LUCAS LANGAT

CM/N/0053/1/09

ASSIGNMENT 1

SALES MANAGEMENT

SALES MANAGEMENT Sales management refers to the administration of the personal selling component of an organization's marketing program. It includes the planning, implementation, and control of sales programs, as well as recruiting, training, motivating, and evaluating members of the sales force. The fundamental role of the sales manager is to develop and administer a selling program that effectively contributes to the achievement of the goals of the overall organization. The term "sales manager" may be properly applied to several members of an organization, including marketing e!ecutives, managers of field sales forces, district and division managers, and product line sales administrators. This te!t emphasizes the role of managers that oversee a field sales force.

T"# $%&# %' S(&#S )(*(+#)#*T (lthough the role of sales management professionals is multidisciplinary, their primary responsibilities are ,-. Setting goals for a sales/force ,0. 1lanning, budgeting, and organizing a program to achieve those goals ,2. Implementing the program ,3. 4ontrolling and evaluating the results #ven when a sales force is already in place, the sales manager will likely view these responsibilities as an ongoing process necessary to adapt to both internal and e!ternal changes. +%(& S#TTI*+ To understand the role of sales managers in formulating goals, one must first comprehend their position within the organization. In fact, sales management is 5ust one facet of a company's overall marketing strategy. ( company's marketing program is represented by its marketing mi!, which encompasses strategies related to products, prices, promotion, and distribution. %b5ectives related to promotion are achieved through three supporting functions ,-. (dvertising which includes direct mail, radio, television, and print advertisements, among other media ,0. Sales promotion, such as contests and coupons ,2. 1ersonal selling The overall goals of the sales force manager are essentially mandated by the marketing mi!. The mi! coordinates ob5ectives between the ma5or components of the mi! within the conte!t of internal

constraints, such as available capital and production capacity. 'or e!ample, the overall corporate marketing strategy may dictate that the sales force needs to increase its share of the market by five percent over two years. It is the 5ob of the sales force manager, then, to figure out how to achieve that directive. The sales force manager, however, may also play an important role in developing the overall marketing mi! strategies that determine his ob5ectives. 'or e!ample, he may be in the best position to determine the specific needs of customers and to discern the potential of new and e!isting markets. %ne of the most critical duties of the sales manager is to accurately estimate the potential of the company's offerings. (n important distinction e!ists between market potential and sales potential. The former is the total e!pected sales of a given product or service for the entire industry in a specific market over a stated period of time. Sales potential refers to the share of a market potential that an individual company can reasonably e!pect to achieve. (ccording to Irwin, a sales forecast is an estimate of sales ,in dollars or product units. that an individual firm e!pects to make during a specified time period, in a stated market, and under a proposed marketing plan. #stimations of sales and market potential are often used to set ma5or organizational ob5ectives related to production, marketing, distribution, and other corporate functions, as well as to assist the sales manager in planning and implementing his overall sales strategy. *umerous sales forecasting tools and techni6ues, many of which are 6uite advanced, are available to help the sales manager determine potential and make forecasts. )a5or e!ternal factors influencing sales and market potential include industry conditions, such as stage of maturity7 market conditions and e!pectations7 general business and economic conditions7 and the regulatory environment. 1&(**I*+, 89:+#TI*+, (*: %$+(*I;I*+ (fter determining goals, the sales manager must develop a strategy to attain them. ( very basic decision is whether to hire a sales force or to simply contract with representatives outside of the organization. The latter strategy eliminates costs associated with hiring, training, and supervising workers, and it takes advantage of sales channels that have already been established by the independent representatives. %n the other hand, maintaining an internal sales force allows the manager to e!ert more control over the salespeople and to ensure that they are trained properly. 'urthermore, establishing an internal sale force provides the opportunity to hire ine!perienced representatives at a very low cost. The type of sales force developed depends on the financial priorities and constraints of the organization. If a manager decides to hire salespeople, he needs to determine the size of the force. This determination typically entails a compromise between the number of people needed to ade6uately service all potential customers and the resources made available by the company. %ne techni6ue sometimes used to determine size is the "work load" strategy, whereby the sum of e!isting and potential customers is multiplied by the ideal number of calls per customer. That sum is then multiplied by the preferred length of a sales call ,in hours.. *e!t, that figure is divided by the selling time available from one sales person. The final sum is theoretically the ideal sales force size. ( second techni6ue is the "incremental" strategy, which recognizes that the incremental increase in sales that results from each additional hire continually decreases. In other words sales people are gradually added until the cost of a new hire e!ceeds the benefit. %ther decisions facing a sales manager about hiring an internal sales force are what degree of e!perience to seek and how to balance 6uality and 6uantity. 8asically, the manager can either "make" or "buy" his

force. <oung hires, or those whom the company "makes," cost less over a long term and do not bring any bad sales habits with them that were learned in other companies. %n the other hand, the initial cost associated with e!perienced sales people is usually lower, and e!perienced employees can start producing results much more 6uickly. 'urthermore, if the manager elects to hire only the most 6ualified people, budgetary constraints may force him to leave some territories only partially covered, resulting in customer dissatisfaction and lost sales. (fter determining the composition of the sales force, the sales manager creates a budget, or a record of planned e!penses that is ,usually. prepared annually. The budget helps the manager decide how much money will be spent on personal selling and how that money will be allocated within the sales force. )a5or budgetary items include sales force salaries, commissions, and bonuses7 travel e!penses7 sales materials7 training7 clerical services7 and office rent and utilities. )any budgets are prepared by simply reviewing the previous year's budget and then making ad5ustments. ( more advanced techni6ue, however, is the percentage of sales method, which allocates funds based on a percentage of e!pected revenues. Typical percentages range from about two percent for heavy industries to as much as eight percent or more for consumer goods and computers. (fter a sales force strategy has been devised and a budget has been adopted, the sales manager should ideally have the opportunity to organize, or structure, the sales force. In general, the hierarchy at larger organizations includes a national or international sales manager, regional managers, district managers, and finally the sales force. Smaller companies may omit the regional, and even the district, management levels. Still, a number of organizational considerations must be addressed. 'or e!ample

Should the force emphasize product, geographic, or customer specialization= "ow centralized will the management be= "ow many layers of management are necessary=

The trend during the ->?@s and early ->>@s was toward flatter organizations, which possess fewer levels of management, and decentralized decision/making, which empowers workers to make decisions within their area of e!pertise. I)1&#)#*TI*+ (fter goal setting, planning, budgeting, and organizing, the sales force plan, budget, and structure must be implemented. Implementation entails activities related to staffing, designing territories, and allocating sales efforts. Staffing, the most significant of those three responsibilities, includes recruiting, training, compensating, and motivating sales people. 8efore sales managers can recruit workers to fill the 5obs, they must analyze each of the positions to be filled. This is often accomplished by sending an observer into the field. The observer records time spent talking to customers, traveling, attending meetings, and doing paperwork. The observer then reports the findings to the sales manager, who uses the information to draft a detailed 5ob description. (lso influencing the 5ob description will be several factors, chiefly the characteristics of the people on which the person will be calling. It is usually important that salespeople possess characteristics similar to those of the buyer, such as age and education.

The manager may seek candidates through advertising, college recruiting, company sources, and employment agencies. 4andidates are typically evaluated through personality tests, interviews, written applications, and background checks. $esearch has shown that the two most important personality traits that sales people can possess are empathy, which helps them relate to customers, and drive, which motivates them to satisfy personal needs for accomplishment. %ther factors of import include maturity, appearance, communication skills, and technical knowledge related to the product or industry. *egative traits include fear of re5ection, distaste for travel, self/consciousness, and interest in artistic or creative originality. (fter recruiting a suitable sales force, the manager must determine how much and what type of training to provide. )ost sales training emphasizes product, company, and industry knowledge. %nly about 0A percent of the average company training program, in fact, addresses personal selling techni6ues. 8ecause of the high cost, many firms try to reduce the amount of training. The average cost of training a person to sell industrial products, for e!ample, commonly e!ceeds B2@,@@@. Sales managers can achieve many benefits with competent training programs, however. 'or instance, research indicates that training reduces employee turnover, thereby lowering the effective cost of hiring new workers. +ood training can also improve customer relations, increase employee morale, and boost sales. 4ommon training methods include lectures, cases studies, role playing, demonstrations, on/the/5ob training, and self/study courses. (fter the sales force is in place, the manager must devise a means of compensating individuals. The main conflict that must be addressed is that between personal and company goals. The manager wants to provide sufficient incentives for salespeople but also must meet the division's or department's goals, such as controlling costs, boosting market share, or increasing cash flow. The ideal system motivates sales people to achieve both personal and company goals. +ood salespeople want to make money for themselves, however, a trait which often detracts from the firm's ob5ectives. )ost approaches to compensation utilize a combination of salary and commission or salary and bonus. (lthough financial rewards are the primary means of motivating workers, most sales organizations employ other motivational techni6ues. +ood sales managers recognize that sales people, by nature, have needs other than the basic physiological needs filled by money they want to feel like they are part of winning team, that their 5obs are secure, and that their efforts and contributions to the organization are recognized. )ethods of meeting those needs include contests, vacations, and other performance based prizes in addition to self/improvement benefits such as tuition for graduate school. (nother tool managers commonly use to stimulate their workers is 6uotas. Cuotas, which can be set for factors such as the number of calls made per day, e!penses consumed per month, or the number of new customers added annually, give salespeople a standard against which they can measure success. In addition to recruiting, training, and motivating a sales force to achieve the sales manager's goals, managers at most organizations must decide how to designate sales territories and allocate the efforts of the sales team. )any organizations, such as real estate and insurance companies, do not use territories, however. Territories are geographic areas such as cities, counties, or countries assigned to individual salespeople. The advantage of establishing territories is that it improves coverage of the market, reduces wasteful overlap of sales efforts, and allows each salesperson to define personal responsibility and 5udge individual success.

(llocating people to different territories is an important sales management task. Typically, the top few territories produce a disproportionately high sales volume. This occurs because managers usually create smaller areas for trainees, medium/sized territories for more e!perienced team members, and larger areas for senior sellers. ( drawback of that strategy, however, is that it becomes difficult to compare performance across territories. (n alternate approach is to divide regions by e!isting and potential base. ( number of computer programs e!ist to help sales managers effectively create territories according to their goals.

4%*T$%&&I*+ (*: #D(&9(TI*+ (fter setting goals, creating a plan, and setting the program into motion, the sales manager's responsibility becomes controlling and evaluating the program. :uring this stage, the sales manager compares the original goals and ob5ectives with the actual accomplishments of the sales force. The performance of each individual is compared with goals or 6uotas, looking at elements such as e!penses, sales volume, customer satisfaction, and cash flow. ( common model used to evaluate individual sales people considers four key measures the number of sales calls, the number of days worked, total sales in dollars, and the number of orders collected. The e6uation below can help to identify a deficiency in any of these areas (n important consideration for the sales manager is profitability. Indeed, simple sales figures may not reflect an accurate image of the performance of the overall sales force. The manager must dig deeper by analyzing e!penses, price/cutting initiatives, and long/term contracts with customers that will impact future income. (n in/depth analysis of these and related influences will help the manager to determine true performance based on profits. 'or use in future goal/setting and planning efforts, the manager may also evaluate sales trends by different factors, such as product line, volume, territory, and market. (fter the manager analyzes and evaluates the achievements of the sales force, that information is used to make corrections to the current strategy and sales program. In other words, the sales manager returns to the initial goal/setting stage. #*DI$%*)#*TS (*: ST$(T#+I#S The goals and plans adopted by the sales manager will be greatly influenced by the industry orientation, competitive position, and market strategy of the overall organization. It is the 5ob of sales managers, or people employed in sales/management/related 5obs, to ensure that their efforts coincide with those of upper/level management. The basic industry orientations are industrial goods, consumer durables, consumer nondurables, and services. 4ompanies or divisions that manufacture industrial goods or sell highly technical services tend to be heavily dependent on personal selling as a marketing tool. Sales managers in those organizations characteristically focus on customer service and education, and employ and train a relatively high/level sales force. Sales managers that sell consumer durables will likely integrate the efforts of their sales force into related advertising and promotional initiatives. Sales management efforts related to consumer

nondurables and consumer services will generally emphasize volume sales, a comparatively low/caliber sales force, and an emphasis on high/volume customers. )ichael 1orter's well/received book Competitive Strategy lists three common market approaches that determine sales management strategies low/cost supplier7 differentiation7 and niche. 4ompanies that adopt a low/cost supplier strategy are usually characterized by a vigorous pursuit of efficiency and cost controls. ( company that manufactures nails and screws would likely take this approach. They profit by offering a better value than their competitors, accumulating market share, and focusing on high/volume and fast inventory turn/over. Sales management efforts in this type of organization should generally stress the minimizing of e!pensesEby having sales people stay at budget hotels, for e!ampleEand appealing to customers on the basis of price. Sales people should be given an incentive to chase large, high/volume customers, and the sales force infrastructure should be designed to efficiently accommodate large order/ taking activities. 4ompanies that adhere to a differentiation strategy achieve market success by offering a uni6ue product or service. They often rely on brand loyalty or a patent protection to insulate them from competitors and, thus, are able to achieve higher/than/average profit margins. ( firm that sells proprietary pharmaceuticals would likely use this method. )anagement initiatives in this type of environment would necessitate selling techni6ues that stressed benefits, rather than price. They might also entail a focus on high customer service, e!tensive prospecting for new buyers, and chasing customers that were minimally sensitive to price. In addition, sales managers would be more apt to seek high/caliber sellers and to spend more money on training. 'irms that pursue a niche market strategy succeed by targeting a very narrow segment of a market and then dominating that segment. The company is able to overcome competitors by aggressively protecting its niche and orienting every action and decision toward the service of its select group. ( company that produced floor coverings only for e!tremely upscale commercial applications might select this approach. Sales managers in this type of organization would tend to emphasize e!tensive employee training or the hiring of industry e!perts. The overall sales program would be centered around customer service and benefits other than price. In addition to the three primary market strategies, $aymond )iles and 4harles Snow claim that most companies can be grouped into one of three classifications based on their product strategy prospector, defender, and analyzer. #ach of these product strategies influences the sales management role. 'or e!ample, prospector companies seek to bring new products to the market. Sales management techni6ues, therefore, tend to emphasize sales volume growth and market penetration through aggressive prospecting. In addition, sales people may have to devote more time to educating their customers about new products. :efender companies usually compete in more mature industries and offer established products. This type of firm is likely to practice a low/cost producer market strategy. The sales manager's primary ob5ective is to maintain the e!isting customer base, primarily through customer service and by aggressively responding to efforts by competitors to steal market share. 'inally, analyzer companies represent a mi! of prospector and defender strategies. They strive to enter high/growth markets while still retaining their position in mature segments. Thus, sales management strategies must encompass elements used by both prospector and defender firms.

$#+9&(TI%* 8esides markets and industries, another chief environmental influence on the sales management process is government regulation. Indeed, selling activities at companies are regulated by a multitude of state and federal laws designed to protect consumers, foster competitive markets, and discourage unfair business practices. 4hief among anti/trust provisions affecting sales managers is the $obinson/1atman (ct, which prohibits companies from engaging in price or service discrimination. In other words, a firm cannot offer special incentives to large customers based solely on volume, because such practices tend to hurt smaller suppliers. 4ompanies can give discounts to buyers, but only if those incentives are based on savings gleaned from manufacturing and distribution processes. Similarly, the Sherman (ct makes it illegal for a seller to force a buyer to purchase one product ,or service. in order to get the opportunity to purchase another product, a practice referred to as a "tying agreement." ( long/distance telephone company, for instance, cannot necessarily re6uire its customers to purchase its telephone e6uipment as a prere6uisite to buying its long/distance service. The Sherman (ct also regulates reciprocal dealing arrangements, whereby companies agree to buy products from each other. $eciprocal dealing is considered anticompetitive because large buyers and sellers tend to have an unfair advantage over their smaller competitors. (lso, several consumer protection regulations impact sales managers. The 'air 1ackaging and &abeling (ct of ->FF, for e!ample, restricts deceptive labeling, and the Truth in &ending (ct re6uires sellers to fully disclose all finance charges incorporated into consumer credit agreements. 4ooling/off laws, which commonly e!ist at the state level, allow buyers to cancel contracts made with door/to/door sellers within a certain time frame. (dditionally, the 'ederal Trade 4ommission ,'T4. re6uires door/to/door sellers who work for companies engaged in interstate trade to clearly announce their purpose when calling on prospects. Sales management can in ol e an! of t"e follo#ing acti ities$ ,-. formulation of sales strategy through development of account management policies, sales force compensation policies, sales revenue forecasts, and sales plan. ,0. implementation of sales strategy through selecting, training, motivating, and supporting the sales force, setting sales revenue targets. ,2. sales force management through development and implementation of sales performance, monitoring, and evaluation methods, and analysis of associated behavioral patterns and costs.