure
• Measures
• Targets
• Tolerance for pay at risk
• Risk - reward ratios
• Use of other monetary rewards
• Use of non-monetary rewards
• Individual performance recognition
7.Fringe Benefits
• Usually determined at corporate level; limited scope at
other levels
• Tie to business and human resource objectives
• Coverage
• Cost
• Communications(Purpose - Coverage - Value)
8.Compensation Administration
• Stakeholder role in compensation administration
• Performance management & evaluation
• Overtime policy(exempt & non-exempt)
• Shift differentials
• Attendance policynce
• Role of seniority
Compensation decisions should be fully integrated into the organization’s business and operations strategy, through
its compensation philosophy. The design of compensation systems should be subsequent to, and not precede, this key
analysis and decision point. For the high performance firm, an appropriate level of employee involvement can further
reinforce the organization’s general beliefs and values.
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The integrated COMPENSATION system includes: Job evaluation and profiling • Defining key performance indicators • Analysis and modification of pay levels and structures to reflect both internal and market relativities • Designing of performance evaluation processes • Structuring of individual, team and corporate performance bonuses Social climate surveys with focus on remuneration • Designing flexible benefits plans • Implementation of new reward components in compensation package • Implementation and assistance in change communications • Training for internal specialists in reward structure planning and maintenance Performance Based COMPENSATION is based on the definition of key performance indicators identified as part of job evaluation, and linking these indicators with reward components. A combination of performance measuring system and additional motivational components delivers an integrated performance-based COMPENSATION system. Flexible Benefit Schemes are a modern approach to the management of budgets for staff remuneration. Employee benefits constitute a considerable portion of staff costs, but they are often expended without the desired effect since employees do not perceive the full value of benefits. This system increases the effectiveness and enable better control. Why COMPENSATION system is required? These components will be designed, developed and maintained on the basis of strategies and policies which will be created within the context of the organizations between strategies, culture and environment: they will be expected to fulfill the following broad aims;
1. Improve Organizational Effectiveness: Support the attainment of the organization's mission, strategies, and help to achieve sustainable, competitive advantage.
2. Support and change culture: Under pin and as necessary help to change the 'organizational culture' as expressed through its values for performance innovation, risks taking, quality, flexibility and team working.
3. Achieve Integration: Be an integrated part of the management process of the organization. This involves playing a key role in a mutually reinforcing and coherent range of personal policies and process. 4. Supportive Managers: Support individual managers in the achievement of their goals.
5. Motivate Employees : Motivate employees to achieve high levels of quality performance.
6. Compete in the Labour Market: Attract and retain high quality people.
7. Increased Commitment: Enhance the commitment of employees to the organization that will a) want to remain members of it, b) develop a strong belief in and acceptance of the values and goals of the organization and c) be ready and willing to exert considerable effort on its behalf.
8. Fairness and Equity: Reward people fairly and consistently according to their contribution and values to the organization.
9. Improved Skills : Upgrade competence and encourage personal development.
10. Improved Quality: Help to achieve continuous improvement in levels of quality and customer service.
11. Develop team working : Improve co-operation and effective team working at all level.
12. Value for money: Pride value for the money for the organization.
13. Manageable: Be easily manageable so that undue administrative burdens are not imposed on managers and members of the personal department.
14. Controllable: Be easily controllable so that the policies can be implemented consistently and costs can be contained within the budget. -------------------------------------------- The rewards of sales work, both extrinsic and intrinsic, are not constant or consistent, as they are in many other organizational jobs. Some days the salesperson comes home feeling that much has been accomplished, since in selling one can see positive results immediately. Other days there is no positive feedback: there have been no successful sales efforts, or other activities have prevented the salesperson from spending time on sales efforts. Thus, the salesperson experiences wide swings of positive and negative feedback. He or she must be able to adapt to this variation in reward structure. In fact this stimulation and uncertainty can act as stimuli to the salesperson.
The nature of sales work also leads to ambiguity. The lack of performance feedback from the supervisor, the focus on outcomes and the consequent uncertainty of how to perform the job, and the lack of participation in decision making all lead to a lack of role clarity for the sales job. The salesperson experiences this as an ambiguous situation. Added to this is the boundary-spanning aspect of the job, which creates role conflict as well as ambiguity.
Achievement drive
Psychologist D.C. McClelland has studied a number of socially derived needs of individuals. One of the most-studied of these is the drive to achieve. A person with a high achievement drive has a number of distinctive characteristics. The first of these is a desire to take moderate risks and to decide upon these for oneself. These risks are achievable but not easy to reach, and in this way provide a challenge rather than discouragement. The second characteristic is the need for immediate feedback. The person must be able to see that he or she is moving toward the goal. Third, the high achiever finds the path to the goal as rewarding as the extrinsic reward at the conclusion of the activity. Last, the high achiever is preoccupied with the task, focusing on the goal and keeping at it until it is achieved. If we put the last two together we can see why the high achiever often feels a letdown upon reaching the goal: it was the pursuit and not the product that was stimulating.
These characteristics would seem to fit sales jobs and the compensation program typically developed for sales work. The sales job allows one to set one's own challenging goals, there is immediate feedback, and one can immerse oneself in the process of the sale and enjoy that process. In fact, McClelland found that the most likely place in the organization for high achievement drive to show up is in sales personnel. There appears to be a self-selection process whereby those with a high need for achievement find sales work to be most satisfying.
SALES COMPENSATION PLANS
As indicated, the dominant feature of sales compensation is the use of incentive plans. The purpose is to align the objectives of the organization and those of the sales person. The objectives that may be used in sales compensation incentives include:
1. Sales Volume. The amount of sales over a specified time period.
2. New Business. Sales to new customers. This may require a great deal of cold calling.
3. Retaining Sales. Keeping customers from one time period to another.
4. Product Mix. The organization may wish to sell a pre-determined mix of products. This will help the competitiveness of the company by selling the whole product line. 5. Win-back Sales. This is sales to old customers who are regained as clients. Straight Salary
Some organizations pay sales personnel a straight salary without any incentive. This makes setting wage rates for sales jobs similar to setting wage rates for other jobs in the organization. The positioning of the sales job can be arrived at through job evaluation and the appropriate salary range assigned to the sales job.
Sales pay ranges are affected by the same forces that influence other wages within the organization. The labor market is a major influence. Surveys of sales compensation are made by trade associations, consultants, and the organization itself. Variations in salary rates, however, tend to be larger for sales jobs than for other jobs. Salary relationships within the organization also influence sales wage rates. The sales-manager position and sales-support positions in the organization often are used as buffer positions; they can be compared with both the sales job and other organizational jobs.
Sales jobs are often more influenced by the incumbent than are other organizational jobs. The skills and abilities of the individual often dictate the particular activities that constitute a particular sales job.
Straight-salary plans do not preclude the use of performance motivation. A pay-for-performance program can be used to focus the salesperson on high performance levels. The sales job has the advantage of having a more measurable standard than other jobs, so the performance measurement is less judgmental. The danger is that the sales volume alone will be used as the measure of performance when other job factors may also contribute to the definition of performance. Equity is always a problem in sales compensation. When sales personnel are paid a straight salary, the comparison with other organizational jobs through job evaluation reduces the equity problem within the organization. But it increases the equity problem with other sales jobs that are paid on an incentive basis. It is difficult to compare sales positions paid on a commission and straight salary, for they often involve quite different work. There are a number of circumstances that make straight salary plans advantageous. These all center in the inability to connect either performance to reward or effort to performance. Where the product is highly complex, the time taken to culminate a sale is long, and/or the sales effort is a team affair, an incentive program is infeasible. In some sales jobs the non-sales aspects are of primary importance to the organization, and the results of these activities are difficult to measure. In general, the less impact the salesperson has upon the sales results, the less argument there is to establish an incentive program. Also, an incentive program may be unfair to new salespeople, who do not know the job or the customers well enough to meet sales goals. Advantages of straight salary plans
A straight-salary program has certain advantages to the organization, the salesperson, and the customer. From the salesperson's standpoint, a straight salary takes the ambiguity out of how much salary he or she is receiving. Some people are very uncomfortable not knowing how much they will make next month, or are unable to budget the good times to cover the bad times. For the organization, a straight salary plan is much simpler. In addition, it gives the organization more control over the salesperson. One of the aspects of placing a person on incentives is that the person feels much more independent of organizational control. It has also been found that salespeople under a straight salary plan are more willing to perform the non-sales aspects of the sales job.From the standpoint of the customer, the sales person on a straight salary is more likely to provide service and less likely to pressure the person into a sale and move on.
Disadvantages of straight salary plans
The disadvantages of a straight-salary program reverse the advantages above. They center in the lack of connection between performance and reward and therefore suggest that motivation levels among salespeople paid in this manner can be expected to be lower than those of salespeople on incentives.
From the organizational viewpoint, straight salaries are a fixed cost rather than a variable cost, making sales salaries a burden in times of low sales. Furthermore, poor performance must be dealt with administratively, a requirement that is becoming more difficult each year.
Commission Plans A straight commission plan is like a straight piecework plan in that the salesperson's earnings are in direct proportion to his or her sales. It is probably the oldest form of compensation program for sales personnel. In theory, a commission plan is very simple. A commission is ordinarily defined as a percentage of the sales price of the product. The exact percentage is highly variable with the product being sold, the industry practice, and the organization's economic situation. It also varies with internal organizational factors and the exact nature of the sales job. For instance, the directness of the relationship between the salesperson's efforts and the sales volume usually affects the percentage given to the salesperson.
Two things need to be noted about providing a percentage of the sale to the salesperson. First, the percentage need not be the same at all levels of sales; it may increase or decrease with volume. This increase or decrease can be related to the effort the salesperson must exert to increase the sale's volume. The second point is that sales may be stated as sales price, sales units, or some other measure that reflects the variation in sales. In particular, the point in the sale process when the sale is counted is important. Sales percentages calculated at the point of sale versus the point of delivery are different figures and occur at different times for the salesperson.
The effects of the commission system need to be examined before it is put into operation. The basic calculation that needs to be made is an estimate of what amounts will be paid to sales personnel in the form of commissions. This information should be used in a number of ways. First, it should be used in the pay level sense of determining the total cost of selling the product. Here the concern is whether sales costs are in line with other costs of production. Second, estimates of commissions should be used in a wage structure sense of determining whether wages paid to salespeople are in line with wages paid other jobs in the organization and with those paid sales jobs in other organizations. Third, these estimates should be used to determine the expected income to the sales personnel. An incentive program may look like a good plan, but unless a sufficient percentage of the sales force are likely to make a minimum amount over expectations, the incentive value of the program may be negative.
Performance motivation
The performance-motivation model specifies that for an incentive plan to be effective the following conditions must be met:
1. Employees must believe that good performance leads to more pay. A commission plan should clearly do this by its construction. This belief is strengthened because the measurement of results is clear and objective. If there is a long time between point of sale and delivery or if many sales are not converted to delivery, this relationship can be weakened.
2. Employees must desire more pay. This seems obvious, but it is more complex than that. First, people differ in their desire for more pay, although sales personnel are reputed to be a group that strongly desires pay.13 Second, the increased pay must be worth the foregone opportunities: if more sales, and therefore more pay, mean more overtime, some people will choose not to pursue more pay. Organizations may be safe in assuming that through self-selection, those who enter sales work highly desire pay, but as sales jobs become more complex and technical this assumption may become less valid. 3. Employees must believe that good performance will not lead to negative consequences. Unfortunately, this is a likely consequence of commission plans. Sales incentive plans are often changed by the organization. These frequent changes are perceived as ways to solve two opposite problems – lack of sales and perceived overpayment of sales personnel. From the salesperson's viewpoint these changes create confusion in the performance-reward connection and a feeling that the organization is cutting the rate. Further, many sales incentive plans are so complex that the salesperson becomes confused as to what will happen if he or she takes certain actions. So some actions are avoided because the salesperson does not know what the consequences of taking action will be. Last, the sales incentive plan can put the salesperson in conflict with the rest of the organization. Difficulties between sales personnel and credit, finance, manufacturing, and shipping are everyday events in many organizations.
4. Employees must see that desired rewards besides pay result from good performance. Sales incentive plans are mixed on this. Feelings of achievement, esteem, and respect are quite likely to occur along with high incentive pay for most sales personnel.14 On the other hand, high pay restricts long-term movement within the organization. Sales positions are often perceived as having little career-growth opportunity.15
5. Employees must believe that their efforts lead to good performance. This perception varies widely among sales incentive plans. Where certain activities clearly lead to sales then this perception is strengthened. However, there are a number of hindrances to this connection. Since sales are highly affected by the economy, the product, past relationships, and other factors beyond the salesperson's control, the connection is often tenuous. The sales incentive plan itself may be perceived as not rewarding important efforts of the salesperson or rewarding efforts that are of little importance. The problem is that if the plan includes a wide range of relevant efforts, then it becomes so complex that the performance-reward connection is not clear and the dysfunctions of condition 3 operate.
Combination Plans A little over half of the sales compensation plans surveyed are some sort of combination of base salary and incentive. The reasons given for developing combination plans are that(1) the salesperson is not the only influence on the sales volume, and(2) some parts of the sales job do not involve direct selling and these need to be rewarded also. Done properly, a combination plan should contain the advantages of both straight-salary and incentive plans. On the other hand, such plans can also be seen as management indecision as to what they want of salespeople, and they can confuse the salesperson as to what is important in the job.
Sales standards
All combination plans involve the establishment of a sales standard – the expected volume of sales for a particular time period. In the sales field this standard is usually called a sales quota. But the standard may be broader than just sales volume: other factors, such as obtaining new customers, retaining customers over time, and doing missionary work, can be included. The advantage of including a number of variables in the standard is that the plan then more clearly covers the whole sales job. The disadvantage is that the complexity of the plan is increased and the salesperson may become confused about what he or she is being paid for.
The basis for developing the standard is the level of sales and other factors that the salesperson can be expected to achieve. Establishing this standard is more difficult here than it is in most incentive plans in a number of ways. Sales jobs tend to be individual, in terms of both the salesperson and the customers dealt with. Also, outside influences can easily affect the sales volume. In setting sales quotas it is useful to consider the past year's performance, economic conditions, technological changes, and competitors' strategies. For these reasons setting the expected volume is more often a figure negotiated with the individual salesperson than a standard for all salespeople to meet.
The standard generally sets the level at which the salesperson's straight salary is considered covered by the sales volume. But this can vary, with the incentive starting after some percentage of the standard has been reached. Straight salary usually constitutes around 75 percent of the total salary in combination plans, but this percentage can be planned as high or as low as desired. The incentive portion will be lower where the direct contribution of the salesperson to sales volume is low, where non-sales activities are valued by management, and where there are considerable variations in sales over time and between sales areas.17
Payment structure
There are a number of ways of establishing the incentive portion of sales compensation. Probably the simplest system is to use a commission combined with a draw. The salesperson receives a specified salary each payday. At periodic times, such as each quarter, the total commissions due the salesperson are calculated. The amount taken as a draw is deducted from this and the salesperson then receives the remainder. If the draw exceeds the commission, the organization must decide whether to reduce the draw, carry over the deficit, and/or retain the salesperson in the position.
A bonus system provides incentive payments after a given level of sales has been reached. These plans can be quite simple or very complex. Simple ones resemble a commission-draw system with a percentage payment made for sales above a standard. More complex plans have payment schedules that vary with sales volume or payments for a variety of things beyond sales volume, such as obtaining new accounts, reducing sales expenses, improving market penetration, and increasing order size. A variation on the more complex bonus plans is the point plan. Here the salesperson receives points for meeting and exceeding goals or quotas in a number of areas. These points are then converted to monetary values.
Completing the Sales Compensation Package
Sales compensation considerations do not end with the design of the direct pay system. There are other aspects of sales compensation that are unique, including the use of contests and benefits.
Contests
The measurable-output of sales jobs allows the organization to design a short-term reward system that gives prizes for accomplishing certain quotas or selling more than all others. This is often attractive to the type of person who enjoys sales work. The prizes can be either monetary or non-monetary but more often are not direct pay. Most popular are non-monetary prizes such as vacation trips or goods such as golf clubs or other recreational equipment.
These contests have a number of advantages. First, they provide a very visible reward. Records of who is winning what can be placed on bulletin boards and put in the newsletter. It is interesting that this publicity seems natural for a contest but out of place for direct pay. Second, a contest, like any bonus, is a one-shot affair: it does not add to the overall wage costs beyond the time of the contest. This allows the rewards to be large and still not have a detrimental effect on labor costs. Last, contests extend to the salesperson's family more clearly than direct pay. Such awards as vacations are shared with family members, ideally creating company loyalty within the family as well as the salesperson.
Contests also have some disadvantages. The publicity can be very discouraging to those salespeople who perceive they have no chance to accomplish the level of sales necessary to win an award. Not only is one not receiving a reward but all one's colleagues are aware of one's shortfall. This is particularly hard on new sales personnel or those in difficult territories. Contests may also shift the focus from the main job to side issues. If the awards are for selling items that are not important to the overall sales effort, then the total sales of the company may actually decline as a result of the contest.
Benefits Salespeople used to be perceived almost as independent contractors. As such they were not included in benefit programs to the same extent as other employee groups. This situation has changed, and sales personnel are now recipients of regular organizational benefit program and at times more.This inclusion in benefits programs should have the effect of increasing the commitment of the salesperson to the organization.
Sales personnel are usually granted two benefits that are not common to other employees: expense accounts and travel allowances.
Expense Accounts. Typical expenses covered include meals with customers, car phones, pagers, company credit cards, etc. Ordinarily, the only other employees to have these benefit are executives. Because these expense accounts have the potential for abuse, they are watched closely by the IRS.
Travel allowances. Sales people, more than any other group in the organization, travel. Some of this travel is around town from one location to another during the day. Other travel requires the sales person to be "on the road" for some period of time away from home. This creates costs that are business expenses and are ordinarily reimbursed by the organization.
The IRS(look into your Govt laws) classifies reimbursement plans into two categories, accountable and non-accountable. Accountable plans are classified as a business expense and are not income to the employee. Non-accountable plans are considered income to the employee although he/she may itemize these expenses as deductions on the personal income tax form. This section deals with accountable plans.
The employee may be paid before the expense is incurred, as an advance, or after the expenditure(as a reimbursement or an allowance). In any of these cases, in order to be qualified as an accountable plan:
1. The expenses must have a business connection, they must have been incurred while performing job duties.
2. The employee must account for the expenses within a reasonable time period.
3. The employee must return any excess reimbursement within a reasonable period of time.
The employer may reimburse an employee for travel expenses on the basis of actual expenditures. In this case, the employee must keep and present all expenditures to the employer. The employer may also develop an allowance plan. Under such a plan the employee may be considered to have accounted for travel expenses if the amounts of the allowance do not exceed the rates established by the federal government. There are two main types of travel allowances – automobile allowances and per diems.
Automobile allowances. There are two methods of calculating rates for automobiles:
1. The standard mileage plan. This method pays the employee a set rate per mile traveled. For 2001 this rate was 34.5 cents per mile, but it changes periodically.
2. Fixed and Variable Rate. The employer reimburses the employee for automobile expenses under 2 categories of costs: fixed and variable. The variable costs are the cents per mile costs of running the car and vary depending on the miles driven. In addition, the employer pays a fixed amount to cover costs such as depreciation, maintenance, leasing and insurance. Developing this type of program is highly complex and is taught in ERI DLC Course 38: FAVR Automobile Allowances(currently underdevelopment).
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b) Explain the need and purpose of monitoring systems in an Enterprise where personal selling is extensively used in promoting the firm’s products.
Making a dynamic sales force links strategy and operational actions that can take place within a department. the SALESFORCE APPRAISAL relies upon objectives, plans, budget, and control indicators under specific conditions. In order to perform the objectives correctly specific procedures must be implemented:
Categories of Sales Force Management Process
for achieving objectives of the mission
• Sales Force control process for ensuring measures are being achieved within a given timeframe
• Mission must be accomplished in a given constrained context(customers and/or markets)
• System must be managed in order to accomplish the mission in uncertain environments
• A sales force command center
The process starts from with a mission of meeting a specific sales objective. The command center interacts directly by analyzing the inputs and outputs established from the control process and the sales force. The control process will enable the sales force to establish the performance standards, measuring actual performance, comparing measured performance against the standards that's already established and taking corrective action. The sales managers adjust their action based upon the overall process. If the processes are implemented wrong they will be ignored and more time will be spent towards enforcing the process to senior management. If the sales leaders follow the process correctly the performance will match the overall objectives of mission.
Aside from the control process, the following metrics are implemented:
• Time Management- Accurately measures the tasks and the percentage of time for each task.
• Call Management- Plan for customer interaction takes into account the percentage of command center reps that comply with the process and have successful calls.
• Opportunity Management- If the process is followed correctly then you will have a sales opportunity. The percentage of command center reps that utilize the tools, comply with the pobjective are all measured.
• Account Management- For multiple opportunities with a customer the account is measured by the tools, process, and objectives.
• Territory Management- For monitoring the account the territory is measured by the number of account reps and perspective versus active customers
• Sales Force Management- Process shared across several people and departments. The process includes training, IT systems, control, and coaching.
Most companies have the problem of measuring the performance of their sales staff because each salesperson is different and they work in varied methods. Because a sale involves customers, there are other factors impacting sales, as well. Customers and their needs are different, business conditions vary, individual customer bases differ and the product mix offered to each customer can vary. What are the important components to track to determine sales success? The factors can be tangible and intangible. When examining the tangible side of the sales ledger you need to consider methods for targeting, frequency of contact, message and presentation, and communications. Some intangible factors that can be difficult to quantify are the salesperson's ability to build relationships and "connect" with customers, and whether or not there is a clear purpose of the call or meeting. The reason for contact can be to help the customer, or sometimes it is to help the salesperson's quota. Effective results from measuring the performance of each salesperson should have a purpose: to help them be more profitable to your company. When this occurs they have more worth through additional pay and incentives, and they receive a value, and that is a good feeling about doing a great job. There are three steps in bringing about the improvement of an employee when a problem is identified: measuring, correcting with training, and planning to make the change permanent. Measuring the Performance
The ability to measure performance depends on the use of success-based criteria as a model to compare daily, weekly and monthly numbers. Here are some of the criteria that Sales Creators uses when designing a monitoring system for their customers: 1. Time spent selling, time spent in administration, time prospecting 2. Number of calls made on existing accounts
3. Number of calls made to new customers, and number of new customers
4. Promptness in submitting reports and sales orders and accuracy of reports
5. Volume of sales, number, size, product mix and repeat account
6. Accuracy in quoting prices and delivery information with approved margins to customer
7. Method of call backs set up with the customer
8. Cost of customer to company
9. Marketing and promotional time, specific areas
10. Improvement areas where time is being invested on the part of the salesperson and management; this includes topics such as behavior modification, appearance, schooling and other personal issues Measuring must start with standards that are compiled from the averages of all employees who are doing the same task. Then review the progress for the last 12 months and determine how it compares to the budget compliance standards. If the performance levels do not meet the basic standards set by the company, or if their performance falls more than 10 percent from last year's numbers then it is time to move into a corrective step of action. Training and Process for Correction
This is a positive step for improvement and it starts with management reevaluating the sales and marketing systems. Is there a need to increase promotional campaigns, change or add prospecting methods, establish tighter controls with price variances, or get input to problems from the sales staff? Management's first duty means time spent working on fixing the systems; then it is time to provide help for the salesperson. They should have daily direction and support, be provided with proper coaching by role-playing on specific areas of weakness found in the 'measuring performance' section. Make mentoring time available with best salesperson and the salesperson that needs help and have them observe and listen to their instructor. Daily progress must be recognized and acknowledged until the problem is resolved by noticeable improvement in a given area. Planning for a Positive Change
Once a problem has been found, management must help get it corrected. Once it has been corrected it is time to outline an agreement to reach the stated goals. Planning in its final form should be in writing with the steps needed to reach the final destination. Then the time must be allotted to put management's system changes into effect by introducing them to the employees at a meeting. The term sales force automation refers to a system designed to track and manage sales activities for individuals and even large sales forces.
- An integral part of any system is company-wide integration among different departments. If the systems aren’t adopted and properly integrated to all departments, there might be a lack of communication that could result in different departments contacting the same customer for the same purpose. In order to mitigate this risk, system must be fully integrated in all departments that deal with customer service management.
- A good sales force automation system allows information about sales opportunities to be easily accessible so it can be reviewed. This information stored in a sales force automation system may relate to individuals, companies, and even specific transactions.
-Good sales force automation should provide the means for a busy sales manager to quickly find out what is happening with each sales opportunity and sales representative.
-A good sales force automation system should provide a company with the means to identify the sales trends that affect the business.
-Sales force automation software should provide comprehensive information on how each team member is performing.
-Should allow the company to accurately forecast future trends and company profits. If these forecasts are not up to expectations the sales force automation software can help make improvements.
-The sales force automation software should be able to automatically send out personalized e-mails to individuals or companies to make sure contact is maintained.
-Good sales force automation software should assist the sales team in closing sales.
Advantages to the sales / marketing manager
• Understanding the economic structure of your industry
• Identifying segments within your market
• Identifying your target market
• Identifying your best customers in place
• Doing marketing research to develop profiles(demographic, psychographic, and behavioral) of your core customers
• Understanding your competitors and their products
• Developing new products
• Establishing environmental scanning mechanisms to detect opportunities and threats
• Understanding your company's strengths and weaknesses
• Auditing your customers' experience of your brand in
• Developing marketing strategies for each of your products using the marketing mix variables of price, product, distribution, and promotion
• Coordinating the sales function with other parts of the promotional mix(such as advertising, sales promotion, public relations, and publicity)
• Creating a sustainable competitive advantage
• Understanding where you want your brands to be in the future, and providing an empirical basis for writing marketing plans on a regular basis to help you get there
• Providing input into feedback systems to help you monitor and adjust the process
Strategic advantages
Sales force automation systems can also create competitive advantage:
• As mentioned above, productivity will increase. Sales staff will use their time more efficiently and more effectively. The sales manager will also become more efficient and more effective.(see above) This increased productivity can create a competitive advantage in three ways: it can reduce costs, it can increase sales revenue, and it can increase market share.
• Field sales staff will send their information more frequently. Typically information will be sent to management after every sales call(rather than once a week). This provides management with current information, information that they will be able to use while it is still valuable. Management response time will be greatly reduced. The company will become more alert and more agile.
• These systems could increase customer satisfaction if they are used with wisdom. If the information obtained and analyzed with the system is used to create a product that matches or exceeds customer expectations, and the sales staff use the system to service customers more expertly and diligently, then customers should be satisfied with the company. This will provide a competitive advantage because customer satisfaction leads to increased customer loyalty, reduced customer acquisition costs, reduced price elasticity of demand, and increased profit margins.
Disadvantages
Detractors claim that sales force management systems are:
• difficult to work with
• require additional work inputting data
• dehumanize a process that should be personal
• require continuous maintenance, information updating, and system upgrading
• costly
• difficult to integrate with other management information systems ###################################
1 a) What are the attributes of a good sales quota plan?
Sales quotas are a way of life for the sales force. All activities of the sales force revolve around the fulfillment of sales quotas. Sales quotas are targets assigned to sales personnel. They signify the performance expected from them by the organization. Sales quotas help in directing, evaluating and controlling the sales force. They form an indispensable tool for sales managers to carry out sales management activities. Sales quotas are prepared on the basis of sales forecasts and budgets. Sales quotas serve various purposes in organizations.
*The only aim of the firm in establishing budget quotas is to make the salesmen cost conscious and this will act as one of the yardstick to measure the performance of salesmen. *Gross Margin or Net Profit quotas: This has the same impact as the budget quotas. *The aim of the firm in setting these quotas is to create cost consciousness among the salesmen. *By having these quotas the possibility of the salesmen to over emphasize the sales volume quota is minimized. *Net profit quotas are established to increase the profitability and this depends on increasing the sales volume and minimizing the sales
expenses. So the salesmen try to restrict their expenditure while
achieving the sales volume.
*This is useful when the firm has both high and low profit margin items in the product line. *Salesmen usually sell low profit margin items because they are easy to sell in the market. *So by fixing Net Profit quotas they are compelled to sell high profit margin items also because it will be impossible for salesmen to achieve their target if they are not sold. *But fixing of Gross Profit quotas is difficult because the salesmen do not fix the prices and they have no control on manufacturing costs. *Fixing and administering of Net Profit quotas are also difficult because the salesmen have no power to control the expenses incurred at the branch office. Activity Quotas: To set these quotas the management should first have knowledge about what are the main activities to be performed by the salesmen and how much time do they need to spend on each of these activities. Some of the activities for which quotas are set are(1) total calls made(2) Calls on each class of customers(3) Calls on prospects(4) product
demonstrations and displays organized(5) New accounts tapped(6)
collection of bills, etc.
Combination of Quotas: Various quotas mentioned above are combined together and points are allocated for each activity to evaluate the performance of the salesmen. \Methods of establishing sales quotas: -Quotas may be established from territorial sales potential by pooling estimates form various territories. -They may be established from total sales estimates by adopting the break down procedure from the census data available. -Quotas set on past sales experience based on averages for previous years. -Sales personnel setting their own quotas. Characteristics of a good quota plan: -Simplicity: The method used to arrive at the quota should be simple and easy to administer. -Accuracy: Guesswork should be eliminated while arriving at quotas. -Definite Task: The salesmen should definitely know what the quota to be achieved is and what are the other duties the firm wants him to perform. -Incentive: The quota should provide some incentive to the salesmen. -Fairness: Every salesman should be treated fairly without any bias. Flexibility: The quota should be flexible so that when basic business conditions change; a change should also be brought about in the quota. Coordination: Quota should be planned so that it will facilitate coordination between various activities of the firm. Like production, marketing, finance, promotion, etc. Reasons for not using sales quotas: -If it is difficult to obtain accurate sales forecasts and if quotas are to be based on guesswork executives prefer not to have quotas. -If the determination of quotas requires using of statistical techniques executives prefer to avoid them because salesmen might view them with suspicion. -Due to over emphasis on sales activity. ----------------------------------------------------------
They provide targets for sales personnel to achieve, act as standards to measure sales force performance and help motivate the sales force. Compensation plans are invariably linked to quotas. The commission and bonuses given to sales persons are based on their meeting quotas set for them. The four categories of sales quotas widely used are -- sales volume quotas, expense quotas, activity quotas and profit quotas. A sales quota should be fair, challenging yet attainable, rewarding, easy to understand, flexible and must satisfy management objectives. It must also help in the coordination of sales force activities. Setting motivating and easy to understand quotas is essential to obtain the cooperation of the sales force. Various methods are used to set sales quotas, among which, quotas based on sales forecasts and market potential are the most common. Skilful administration by sales managers is required for effective implementation of quotas. Convincing salespeople about the fairness and accuracy of quotas helps the sales management to successfully implement-quotas. Importance of sales quotas
Provide performance targets
Provide standards
Provide control
Provide change of direction
Tool for motivating salespeople
Types of sales quotas
Sales volume quotas
Profit quotas
Expense quotas
Activity quotas
Methods of setting sales quotas
Quota setting processes
Quotas based on sales forecasts and market potential
Quotas based on sales forecasts alone
Quotas based on past experience
Quotas based on executive judgment
Quotas based on sales force compensation
Quotas set by sales people themselves
Sales quotas have certain limitations such as being time consuming, difficulty in comprehending if complicated statistical calculations have been used and focusing on attaining sales volumes at the cost of ignoring important non-selling activities. Quotas may reduce risk-taking among sales personnel and may influence them to adopt unethical selling practices. With changes in the competitive environment and variations in customer expectations, many companies have started developing compensation plans that are increasingly based on non-traditional aspects, thereby reducing dependency on quotas.
#########################################
b) Discuss the commonly used methods of sales control. How should sales analysis be done for multi Product Company selling consumer durables through nationwide retail network?
SALES performance review MEANS REVIEWING THE PERFORMANCE
OF SALES WITH RESPECT TO ALL FACTORS ASSOCIATED WITH THE SALES.
1.TOTAL ACTUAL SALES VS BUDGET [TARGET ]
what is your sales performance by month?
col 1 [ month ] / col 2 actual sales / col 3 budget/ +/_ variances
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2. SALES BY PRODUCT GROUP
what is your sales performance by product group?
col 1 [ product ]/ col 2 actual sales / col 3 budget / +_ variances
-----------------------------------------------------------------------
3.SALES BY TERRITORY what is your sales performance by individual territory?
col 1 [ territory ]/ col 2 actual sales / col 3 budget / +_ variances
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4.SALES BY CUSTOMERS what is your sales performance by individual customers?
col 1 [ customers ]/ col 2 actual sales / col 3 budget / +_ variances
---------------------------------------------------------------------------
5. SALES BY REGION
what is your sales performance by region?
col 1 [ region ]/ col 2 actual sales / col 3 budget / +_ variances
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6. MARKET SIZE BY MONTHS what is the market size by months ?
col 1 [ month ] / col 2 estimate market size
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6. MARKET SHARE BY MONTHS what is the market share by months ?
col 1 [ month ] / col 2 estimate market size/ col 3 actual sales / col 4 market share
BASED ON THE OUTCOME OF THE ABOVE ANALYSIS,
SET PERFORMANCE STANDARDS.
-REVIEW MONTHLY THE PERFORMANCE.
THE PERFORMANCE STANDARDS COULD CONSISTS
OF BOTH QUANTITATIVE AS WELL AS QUALITATIVE.
1.QUANTITATIVE COULD INCLUDE
-sales quota for the individual.
-sales quota for the team .
-actual sales this year against this year budget
-actual sales this year against the last year actual sales.
-sales expenses against sales target.
-market share target for the territory
-gross margin against the sales. [ this year ]
-this year gross margin against last year.
-call frequency ratio.
-call per day.
-order call ratio.
-average sales percall.
-average expenses per call.
-average order size.
-sales coverage index.
etc etc
-------------------------------------
2.QUALITITATIVE COULD INCLUDE
-product knowledge index.
-customer knowledge index.
-level of customer satisfaction index.
-monthly reports index
etcetc
=============================
General Measures. Performance standards should be objective, measurable, realistic, and stated clearly in writing(or otherwise recorded). The standards should be written in terms of specific measurers that will be used to appraise performance. In order to develop specific measurers, you first must determine the general measure(s) that are important for each element. General measurers used to measure employee performance include the following: • Quality address how well the work is performed and/or how accurate or how effective the final product is. Quality refers to accuracy, appearance, usefulness, or effectiveness. • Quantity addresses how much work is produced. A quantity measure can be expressed as an error rate, such as number ore percentage of errors allowable per unit of work, or as a general result to be achieved. When a quality or quantity standard is set, the Fully Successful standard should be high enough to be challenging but not so high that it is not really achievable. • Timeliness addresses how quickly, when or by what date the work is produced. The most common error made in setting timeliness standards is to allow no margin for error. As with other standards, timeliness standards should be set realistically in view of other performance requirements and needs of the organization. • Cost-Effectiveness addresses dollar savings to the Government or working within a budget. Standards that address cost-effectiveness should be based on specific resource levels(money, personnel, or time) that generally can be documented and measured in agencies' annual fiscal year budgets. Cost-effectiveness standards may include such aspects of performance as maintaining or reducing unit costs, reducing the time it takes to produce a product or service, or reducing waste. =========================================
TYPE ONE.
*actual sales performance against set sales target.= %
*actual sales performance against actual last year.= %
*gross margin / sales %
=======================================
TYPE TWO
*actual sales performance against set sales target.= %
*actual sales performance against actual last year.= %
*gross margin / sales %
PLUS
*MARKET SHARE FOR THE TERRITORY [ actual / target =%]
*TOTAL SALES EXPENSES / TOTAL ACTUAL SALES = %
==============================================
TYPE THREE
QUANTITATIVE
*actual sales performance against set sales target.= %
*actual sales performance against actual last year.= %
*gross margin / sales %
PLUS
*MARKET SHARE FOR THE TERRITORY [ actual / target =%]
*TOTAL SALES EXPENSES / TOTAL ACTUAL SALES = %
==============================
QUALITATIVE
1.JOB ELEMENT
-keep trying to maintain sales / volume target despite obstacles.
PERFORMANCE STANDARDS/ PERFORMANCE INDICATORS
-makes effective sales planning
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2.JOB ELEMENT
-taking action to capitalize on identifying sales opportunities
PERFORMANCE STANDARDS/ PERFORMANCE INDICATORS
-makes regular effective sales presentation / negotiation
---------------------------------------------------------------------------------------------
3.JOB ELEMENT
-preparing proposals for gaining opportunities
PERFORMANCE STANDARDS/ PERFORMANCE INDICATORS
-makes sales presentation / promote sales.
-------------------------------------------------------------------------------------------
4.JOB ELEMENT
-identify sales opportunities within individual customers
PERFORMANCE STANDARDS/ PERFORMANCE INDICATORS
-anlayse the performance within the customer/ plan increase share
----------------------------------------------------------------------------------------
5.JOB ELEMENT
-indentifying more product ranging opportunities within customers
PERFORMANCE STANDARDS/ PERFORMANCE INDICATORS
-plans increase sales of products
----------------------------------------------------------------------------------
6.JOB ELEMENT
-reviews customers performance on monthly basis
PERFORMANCE STANDARDS/ PERFORMANCE INDICATORS
KPI ACTUAL SALES VS SALES TARGET [ CURRENT YEAR]
ACTUAL SALES VS LAST YEAR SALES ------------------------------------------------------------------------------------------
7.JOB ELEMENT
-reviews sales by products on a monthly basis
PERFORMANCE STANDARDS/ PERFORMANCE INDICATORS
KPI ACTUAL SALES VS SALES TARGET [ CURRENT YEAR]
ACTUAL SALES VS LAST YEAR SALES ------------------------------------------------------------------------------------------
8.JOB ELEMENT
-ensures the implementation / coordination of sales promotion programs
PERFORMANCE STANDARDS/ PERFORMANCE INDICATORS
-takes initiatives in the coordination / implementation
-------------------------------------------------------------------------------------------
9.JOB ELEMENT
-ensures promotions materials are distributed to all customers
PERFORMANCE STANDARDS/ PERFORMANCE INDICATORS
-distributes effectively and follows up
---------------------------------------------------------------------------------------
10.JOB ELEMENT
-ensures agreed ranging of products with each customers
PERFORMANCE STANDARDS/ PERFORMANCE INDICATORS
-maintains full stock level
-----------------------------------------------------------------------------------
11.JOB ELEMENT
-ensures the effective implementation of new product launch programs
PERFORMANCE STANDARDS/ PERFORMANCE INDICATORS
-takes initiiatives in the coordination and implementation of the program.
-----------------------------------------------------------------------------------
12.JOB ELEMENT
-Conduct research and analysis to propose a product or service that addresses a customer need or want.
PERFORMANCE STANDARDS/ PERFORMANCE INDICATORS
-Identifies current/future needs and wants of consumers, businesses, or others
----------------------------------------------------------------------------------------
13.JOB ELEMENT
-Recognizes market and competitor attributes and determines an appropriate plan to
enter and exist within the market.
PERFORMANCE STANDARDS/ PERFORMANCE INDICATORS
-Researches the defined market for the proposed product or service offering.
---------------------------------------------------------------------------------------------
14.JOB ELEMENT
-manages the customer service
PERFORMANCE STANDARDS/ PERFORMANCE INDICATORS
-Research how existing needs and wants are being served.
-----------------------------------------------------------------------------------------------------------------------------------------------
15.JOB ELEMENT
-regularly maitains the customer satisfaction level
PERFORMANCE STANDARDS/ PERFORMANCE INDICATORS
-Assess end-users’ degree of satisfaction with existing goods and services to satisfy those needs and wants.
----------------------------------------------------------------------------------------------------------------------
YOU CAN HAVE A SELECTION OF THE ABOVE
AND USE THE FOLLOWING RATINGS
LEVEL 1 =ESSENTIAL FUNCTIONS not fulfilled =[below 30 points]
LEVEL 2 =ESSENTIAL FUNCTIONS fulfilled but need improvements = [31 - 49 ]points LEVEL 3 =ESSENTIAL FUNCTIONS fulfilled [ 50 ---65] points
LEVEL 4 =ESSENTIAL FUNCTIONS exceeds [ 66 ---80 ] points
LEVEL 5 =ESSENTIAL FUNCTIONS far exceeds [ above 80 points]
============================================================
AS PART OF SALES PERFORMANCE STANDARDS,
YOU CAN SET STANDARDS FOR '' SALES BEHAVIOR''.
Functional activities
Use of time
Journey planning
Preparation
Sales call sequence
Call rate
Conversion rate
Product knowledge
Knowledge of the territory
Key accounts knowledge
Other:
Sales techniques
Approach
Identifying decision maker
Opening
Control
Listening
Identifying needs
Creativity
Objection handling
Closing techniques
Benefit selling
Communications
Use of sales aids
Product knowledge
Other:
Organisation
Call records
Information retrieval
Sales aids
Journey planning
Appointments
Vehicle
Administration
Communications
Other: Attitudes
Empathy
Enthusiasm
Loyalty'
Positiveness
Team spirit
Other:
SALES PROCESS
*Product Knowledge
*Company Knowledge
* Planning of Sales
* Prospecting new Clients
* Opening the sales
*Sales Presentation
*Sales Negotiation
*Sales Communication
*Sales Counselling
• Consultative Selling
• Handling Objections
• Work Organisation
• Setting Goals
*Selling Benefits
*Competitor's Knowledge
• Closinn Sales
• Buying Signals *Motivate prospects *Motivate Yourself
*Merchandising
*Creative Approach *Human Relations in Selling *Time Management
*• Territory Planning
• Customer Relations
• Major Account planning &Servicing
• Persuasive Selling
• Psychology in Selling
• Probing Techniquies
• Building Goodwill
• Listening Skills
• Telephone Techniques
• Identifying Sales Potential
* Pre call Planning
* Post call Analysis
*managing territory
=================================
####################################
COMPENSATION system usually mean the financial reward on organization gives its employees in return for their labour. While the term COMPENSATION system, not only includes material rewards, but also non-material rewards. The components of a COMPENSATION system consist of financial rewards(basic and performance pay) and employee benefits, which together comprise total remuneration. They also include non-financial rewards(recognition, promotion, praise, achievement responsibility and personal growth) and in many case a system of performance management. Pay arrangements are central to the cultural initiative as they are the most tangible expression of the working relationship between employer and employee.
---------------------------------------------------
Compensation philosophy is the set of values and beliefs that an organization has in regards to compensation
decision-making. This often is combined with a set of guiding principles that further assist in compensation administration. The collection of decisions that the firm has
made over a period of time constitutes a compensation set of beliefs and values — a compensation philosophy —
regardless of whether or not the firm has actually committed those ideas to a formal document. Compensation strategy is
used to guide the design of specific compensation decisions.
Differences in compensation philosophies are widespread. Thus, some organizations believe in the widespread use of
incentive compensation, while others only apply incentive compensation to a very narrow group of employees who are
believed to affect the bottom line. Another illustration may be found in the examination of the behavior of firms who seek to apply compensation levels “at the midpoint.” These firms differ philosophically from those firms that seek to pay at the top of the market, thus enabling them to attract the highest caliber employees that they can find. Business settings often explain these differences. Some
firms are proportionally more generous to certain levels of exempt employees, while others believe in principles of
achieving widespread equity across all employees. The openness with which compensation decisions are made, and the
degree of stakeholder involvement in those decisions, is yet another example of philosophical differences that may exist
between organization.
Needless to say, compensation is a key issue for the high performance organization, as the employee and management
systems utilized by the organization must be reinforced through the rewards structure. Again, our experience is
telling in avoiding making compensation unduly controversial, thus adversely affecting the very heart of the high
performance system.
Compensation administration includes a collection of activities required to sustain the effectiveness of a compensation
strategy. Thus issues ranging from labor market surveying to performance management to skill certification and peer
review come under this umbrella. Involving stakeholders in compensation administration can reinforce the values and
beliefs underlying the compensation philosophy and strategy.
AS PART OF THE ALIGNING PROCESS, THE FOLLOWING
FACTORS ARE TAKEN INTO CONSIDERATION.
1.Employee Inputs and Preferences
• Perceptions of external pay equity
• Perceptions of internal pay equity
• Pay delivery beliefs
— Form(cash, gainsharing, benefits)
— Method(individual, small group, large group)
• Risk tolerance
• Trust in management
2.Business and Operating Inputs
• Operations and Manufacturing strategy
• Sales development strategy
• Percentage of compensation costs to total product/
service costs
• Percentage of compensation costs to controllable
product/service cost
• Existing markets/products
• Potential markets/products
• Anticipated volume
• Reinforce/enhance work design
• Maintain cultural change processes
• Other operating issues
3.Industry and Labor Market Practices
and Trends
• Availability and quality of work force
• Industry practices
• Retention of work force
• Retention of key contributors
• Wage/salary levels and movement
• Wage/salary delivery charges
4.Compensation Philosophy and Objectives
• How much emphasis should be placed on rewards to
drive organization
• What issues are to be driven by compensation as
opposed to management practices
• Market definition(exempt and non-exempt)
• Method of delivery
• Targeted position in labor market
• Targeted position in product market
• Relationship within total company
• Relationship to selection and retention
• Portion of pay guaranteed and at risk
• Percentage of workforce bonus eligible
5.Base Pay Delivery
• Method of delivery — Job-based vs. individual-based
• Number of levels
• Structure of levels
• Pricing strategies
• Adjustment method
• Weighting of individual performance
6.Organization Performance or Variable Pay
• Role in total compensation strategy
• Structure
• Measures
• Targets
• Tolerance for pay at risk
• Risk - reward ratios
• Use of other monetary rewards
• Use of non-monetary rewards
• Individual performance recognition
7.Fringe Benefits
• Usually determined at corporate level; limited scope at
other levels
• Tie to business and human resource objectives
• Coverage
• Cost
• Communications(Purpose - Coverage - Value)
8.Compensation Administration
• Stakeholder role in compensation administration
• Performance management & evaluation
• Overtime policy(exempt & non-exempt)
• Shift differentials
• Attendance policynce
• Role of seniority
Compensation decisions should be fully integrated into the organization’s business and operations strategy, through
its compensation philosophy. The design of compensation systems should be subsequent to, and not precede, this key
analysis and decision point. For the high performance firm, an appropriate level of employee involvement can further
reinforce the organization’s general beliefs and values.
==========================================
The integrated COMPENSATION system includes: Job evaluation and profiling • Defining key performance indicators • Analysis and modification of pay levels and structures to reflect both internal and market relativities • Designing of performance evaluation processes • Structuring of individual, team and corporate performance bonuses Social climate surveys with focus on remuneration • Designing flexible benefits plans • Implementation of new reward components in compensation package • Implementation and assistance in change communications • Training for internal specialists in reward structure planning and maintenance Performance Based COMPENSATION is based on the definition of key performance indicators identified as part of job evaluation, and linking these indicators with reward components. A combination of performance measuring system and additional motivational components delivers an integrated performance-based COMPENSATION system. Flexible Benefit Schemes are a modern approach to the management of budgets for staff remuneration. Employee benefits constitute a considerable portion of staff costs, but they are often expended without the desired effect since employees do not perceive the full value of benefits. This system increases the effectiveness and enable better control. Why COMPENSATION system is required? These components will be designed, developed and maintained on the basis of strategies and policies which will be created within the context of the organizations between strategies, culture and environment: they will be expected to fulfill the following broad aims;
1. Improve Organizational Effectiveness: Support the attainment of the organization's mission, strategies, and help to achieve sustainable, competitive advantage.
2. Support and change culture: Under pin and as necessary help to change the 'organizational culture' as expressed through its values for performance innovation, risks taking, quality, flexibility and team working.
3. Achieve Integration: Be an integrated part of the management process of the organization. This involves playing a key role in a mutually reinforcing and coherent range of personal policies and process. 4. Supportive Managers: Support individual managers in the achievement of their goals.
5. Motivate Employees : Motivate employees to achieve high levels of quality performance.
6. Compete in the Labour Market: Attract and retain high quality people.
7. Increased Commitment: Enhance the commitment of employees to the organization that will a) want to remain members of it, b) develop a strong belief in and acceptance of the values and goals of the organization and c) be ready and willing to exert considerable effort on its behalf.
8. Fairness and Equity: Reward people fairly and consistently according to their contribution and values to the organization.
9. Improved Skills : Upgrade competence and encourage personal development.
10. Improved Quality: Help to achieve continuous improvement in levels of quality and customer service.
11. Develop team working : Improve co-operation and effective team working at all level.
12. Value for money: Pride value for the money for the organization.
13. Manageable: Be easily manageable so that undue administrative burdens are not imposed on managers and members of the personal department.
14. Controllable: Be easily controllable so that the policies can be implemented consistently and costs can be contained within the budget. -------------------------------------------- The rewards of sales work, both extrinsic and intrinsic, are not constant or consistent, as they are in many other organizational jobs. Some days the salesperson comes home feeling that much has been accomplished, since in selling one can see positive results immediately. Other days there is no positive feedback: there have been no successful sales efforts, or other activities have prevented the salesperson from spending time on sales efforts. Thus, the salesperson experiences wide swings of positive and negative feedback. He or she must be able to adapt to this variation in reward structure. In fact this stimulation and uncertainty can act as stimuli to the salesperson.
The nature of sales work also leads to ambiguity. The lack of performance feedback from the supervisor, the focus on outcomes and the consequent uncertainty of how to perform the job, and the lack of participation in decision making all lead to a lack of role clarity for the sales job. The salesperson experiences this as an ambiguous situation. Added to this is the boundary-spanning aspect of the job, which creates role conflict as well as ambiguity.
Achievement drive
Psychologist D.C. McClelland has studied a number of socially derived needs of individuals. One of the most-studied of these is the drive to achieve. A person with a high achievement drive has a number of distinctive characteristics. The first of these is a desire to take moderate risks and to decide upon these for oneself. These risks are achievable but not easy to reach, and in this way provide a challenge rather than discouragement. The second characteristic is the need for immediate feedback. The person must be able to see that he or she is moving toward the goal. Third, the high achiever finds the path to the goal as rewarding as the extrinsic reward at the conclusion of the activity. Last, the high achiever is preoccupied with the task, focusing on the goal and keeping at it until it is achieved. If we put the last two together we can see why the high achiever often feels a letdown upon reaching the goal: it was the pursuit and not the product that was stimulating.
These characteristics would seem to fit sales jobs and the compensation program typically developed for sales work. The sales job allows one to set one's own challenging goals, there is immediate feedback, and one can immerse oneself in the process of the sale and enjoy that process. In fact, McClelland found that the most likely place in the organization for high achievement drive to show up is in sales personnel. There appears to be a self-selection process whereby those with a high need for achievement find sales work to be most satisfying.
SALES COMPENSATION PLANS
As indicated, the dominant feature of sales compensation is the use of incentive plans. The purpose is to align the objectives of the organization and those of the sales person. The objectives that may be used in sales compensation incentives include:
1. Sales Volume. The amount of sales over a specified time period.
2. New Business. Sales to new customers. This may require a great deal of cold calling.
3. Retaining Sales. Keeping customers from one time period to another.
4. Product Mix. The organization may wish to sell a pre-determined mix of products. This will help the competitiveness of the company by selling the whole product line. 5. Win-back Sales. This is sales to old customers who are regained as clients. Straight Salary
Some organizations pay sales personnel a straight salary without any incentive. This makes setting wage rates for sales jobs similar to setting wage rates for other jobs in the organization. The positioning of the sales job can be arrived at through job evaluation and the appropriate salary range assigned to the sales job.
Sales pay ranges are affected by the same forces that influence other wages within the organization. The labor market is a major influence. Surveys of sales compensation are made by trade associations, consultants, and the organization itself. Variations in salary rates, however, tend to be larger for sales jobs than for other jobs. Salary relationships within the organization also influence sales wage rates. The sales-manager position and sales-support positions in the organization often are used as buffer positions; they can be compared with both the sales job and other organizational jobs.
Sales jobs are often more influenced by the incumbent than are other organizational jobs. The skills and abilities of the individual often dictate the particular activities that constitute a particular sales job.
Straight-salary plans do not preclude the use of performance motivation. A pay-for-performance program can be used to focus the salesperson on high performance levels. The sales job has the advantage of having a more measurable standard than other jobs, so the performance measurement is less judgmental. The danger is that the sales volume alone will be used as the measure of performance when other job factors may also contribute to the definition of performance. Equity is always a problem in sales compensation. When sales personnel are paid a straight salary, the comparison with other organizational jobs through job evaluation reduces the equity problem within the organization. But it increases the equity problem with other sales jobs that are paid on an incentive basis. It is difficult to compare sales positions paid on a commission and straight salary, for they often involve quite different work. There are a number of circumstances that make straight salary plans advantageous. These all center in the inability to connect either performance to reward or effort to performance. Where the product is highly complex, the time taken to culminate a sale is long, and/or the sales effort is a team affair, an incentive program is infeasible. In some sales jobs the non-sales aspects are of primary importance to the organization, and the results of these activities are difficult to measure. In general, the less impact the salesperson has upon the sales results, the less argument there is to establish an incentive program. Also, an incentive program may be unfair to new salespeople, who do not know the job or the customers well enough to meet sales goals. Advantages of straight salary plans
A straight-salary program has certain advantages to the organization, the salesperson, and the customer. From the salesperson's standpoint, a straight salary takes the ambiguity out of how much salary he or she is receiving. Some people are very uncomfortable not knowing how much they will make next month, or are unable to budget the good times to cover the bad times. For the organization, a straight salary plan is much simpler. In addition, it gives the organization more control over the salesperson. One of the aspects of placing a person on incentives is that the person feels much more independent of organizational control. It has also been found that salespeople under a straight salary plan are more willing to perform the non-sales aspects of the sales job.From the standpoint of the customer, the sales person on a straight salary is more likely to provide service and less likely to pressure the person into a sale and move on.
Disadvantages of straight salary plans
The disadvantages of a straight-salary program reverse the advantages above. They center in the lack of connection between performance and reward and therefore suggest that motivation levels among salespeople paid in this manner can be expected to be lower than those of salespeople on incentives.
From the organizational viewpoint, straight salaries are a fixed cost rather than a variable cost, making sales salaries a burden in times of low sales. Furthermore, poor performance must be dealt with administratively, a requirement that is becoming more difficult each year.
Commission Plans A straight commission plan is like a straight piecework plan in that the salesperson's earnings are in direct proportion to his or her sales. It is probably the oldest form of compensation program for sales personnel. In theory, a commission plan is very simple. A commission is ordinarily defined as a percentage of the sales price of the product. The exact percentage is highly variable with the product being sold, the industry practice, and the organization's economic situation. It also varies with internal organizational factors and the exact nature of the sales job. For instance, the directness of the relationship between the salesperson's efforts and the sales volume usually affects the percentage given to the salesperson.
Two things need to be noted about providing a percentage of the sale to the salesperson. First, the percentage need not be the same at all levels of sales; it may increase or decrease with volume. This increase or decrease can be related to the effort the salesperson must exert to increase the sale's volume. The second point is that sales may be stated as sales price, sales units, or some other measure that reflects the variation in sales. In particular, the point in the sale process when the sale is counted is important. Sales percentages calculated at the point of sale versus the point of delivery are different figures and occur at different times for the salesperson.
The effects of the commission system need to be examined before it is put into operation. The basic calculation that needs to be made is an estimate of what amounts will be paid to sales personnel in the form of commissions. This information should be used in a number of ways. First, it should be used in the pay level sense of determining the total cost of selling the product. Here the concern is whether sales costs are in line with other costs of production. Second, estimates of commissions should be used in a wage structure sense of determining whether wages paid to salespeople are in line with wages paid other jobs in the organization and with those paid sales jobs in other organizations. Third, these estimates should be used to determine the expected income to the sales personnel. An incentive program may look like a good plan, but unless a sufficient percentage of the sales force are likely to make a minimum amount over expectations, the incentive value of the program may be negative.
Performance motivation
The performance-motivation model specifies that for an incentive plan to be effective the following conditions must be met:
1. Employees must believe that good performance leads to more pay. A commission plan should clearly do this by its construction. This belief is strengthened because the measurement of results is clear and objective. If there is a long time between point of sale and delivery or if many sales are not converted to delivery, this relationship can be weakened.
2. Employees must desire more pay. This seems obvious, but it is more complex than that. First, people differ in their desire for more pay, although sales personnel are reputed to be a group that strongly desires pay.13 Second, the increased pay must be worth the foregone opportunities: if more sales, and therefore more pay, mean more overtime, some people will choose not to pursue more pay. Organizations may be safe in assuming that through self-selection, those who enter sales work highly desire pay, but as sales jobs become more complex and technical this assumption may become less valid. 3. Employees must believe that good performance will not lead to negative consequences. Unfortunately, this is a likely consequence of commission plans. Sales incentive plans are often changed by the organization. These frequent changes are perceived as ways to solve two opposite problems – lack of sales and perceived overpayment of sales personnel. From the salesperson's viewpoint these changes create confusion in the performance-reward connection and a feeling that the organization is cutting the rate. Further, many sales incentive plans are so complex that the salesperson becomes confused as to what will happen if he or she takes certain actions. So some actions are avoided because the salesperson does not know what the consequences of taking action will be. Last, the sales incentive plan can put the salesperson in conflict with the rest of the organization. Difficulties between sales personnel and credit, finance, manufacturing, and shipping are everyday events in many organizations.
4. Employees must see that desired rewards besides pay result from good performance. Sales incentive plans are mixed on this. Feelings of achievement, esteem, and respect are quite likely to occur along with high incentive pay for most sales personnel.14 On the other hand, high pay restricts long-term movement within the organization. Sales positions are often perceived as having little career-growth opportunity.15
5. Employees must believe that their efforts lead to good performance. This perception varies widely among sales incentive plans. Where certain activities clearly lead to sales then this perception is strengthened. However, there are a number of hindrances to this connection. Since sales are highly affected by the economy, the product, past relationships, and other factors beyond the salesperson's control, the connection is often tenuous. The sales incentive plan itself may be perceived as not rewarding important efforts of the salesperson or rewarding efforts that are of little importance. The problem is that if the plan includes a wide range of relevant efforts, then it becomes so complex that the performance-reward connection is not clear and the dysfunctions of condition 3 operate.
Combination Plans A little over half of the sales compensation plans surveyed are some sort of combination of base salary and incentive. The reasons given for developing combination plans are that(1) the salesperson is not the only influence on the sales volume, and(2) some parts of the sales job do not involve direct selling and these need to be rewarded also. Done properly, a combination plan should contain the advantages of both straight-salary and incentive plans. On the other hand, such plans can also be seen as management indecision as to what they want of salespeople, and they can confuse the salesperson as to what is important in the job.
Sales standards
All combination plans involve the establishment of a sales standard – the expected volume of sales for a particular time period. In the sales field this standard is usually called a sales quota. But the standard may be broader than just sales volume: other factors, such as obtaining new customers, retaining customers over time, and doing missionary work, can be included. The advantage of including a number of variables in the standard is that the plan then more clearly covers the whole sales job. The disadvantage is that the complexity of the plan is increased and the salesperson may become confused about what he or she is being paid for.
The basis for developing the standard is the level of sales and other factors that the salesperson can be expected to achieve. Establishing this standard is more difficult here than it is in most incentive plans in a number of ways. Sales jobs tend to be individual, in terms of both the salesperson and the customers dealt with. Also, outside influences can easily affect the sales volume. In setting sales quotas it is useful to consider the past year's performance, economic conditions, technological changes, and competitors' strategies. For these reasons setting the expected volume is more often a figure negotiated with the individual salesperson than a standard for all salespeople to meet.
The standard generally sets the level at which the salesperson's straight salary is considered covered by the sales volume. But this can vary, with the incentive starting after some percentage of the standard has been reached. Straight salary usually constitutes around 75 percent of the total salary in combination plans, but this percentage can be planned as high or as low as desired. The incentive portion will be lower where the direct contribution of the salesperson to sales volume is low, where non-sales activities are valued by management, and where there are considerable variations in sales over time and between sales areas.17
Payment structure
There are a number of ways of establishing the incentive portion of sales compensation. Probably the simplest system is to use a commission combined with a draw. The salesperson receives a specified salary each payday. At periodic times, such as each quarter, the total commissions due the salesperson are calculated. The amount taken as a draw is deducted from this and the salesperson then receives the remainder. If the draw exceeds the commission, the organization must decide whether to reduce the draw, carry over the deficit, and/or retain the salesperson in the position.
A bonus system provides incentive payments after a given level of sales has been reached. These plans can be quite simple or very complex. Simple ones resemble a commission-draw system with a percentage payment made for sales above a standard. More complex plans have payment schedules that vary with sales volume or payments for a variety of things beyond sales volume, such as obtaining new accounts, reducing sales expenses, improving market penetration, and increasing order size. A variation on the more complex bonus plans is the point plan. Here the salesperson receives points for meeting and exceeding goals or quotas in a number of areas. These points are then converted to monetary values.
Completing the Sales Compensation Package
Sales compensation considerations do not end with the design of the direct pay system. There are other aspects of sales compensation that are unique, including the use of contests and benefits.
Contests
The measurable-output of sales jobs allows the organization to design a short-term reward system that gives prizes for accomplishing certain quotas or selling more than all others. This is often attractive to the type of person who enjoys sales work. The prizes can be either monetary or non-monetary but more often are not direct pay. Most popular are non-monetary prizes such as vacation trips or goods such as golf clubs or other recreational equipment.
These contests have a number of advantages. First, they provide a very visible reward. Records of who is winning what can be placed on bulletin boards and put in the newsletter. It is interesting that this publicity seems natural for a contest but out of place for direct pay. Second, a contest, like any bonus, is a one-shot affair: it does not add to the overall wage costs beyond the time of the contest. This allows the rewards to be large and still not have a detrimental effect on labor costs. Last, contests extend to the salesperson's family more clearly than direct pay. Such awards as vacations are shared with family members, ideally creating company loyalty within the family as well as the salesperson.
Contests also have some disadvantages. The publicity can be very discouraging to those salespeople who perceive they have no chance to accomplish the level of sales necessary to win an award. Not only is one not receiving a reward but all one's colleagues are aware of one's shortfall. This is particularly hard on new sales personnel or those in difficult territories. Contests may also shift the focus from the main job to side issues. If the awards are for selling items that are not important to the overall sales effort, then the total sales of the company may actually decline as a result of the contest.
Benefits Salespeople used to be perceived almost as independent contractors. As such they were not included in benefit programs to the same extent as other employee groups. This situation has changed, and sales personnel are now recipients of regular organizational benefit program and at times more.This inclusion in benefits programs should have the effect of increasing the commitment of the salesperson to the organization.
Sales personnel are usually granted two benefits that are not common to other employees: expense accounts and travel allowances.
Expense Accounts. Typical expenses covered include meals with customers, car phones, pagers, company credit cards, etc. Ordinarily, the only other employees to have these benefit are executives. Because these expense accounts have the potential for abuse, they are watched closely by the IRS.
Travel allowances. Sales people, more than any other group in the organization, travel. Some of this travel is around town from one location to another during the day. Other travel requires the sales person to be "on the road" for some period of time away from home. This creates costs that are business expenses and are ordinarily reimbursed by the organization.
The IRS(look into your Govt laws) classifies reimbursement plans into two categories, accountable and non-accountable. Accountable plans are classified as a business expense and are not income to the employee. Non-accountable plans are considered income to the employee although he/she may itemize these expenses as deductions on the personal income tax form. This section deals with accountable plans.
The employee may be paid before the expense is incurred, as an advance, or after the expenditure(as a reimbursement or an allowance). In any of these cases, in order to be qualified as an accountable plan:
1. The expenses must have a business connection, they must have been incurred while performing job duties.
2. The employee must account for the expenses within a reasonable time period.
3. The employee must return any excess reimbursement within a reasonable period of time.
The employer may reimburse an employee for travel expenses on the basis of actual expenditures. In this case, the employee must keep and present all expenditures to the employer. The employer may also develop an allowance plan. Under such a plan the employee may be considered to have accounted for travel expenses if the amounts of the allowance do not exceed the rates established by the federal government. There are two main types of travel allowances – automobile allowances and per diems.
Automobile allowances. There are two methods of calculating rates for automobiles:
1. The standard mileage plan. This method pays the employee a set rate per mile traveled. For 2001 this rate was 34.5 cents per mile, but it changes periodically.
2. Fixed and Variable Rate. The employer reimburses the employee for automobile expenses under 2 categories of costs: fixed and variable. The variable costs are the cents per mile costs of running the car and vary depending on the miles driven. In addition, the employer pays a fixed amount to cover costs such as depreciation, maintenance, leasing and insurance. Developing this type of program is highly complex and is taught in ERI DLC Course 38: FAVR Automobile Allowances(currently underdevelopment).
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b) Explain the need and purpose of monitoring systems in an Enterprise where personal selling is extensively used in promoting the firm’s products.
Making a dynamic sales force links strategy and operational actions that can take place within a department. the SALESFORCE APPRAISAL relies upon objectives, plans, budget, and control indicators under specific conditions. In order to perform the objectives correctly specific procedures must be implemented:
Categories of Sales Force Management Process
for achieving objectives of the mission
• Sales Force control process for ensuring measures are being achieved within a given timeframe
• Mission must be accomplished in a given constrained context(customers and/or markets)
• System must be managed in order to accomplish the mission in uncertain environments
• A sales force command center
The process starts from with a mission of meeting a specific sales objective. The command center interacts directly by analyzing the inputs and outputs established from the control process and the sales force. The control process will enable the sales force to establish the performance standards, measuring actual performance, comparing measured performance against the standards that's already established and taking corrective action. The sales managers adjust their action based upon the overall process. If the processes are implemented wrong they will be ignored and more time will be spent towards enforcing the process to senior management. If the sales leaders follow the process correctly the performance will match the overall objectives of mission.
Aside from the control process, the following metrics are implemented:
• Time Management- Accurately measures the tasks and the percentage of time for each task.
• Call Management- Plan for customer interaction takes into account the percentage of command center reps that comply with the process and have successful calls.
• Opportunity Management- If the process is followed correctly then you will have a sales opportunity. The percentage of command center reps that utilize the tools, comply with the pobjective are all measured.
• Account Management- For multiple opportunities with a customer the account is measured by the tools, process, and objectives.
• Territory Management- For monitoring the account the territory is measured by the number of account reps and perspective versus active customers
• Sales Force Management- Process shared across several people and departments. The process includes training, IT systems, control, and coaching.
Most companies have the problem of measuring the performance of their sales staff because each salesperson is different and they work in varied methods. Because a sale involves customers, there are other factors impacting sales, as well. Customers and their needs are different, business conditions vary, individual customer bases differ and the product mix offered to each customer can vary. What are the important components to track to determine sales success? The factors can be tangible and intangible. When examining the tangible side of the sales ledger you need to consider methods for targeting, frequency of contact, message and presentation, and communications. Some intangible factors that can be difficult to quantify are the salesperson's ability to build relationships and "connect" with customers, and whether or not there is a clear purpose of the call or meeting. The reason for contact can be to help the customer, or sometimes it is to help the salesperson's quota. Effective results from measuring the performance of each salesperson should have a purpose: to help them be more profitable to your company. When this occurs they have more worth through additional pay and incentives, and they receive a value, and that is a good feeling about doing a great job. There are three steps in bringing about the improvement of an employee when a problem is identified: measuring, correcting with training, and planning to make the change permanent. Measuring the Performance
The ability to measure performance depends on the use of success-based criteria as a model to compare daily, weekly and monthly numbers. Here are some of the criteria that Sales Creators uses when designing a monitoring system for their customers: 1. Time spent selling, time spent in administration, time prospecting 2. Number of calls made on existing accounts
3. Number of calls made to new customers, and number of new customers
4. Promptness in submitting reports and sales orders and accuracy of reports
5. Volume of sales, number, size, product mix and repeat account
6. Accuracy in quoting prices and delivery information with approved margins to customer
7. Method of call backs set up with the customer
8. Cost of customer to company
9. Marketing and promotional time, specific areas
10. Improvement areas where time is being invested on the part of the salesperson and management; this includes topics such as behavior modification, appearance, schooling and other personal issues Measuring must start with standards that are compiled from the averages of all employees who are doing the same task. Then review the progress for the last 12 months and determine how it compares to the budget compliance standards. If the performance levels do not meet the basic standards set by the company, or if their performance falls more than 10 percent from last year's numbers then it is time to move into a corrective step of action. Training and Process for Correction
This is a positive step for improvement and it starts with management reevaluating the sales and marketing systems. Is there a need to increase promotional campaigns, change or add prospecting methods, establish tighter controls with price variances, or get input to problems from the sales staff? Management's first duty means time spent working on fixing the systems; then it is time to provide help for the salesperson. They should have daily direction and support, be provided with proper coaching by role-playing on specific areas of weakness found in the 'measuring performance' section. Make mentoring time available with best salesperson and the salesperson that needs help and have them observe and listen to their instructor. Daily progress must be recognized and acknowledged until the problem is resolved by noticeable improvement in a given area. Planning for a Positive Change
Once a problem has been found, management must help get it corrected. Once it has been corrected it is time to outline an agreement to reach the stated goals. Planning in its final form should be in writing with the steps needed to reach the final destination. Then the time must be allotted to put management's system changes into effect by introducing them to the employees at a meeting. The term sales force automation refers to a system designed to track and manage sales activities for individuals and even large sales forces.
- An integral part of any system is company-wide integration among different departments. If the systems aren’t adopted and properly integrated to all departments, there might be a lack of communication that could result in different departments contacting the same customer for the same purpose. In order to mitigate this risk, system must be fully integrated in all departments that deal with customer service management.
- A good sales force automation system allows information about sales opportunities to be easily accessible so it can be reviewed. This information stored in a sales force automation system may relate to individuals, companies, and even specific transactions.
-Good sales force automation should provide the means for a busy sales manager to quickly find out what is happening with each sales opportunity and sales representative.
-A good sales force automation system should provide a company with the means to identify the sales trends that affect the business.
-Sales force automation software should provide comprehensive information on how each team member is performing.
-Should allow the company to accurately forecast future trends and company profits. If these forecasts are not up to expectations the sales force automation software can help make improvements.
-The sales force automation software should be able to automatically send out personalized e-mails to individuals or companies to make sure contact is maintained.
-Good sales force automation software should assist the sales team in closing sales.
Advantages to the sales / marketing manager
• Understanding the economic structure of your industry
• Identifying segments within your market
• Identifying your target market
• Identifying your best customers in place
• Doing marketing research to develop profiles(demographic, psychographic, and behavioral) of your core customers
• Understanding your competitors and their products
• Developing new products
• Establishing environmental scanning mechanisms to detect opportunities and threats
• Understanding your company's strengths and weaknesses
• Auditing your customers' experience of your brand in
• Developing marketing strategies for each of your products using the marketing mix variables of price, product, distribution, and promotion
• Coordinating the sales function with other parts of the promotional mix(such as advertising, sales promotion, public relations, and publicity)
• Creating a sustainable competitive advantage
• Understanding where you want your brands to be in the future, and providing an empirical basis for writing marketing plans on a regular basis to help you get there
• Providing input into feedback systems to help you monitor and adjust the process
Strategic advantages
Sales force automation systems can also create competitive advantage:
• As mentioned above, productivity will increase. Sales staff will use their time more efficiently and more effectively. The sales manager will also become more efficient and more effective.(see above) This increased productivity can create a competitive advantage in three ways: it can reduce costs, it can increase sales revenue, and it can increase market share.
• Field sales staff will send their information more frequently. Typically information will be sent to management after every sales call(rather than once a week). This provides management with current information, information that they will be able to use while it is still valuable. Management response time will be greatly reduced. The company will become more alert and more agile.
• These systems could increase customer satisfaction if they are used with wisdom. If the information obtained and analyzed with the system is used to create a product that matches or exceeds customer expectations, and the sales staff use the system to service customers more expertly and diligently, then customers should be satisfied with the company. This will provide a competitive advantage because customer satisfaction leads to increased customer loyalty, reduced customer acquisition costs, reduced price elasticity of demand, and increased profit margins.
Disadvantages
Detractors claim that sales force management systems are:
• difficult to work with
• require additional work inputting data
• dehumanize a process that should be personal
• require continuous maintenance, information updating, and system upgrading
• costly
• difficult to integrate with other management information systems ###################################
1 a) What are the attributes of a good sales quota plan?
Sales quotas are a way of life for the sales force. All activities of the sales force revolve around the fulfillment of sales quotas. Sales quotas are targets assigned to sales personnel. They signify the performance expected from them by the organization. Sales quotas help in directing, evaluating and controlling the sales force. They form an indispensable tool for sales managers to carry out sales management activities. Sales quotas are prepared on the basis of sales forecasts and budgets. Sales quotas serve various purposes in organizations.
*The only aim of the firm in establishing budget quotas is to make the salesmen cost conscious and this will act as one of the yardstick to measure the performance of salesmen. *Gross Margin or Net Profit quotas: This has the same impact as the budget quotas. *The aim of the firm in setting these quotas is to create cost consciousness among the salesmen. *By having these quotas the possibility of the salesmen to over emphasize the sales volume quota is minimized. *Net profit quotas are established to increase the profitability and this depends on increasing the sales volume and minimizing the sales
expenses. So the salesmen try to restrict their expenditure while
achieving the sales volume.
*This is useful when the firm has both high and low profit margin items in the product line. *Salesmen usually sell low profit margin items because they are easy to sell in the market. *So by fixing Net Profit quotas they are compelled to sell high profit margin items also because it will be impossible for salesmen to achieve their target if they are not sold. *But fixing of Gross Profit quotas is difficult because the salesmen do not fix the prices and they have no control on manufacturing costs. *Fixing and administering of Net Profit quotas are also difficult because the salesmen have no power to control the expenses incurred at the branch office. Activity Quotas: To set these quotas the management should first have knowledge about what are the main activities to be performed by the salesmen and how much time do they need to spend on each of these activities. Some of the activities for which quotas are set are(1) total calls made(2) Calls on each class of customers(3) Calls on prospects(4) product
demonstrations and displays organized(5) New accounts tapped(6)
collection of bills, etc.
Combination of Quotas: Various quotas mentioned above are combined together and points are allocated for each activity to evaluate the performance of the salesmen. \Methods of establishing sales quotas: -Quotas may be established from territorial sales potential by pooling estimates form various territories. -They may be established from total sales estimates by adopting the break down procedure from the census data available. -Quotas set on past sales experience based on averages for previous years. -Sales personnel setting their own quotas. Characteristics of a good quota plan: -Simplicity: The method used to arrive at the quota should be simple and easy to administer. -Accuracy: Guesswork should be eliminated while arriving at quotas. -Definite Task: The salesmen should definitely know what the quota to be achieved is and what are the other duties the firm wants him to perform. -Incentive: The quota should provide some incentive to the salesmen. -Fairness: Every salesman should be treated fairly without any bias. Flexibility: The quota should be flexible so that when basic business conditions change; a change should also be brought about in the quota. Coordination: Quota should be planned so that it will facilitate coordination between various activities of the firm. Like production, marketing, finance, promotion, etc. Reasons for not using sales quotas: -If it is difficult to obtain accurate sales forecasts and if quotas are to be based on guesswork executives prefer not to have quotas. -If the determination of quotas requires using of statistical techniques executives prefer to avoid them because salesmen might view them with suspicion. -Due to over emphasis on sales activity. ----------------------------------------------------------
They provide targets for sales personnel to achieve, act as standards to measure sales force performance and help motivate the sales force. Compensation plans are invariably linked to quotas. The commission and bonuses given to sales persons are based on their meeting quotas set for them. The four categories of sales quotas widely used are -- sales volume quotas, expense quotas, activity quotas and profit quotas. A sales quota should be fair, challenging yet attainable, rewarding, easy to understand, flexible and must satisfy management objectives. It must also help in the coordination of sales force activities. Setting motivating and easy to understand quotas is essential to obtain the cooperation of the sales force. Various methods are used to set sales quotas, among which, quotas based on sales forecasts and market potential are the most common. Skilful administration by sales managers is required for effective implementation of quotas. Convincing salespeople about the fairness and accuracy of quotas helps the sales management to successfully implement-quotas. Importance of sales quotas
Provide performance targets
Provide standards
Provide control
Provide change of direction
Tool for motivating salespeople
Types of sales quotas
Sales volume quotas
Profit quotas
Expense quotas
Activity quotas
Methods of setting sales quotas
Quota setting processes
Quotas based on sales forecasts and market potential
Quotas based on sales forecasts alone
Quotas based on past experience
Quotas based on executive judgment
Quotas based on sales force compensation
Quotas set by sales people themselves
Sales quotas have certain limitations such as being time consuming, difficulty in comprehending if complicated statistical calculations have been used and focusing on attaining sales volumes at the cost of ignoring important non-selling activities. Quotas may reduce risk-taking among sales personnel and may influence them to adopt unethical selling practices. With changes in the competitive environment and variations in customer expectations, many companies have started developing compensation plans that are increasingly based on non-traditional aspects, thereby reducing dependency on quotas.
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b) Discuss the commonly used methods of sales control. How should sales analysis be done for multi Product Company selling consumer durables through nationwide retail network?
SALES performance review MEANS REVIEWING THE PERFORMANCE
OF SALES WITH RESPECT TO ALL FACTORS ASSOCIATED WITH THE SALES.
1.TOTAL ACTUAL SALES VS BUDGET [TARGET ]
what is your sales performance by month?
col 1 [ month ] / col 2 actual sales / col 3 budget/ +/_ variances
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2. SALES BY PRODUCT GROUP
what is your sales performance by product group?
col 1 [ product ]/ col 2 actual sales / col 3 budget / +_ variances
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3.SALES BY TERRITORY what is your sales performance by individual territory?
col 1 [ territory ]/ col 2 actual sales / col 3 budget / +_ variances
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4.SALES BY CUSTOMERS what is your sales performance by individual customers?
col 1 [ customers ]/ col 2 actual sales / col 3 budget / +_ variances
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5. SALES BY REGION
what is your sales performance by region?
col 1 [ region ]/ col 2 actual sales / col 3 budget / +_ variances
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6. MARKET SIZE BY MONTHS what is the market size by months ?
col 1 [ month ] / col 2 estimate market size
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6. MARKET SHARE BY MONTHS what is the market share by months ?
col 1 [ month ] / col 2 estimate market size/ col 3 actual sales / col 4 market share
BASED ON THE OUTCOME OF THE ABOVE ANALYSIS,
SET PERFORMANCE STANDARDS.
-REVIEW MONTHLY THE PERFORMANCE.
THE PERFORMANCE STANDARDS COULD CONSISTS
OF BOTH QUANTITATIVE AS WELL AS QUALITATIVE.
1.QUANTITATIVE COULD INCLUDE
-sales quota for the individual.
-sales quota for the team .
-actual sales this year against this year budget
-actual sales this year against the last year actual sales.
-sales expenses against sales target.
-market share target for the territory
-gross margin against the sales. [ this year ]
-this year gross margin against last year.
-call frequency ratio.
-call per day.
-order call ratio.
-average sales percall.
-average expenses per call.
-average order size.
-sales coverage index.
etc etc
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2.QUALITITATIVE COULD INCLUDE
-product knowledge index.
-customer knowledge index.
-level of customer satisfaction index.
-monthly reports index
etcetc
=============================
General Measures. Performance standards should be objective, measurable, realistic, and stated clearly in writing(or otherwise recorded). The standards should be written in terms of specific measurers that will be used to appraise performance. In order to develop specific measurers, you first must determine the general measure(s) that are important for each element. General measurers used to measure employee performance include the following: • Quality address how well the work is performed and/or how accurate or how effective the final product is. Quality refers to accuracy, appearance, usefulness, or effectiveness. • Quantity addresses how much work is produced. A quantity measure can be expressed as an error rate, such as number ore percentage of errors allowable per unit of work, or as a general result to be achieved. When a quality or quantity standard is set, the Fully Successful standard should be high enough to be challenging but not so high that it is not really achievable. • Timeliness addresses how quickly, when or by what date the work is produced. The most common error made in setting timeliness standards is to allow no margin for error. As with other standards, timeliness standards should be set realistically in view of other performance requirements and needs of the organization. • Cost-Effectiveness addresses dollar savings to the Government or working within a budget. Standards that address cost-effectiveness should be based on specific resource levels(money, personnel, or time) that generally can be documented and measured in agencies' annual fiscal year budgets. Cost-effectiveness standards may include such aspects of performance as maintaining or reducing unit costs, reducing the time it takes to produce a product or service, or reducing waste. =========================================
TYPE ONE.
*actual sales performance against set sales target.= %
*actual sales performance against actual last year.= %
*gross margin / sales %
=======================================
TYPE TWO
*actual sales performance against set sales target.= %
*actual sales performance against actual last year.= %
*gross margin / sales %
PLUS
*MARKET SHARE FOR THE TERRITORY [ actual / target =%]
*TOTAL SALES EXPENSES / TOTAL ACTUAL SALES = %
==============================================
TYPE THREE
QUANTITATIVE
*actual sales performance against set sales target.= %
*actual sales performance against actual last year.= %
*gross margin / sales %
PLUS
*MARKET SHARE FOR THE TERRITORY [ actual / target =%]
*TOTAL SALES EXPENSES / TOTAL ACTUAL SALES = %
==============================
QUALITATIVE
1.JOB ELEMENT
-keep trying to maintain sales / volume target despite obstacles.
PERFORMANCE STANDARDS/ PERFORMANCE INDICATORS
-makes effective sales planning
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2.JOB ELEMENT
-taking action to capitalize on identifying sales opportunities
PERFORMANCE STANDARDS/ PERFORMANCE INDICATORS
-makes regular effective sales presentation / negotiation
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3.JOB ELEMENT
-preparing proposals for gaining opportunities
PERFORMANCE STANDARDS/ PERFORMANCE INDICATORS
-makes sales presentation / promote sales.
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4.JOB ELEMENT
-identify sales opportunities within individual customers
PERFORMANCE STANDARDS/ PERFORMANCE INDICATORS
-anlayse the performance within the customer/ plan increase share
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5.JOB ELEMENT
-indentifying more product ranging opportunities within customers
PERFORMANCE STANDARDS/ PERFORMANCE INDICATORS
-plans increase sales of products
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6.JOB ELEMENT
-reviews customers performance on monthly basis
PERFORMANCE STANDARDS/ PERFORMANCE INDICATORS
KPI ACTUAL SALES VS SALES TARGET [ CURRENT YEAR]
ACTUAL SALES VS LAST YEAR SALES ------------------------------------------------------------------------------------------
7.JOB ELEMENT
-reviews sales by products on a monthly basis
PERFORMANCE STANDARDS/ PERFORMANCE INDICATORS
KPI ACTUAL SALES VS SALES TARGET [ CURRENT YEAR]
ACTUAL SALES VS LAST YEAR SALES ------------------------------------------------------------------------------------------
8.JOB ELEMENT
-ensures the implementation / coordination of sales promotion programs
PERFORMANCE STANDARDS/ PERFORMANCE INDICATORS
-takes initiatives in the coordination / implementation
-------------------------------------------------------------------------------------------
9.JOB ELEMENT
-ensures promotions materials are distributed to all customers
PERFORMANCE STANDARDS/ PERFORMANCE INDICATORS
-distributes effectively and follows up
---------------------------------------------------------------------------------------
10.JOB ELEMENT
-ensures agreed ranging of products with each customers
PERFORMANCE STANDARDS/ PERFORMANCE INDICATORS
-maintains full stock level
-----------------------------------------------------------------------------------
11.JOB ELEMENT
-ensures the effective implementation of new product launch programs
PERFORMANCE STANDARDS/ PERFORMANCE INDICATORS
-takes initiiatives in the coordination and implementation of the program.
-----------------------------------------------------------------------------------
12.JOB ELEMENT
-Conduct research and analysis to propose a product or service that addresses a customer need or want.
PERFORMANCE STANDARDS/ PERFORMANCE INDICATORS
-Identifies current/future needs and wants of consumers, businesses, or others
----------------------------------------------------------------------------------------
13.JOB ELEMENT
-Recognizes market and competitor attributes and determines an appropriate plan to
enter and exist within the market.
PERFORMANCE STANDARDS/ PERFORMANCE INDICATORS
-Researches the defined market for the proposed product or service offering.
---------------------------------------------------------------------------------------------
14.JOB ELEMENT
-manages the customer service
PERFORMANCE STANDARDS/ PERFORMANCE INDICATORS
-Research how existing needs and wants are being served.
-----------------------------------------------------------------------------------------------------------------------------------------------
15.JOB ELEMENT
-regularly maitains the customer satisfaction level
PERFORMANCE STANDARDS/ PERFORMANCE INDICATORS
-Assess end-users’ degree of satisfaction with existing goods and services to satisfy those needs and wants.
----------------------------------------------------------------------------------------------------------------------
YOU CAN HAVE A SELECTION OF THE ABOVE
AND USE THE FOLLOWING RATINGS
LEVEL 1 =ESSENTIAL FUNCTIONS not fulfilled =[below 30 points]
LEVEL 2 =ESSENTIAL FUNCTIONS fulfilled but need improvements = [31 - 49 ]points LEVEL 3 =ESSENTIAL FUNCTIONS fulfilled [ 50 ---65] points
LEVEL 4 =ESSENTIAL FUNCTIONS exceeds [ 66 ---80 ] points
LEVEL 5 =ESSENTIAL FUNCTIONS far exceeds [ above 80 points]
============================================================
AS PART OF SALES PERFORMANCE STANDARDS,
YOU CAN SET STANDARDS FOR '' SALES BEHAVIOR''.
Functional activities
Use of time
Journey planning
Preparation
Sales call sequence
Call rate
Conversion rate
Product knowledge
Knowledge of the territory
Key accounts knowledge
Other:
Sales techniques
Approach
Identifying decision maker
Opening
Control
Listening
Identifying needs
Creativity
Objection handling
Closing techniques
Benefit selling
Communications
Use of sales aids
Product knowledge
Other:
Organisation
Call records
Information retrieval
Sales aids
Journey planning
Appointments
Vehicle
Administration
Communications
Other: Attitudes
Empathy
Enthusiasm
Loyalty'
Positiveness
Team spirit
Other:
SALES PROCESS
*Product Knowledge
*Company Knowledge
* Planning of Sales
* Prospecting new Clients
* Opening the sales
*Sales Presentation
*Sales Negotiation
*Sales Communication
*Sales Counselling
• Consultative Selling
• Handling Objections
• Work Organisation
• Setting Goals
*Selling Benefits
*Competitor's Knowledge
• Closinn Sales
• Buying Signals *Motivate prospects *Motivate Yourself
*Merchandising
*Creative Approach *Human Relations in Selling *Time Management
*• Territory Planning
• Customer Relations
• Major Account planning &Servicing
• Persuasive Selling
• Psychology in Selling
• Probing Techniquies
• Building Goodwill
• Listening Skills
• Telephone Techniques
• Identifying Sales Potential
* Pre call Planning
* Post call Analysis
*managing territory
=================================
####################################
- Shattuck
- Posts: 14
- Joined: Sun Mar 09, 2014 5:34 am
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