Marketing bán hàng - Chapter 7: Controlling the salesforce

Chapter 7Controlling the SalesforceLearning ObjectivesTo know criteria and types of salesforce expense plansTo understand salesforce audit and its evaluation processTo learn evaluation of effectiveness of a sales organisation through sales, cost, profitability, and productivity analysisTo know purposes and procedure for evaluating and controlling the performance of salespeopleTo understand ethical, social, and legal responsibilities of sales managers and salespeopleSalesforce Expense PlansSalesforce expenses include travel, meals, lodging, telephone, and customer entertainmentFirms have salesforce expense plans to ensure proper spendingObjectives / Criteria of effective expense plans are: It should beFair to the salesperson and companySimple and economical to administerClear to prevent misunderstandingReimbursed without much delayAllowing differences in expenses among different territoriesSalesforce Expense Plans (Continued)Four types of salesforce expense plansSalespeople pay all expenses Merits: Simple, less cost for company, salespeople get income tax advantage Demerits: Less control on salespeople’s activities; non-selling activities not done properlyCompany pays all expenses / Unlimited payment plan Merits: Good control on salespersons activities; no anxiety for sales people on spending money Demerits: Salespeople spend more and may make money unethicallySalesforce Expense Plans (Continured)Company partially pays expenses / Limited payment plan Merits: Useful in budget planning; less disputes; better control on salesperson’s activities Demerits: Needs more time to set expense limits and administer; Inflexible plan, not liked by good salespeopleCombination plan / Expense-quota planCombines limited and unlimited plansAdvantages of both plansCompany has control on selling expenses; salespeople have flexibility within total expense budgetSalesforce AuditSalesforce or sales management audit is a part of marketing auditA marketing or salesforce audit is a comprehensive, systematic, diagnostic, and prescriptive tool, to be used periodicallyPurpose. To assess adequacy of process, improve performance, recommend changesEvaluation process of salesforce audit. It has 3 stages. Company management should find out:What happened by comparing actual performance with goalsWhy it happened by identifying factors contributing to negative variance. Difficult and time consuming taskWhat to do about it by taking corrective actionsEvaluation of Effectiveness of Sales OrganisationTo know “what happened”, companies analyse their sales, costs, profits, and productivityEffectiveness model of a sales organisationEffectiveness of a SalesOrganisationSales AnalysisCost AnalysisProfitability AnalysisProductivity AnalysisWe shall examine each of the above factorsSales AnalysisSales analysis of a company can be done in different ways:Different alternatives are shown in a framework below:Sales AnalysisAll levelsIn SalesOrganisationDifferentType of SalesDifferent Type of AnalysisNational and/or international levels sales organisationRegional levelBranch /district levelTerritory levelIndividual levelTotal sales of the companyBy type of productsBy type of distribution channelsBy type of customer classificationsBy size of ordersComparisons with sales quotas / targetsComparisons with previous periodsComparisons with industry / competitorsComparisons within sales organisationsComparisons with sales forecastsSales Analysis (Continued)Sales analysis is done at all levels of the sales organisationReasons (1) For evaluation and control: sales analysis needed at different organisation levels like regional, district, territory (2) For identifying problems: Use hierarchical sales analysis. E.G.Sales performance at national level below sales volume budgetFind which regions have problems in achieving sales quotasFocus sales analysis of branches reporting to problematic regionsDo sales analysis of territories under problematic branchesFurther analysis of problematic territories to be done by talking to salespeople, customers, branch managersCorrective actions can then be taken to improve salesExtend hierarchical sales analysis to different type of salesOut of different type of analysis, comparisons with sales quotas are widely usedMarketing Cost and Profitability AnalysisPurpose: To measure profitability of company’s marketing units such as territories, market segments, products, channels, & customersThis information helps to decide which marketing units to be expanded, reduced, or eliminated in future.ProcedureState purpose of the analysisIdentity major functional (or activity) expensesConvert natural accounting expenses into functional expensesAllocate functional expenses to marketing unitsPrepare profitability of marketing units, by using “full-cost approach”, or “contribution approach”Purpose of the AnalysisBefore starting cost and profitability analysis, it is necessary to know for which marketing units the analysis would be doneThis helps to classify costs into direct and indirect. E.G. Salesperson’s salary is direct cost for territory analysis, but indirect cost for analysis of products or segmentsIdentify Major Functional ExpensesThe company should prepare a list of major functions or activities with respect to marketing expensesE.G. Personal selling expenses, order processing expenses, packing and delivery expenses, warehousing and inventory expenses, administration expensesConvert Natural Accounting Expenses into Functional ExpensesNatural or traditional expenses are to be converted to functional expenses, for doing marketing cost analysisAn example will make this point clearNatural / Traditional ExpensesTotalFunctional ExpensesPersonal SellingAdv. and Sales PromotionWarehousing & InventoryAdministrationSalaries20,000,00010,000,0004,000,0002,000,0004,000,000Rent10,000,0002,500,0001,000,0005,000,0001,500,000Travel5,000,0005,000,000______Adv. and Sales Promotion15,000,000__15,000,000____Total50,000,00017,500,00020,000,0007,000,0005,500,000A better method for allocating costs is activity-based costing (ABC), which allocates costs based on cause of expensesNote: All figures are in RupeesAllocate Functional Expenses to Marketing UnitsFunctional expenses are allocated to the marketing unit under study, depending on several bases shown below, as examplesFunctionBases of allocation of expenses Personal selling Directly to sales territories Selling time given to each product and market segment Sales calls x average time per call to customers & channels Advertising and sales promotion Circulation of media to sales territories Media space for each product & market segment Equal charges to customers & channels Administration Equal charges for all marketing unitsAbove allocations are done to find marketing costs and profitability of marketing unitsPrepare Profitability of Marketing UnitsThis is done by preparing profit & loss statements for the marketing units under studyTwo approaches are available in allocating marketing costs for profitability analysis: (1) Full-cost, (2) ContributionFull-cost approach: All marketing costs, both direct & indirect, are allocated to the marketing unitUseful for long-term profitability studies of products and market segmentsContribution approach: Only direct marketing costs are allocated to the marketing unitUseful for short-term decisions like profitability of branches / regionsAn Example of Profitability AnalysisSNoParticularsFull-costApproachContribution ApproachWestern RegionBranch ABranch BBranch C1Sales4001501301202Cost of good sold300112.597.5903Gross margin (1-2)10037.532.5304Branch selling expenses12.74.54.245W. Region direct selling expenses12.0---6Contribution (3-4-5)75.333.028.326.07Allocated indirect expenses36.3---8Net profit (6-7)39.0---Note: All figures are in Rupees millionProductivity AnalysisProductivity is generally measured by ratio between output & inputSome of the productivity ratios in sales management are:Sales per salesperson (used by many companies)Selling expenses per salespersonSales calls per salespersonImprovement in productivity leads to increase in profitabilitySome of the methods used by firms to improve productivityReducing salesforce sizeHiring manufacturer’s reps. or agents on commission basisUsing the internet, telemarketing, direct mail to reach customersIncreasing sales volume substantiallyEvaluating & Controlling Performance of SalespeoplePurposes / objectives / importance of performance evaluation of salespeople are:Mainly to find how salespeople have performedThis information is used for other purposes, such as:Improving salespersons’ performance, by identifying causes of unsatisfactory performanceDeciding salary increments and incentive paymentsIdentifying salespeople for promotionDetermining training needsMotivating salespeople through recognition and rewardUnderstanding strengths and weaknesses of salespeopleProcedure for Evaluating and Controlling Salesforce PerformanceThe steps involved in the procedure are:Set policies on performance evaluation and controlDecide bases of salespersons’ performance evaluationEstablish performance standardsCompare actual performance with the standardsReview performance evaluation with salespeopleDecide sales management actions and controlWe shall describe above steps brieflySet Policies on Performance Evaluation & ControlMost companies establish basic policies. Examples are:Frequency of evaluation. Mostly once a year.Who conducts evaluation? Mainly immediate supervisorAssessment techniques to be used. E.G. Management by objectives (MBO), 360-degree feedbackSources of information. Sales analysis, new business reports, lost business reports, call plans, etcBases of salesforce evaluation. (next slide)Conducting performance review sessions with salespeopleDecide Bases for Salespersons’ Performance EvaluationA firm should decide which of the following bases / criteria it would use: (1) result / outcome based, (2) efforts / behavioural based, or (3) both results & efforts basedA company selects performance bases or criteria from a list of alternatives, some of them shown below:Quantitative results / outcome bases / criteriaQuantitative efforts / behavioural bases / criteriaQualitative efforts / behavioural bases / criteria Sales volume In value / unitsPercentage of quota by products & segments Accounts / customers New accounts nos. Lost accounts nos. Customer calls No. of calls per day No. of calls per customer Non-selling activities overdue payments collected No. of reports sent Personal skills Selling skills Planning ability Team player Personality & Attitudes Cooperation EnthusiasmEstablish Performance StandardsPerformance standards are also called sales goals, targets, sales quotas, sales objectivesPerformance standards for quantitative results are related to the company’s sales volume or market share goalsPerformance standards for efforts / behavioural criteria are difficult to setFor this, companies do “time and duty analysis” or use executive judgementPerformance standards should not be too high or too lowAfter establishing standards, salespeople must be informed Compare Actual Performance with StandardsSalesperson’s actual performance is measured and compared with the performance standardsFor this, sales managers use different methods or forms:Graphic rating scalesRankingBehaviourally anchored rating scale (BARS)Management by Objectives (MBO)Descriptive statementsCompanies combine some of the above methods for an effective evaluation systemReview Performance Evaluation with SalespeoplePerformance review / appraisal session is conducted, after evaluation of the salesperson’s performanceSales manager should first review high / good ratings, and then review other ratingsBoth should decide objectives / goals and action plan for future periodAfter the review, sales manager should write about performance evaluation & objectives for the futureGuidelines for reviewing performance of salespersonsFirst discuss performance standards / criteria / basesAsk the salesperson to review his performanceSales manager presents his viewsEstablish mutual agreement on the performanceDecide Sales Management Actions and ControlMany companies combine this step with the previous step – i.e. performance reviewDuring performance review meeting with salesperson, sales manager does the following:Identifies the problem areas. E.G. Sales quotas not achievedFinds causes. E.G. less sales calls, poor market coverage, or superior performance of competitorsDecides sales management actions E.G. train salesperson, redesign territories, or review company’s sales / marketing strategiesIf a salesperson’s performance is good, he / she should be rewarded and recognisedBusiness Ethics and Sales ManagementSales managers and salespeople have ethical responsibilitiesSome of the ethical situations are:Relations with the company. EGs. Expense statements, credit for damaged merchandiseRelations with customers. EGs. Gifts, false information to get business, customer entertainmentEthical guidelinesA code of ethics developed by the company would be effective if it is enforced by top managementSocial ResponsibilitiesCorporate social responsibility means distinguishing right from wrong and doing the rightSocial responsibility is the management’s responsibility to take decisions and actions for welfare and interests of society and the companyA company has following four responsibilities to its eight stakeholders: Customers, Community, Creditors, Government, Owners, Managers, Employees, and Suppliers, acronym: CCCGOMESEthical responsibilities. Deal with fairness, equity, impartialityLegal responsibilities. Follow laws and regulationsEconomic responsibilities. Produce and market goods / services that society wants, and make reasonable profitsVoluntary responsibilities. Make social (EG philanthropic) contributionsLegal Responsibilities and Sales ManagementLaws and regulations by local, state, or central governments have impact on sales managementPrice discrimination. As per MRTP act, 1969, seller should not discriminate prices among similar buyers (e.g. retailers)Price fixing. Under MRTP act, it is unlawful for suppliers to fix pricesConsumer protection. As per Consumer Protection Act, 1986, it is illegal to make false or misleading claims about products / servicesBribes. Payment of money or giving gifts to gain a customer is illegal under Indian Contracts Act 1872 and Sale of Goods act, 1930. Sales managers must take responsibility that laws are not violated Key LearningsSalesforce expenses include travel, meals, lodging, telephone, and customer entertainmentSalesforce expense plans consists of (1) salespeople paying all expenses, (2) company paying expenses partially, (3) company paying all expenses, (4) combination planSalesforce audit is done to access process adequacy, improve performance, and recommend changesFor evaluating effectiveness of a sales organisation, the company analyse sales, costs, profits, and productivitySales analysis is done at all levels in a sales organisation, for (a) evaluation and control, and (b) identifying problemsPurpose of marketing cost and profitability analysis is to measure profitability of company’s marketing unitsKey Learnings (Continued)Two approaches for profitability analysis are: full-cost and contributionMost commonly used productivity ratio in sales management is sales per salespersonMain purpose of performance evaluation of salespeople is to find how salespeople have performedSales managers have ethical, social, and legal responsibilitiesCorporate social responsibility is distinguishing right from wrong and doing the right