Sales. Management Shaping Future Sales Leaders JOHN F. TANNER JR. Baylor University EARL D. HONEYCUTT JR. Elon University ROBERT C.

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1 Sales Management Shaping Future Sales Leaders JOHN F. TANNER JR. Baylor University EARL D. HONEYCUTT JR. Elon University ROBERT C. ERFFMEYER University of Wisconsin - Eau Claire Pearson Education International

2 Contents Preface xix Acknowledgments xxi About the Authors xxiv PART ONE Strategic Planning "xxvi Chapter 1 Introduction to Sales Management 2 From Sales Rep to Sales Manager 4 Establishing the Parameters of the Firm's Strategy: The Mission Statement 5 The Strategy Hierarchy 5 What Markets Do We Serve with What Products? 7 What Types of Relationships Do We Form and with Whom? 8 GLOBAL SALES MANAGEMENT Going Global to Achieve Growth SELF-ASSESSMENT LIBRARY 12 What Level of Investment Will Be Required, and How Will We Allocate the Needed Resources? 10 What Are the Detailed Objectives and Action Plans? 11 Selling Approaches 12 The Selling Process 13 Prospecting 14 Pre-Approach 14 Approach 14 Needs Identification 14 Presentation 15 Handling Objections 16 Closing the Sale 16 Implementation/Follow-up 17 The Selling Process versus the Selling Approach 17 Sales Leaders 17 The Sales Executive 18 ETHICS IN SALES MANAGEMENT Maintaining NCR's Ethical Sales Culture 19 The Field Sales Manager 20 Summary 21 Key Terms 21 Questions and Problems 22 Role Play: T&G Supply 22 CASELET1.1 Killebrew Manufacturing 23 CASELET 1.2 Morton's Ice House 23 References 23 IX

3 CONTENTS Chapter 2 The Sales Function and Multi-Sales Channels 24 The Sales Function 26 Selling in a Multi-Channel Environment 28 M GLOBAL SALES MANAGEMENT Outsourcing to India 29 To Outsource or Not to Outsource the Sales Function 30 Types of Outsourced Salespeople 30 Types of Company-Employed Salespeople 31 Aligning the Organization 32 Achieving Alignment 34 SELF-ASSESSMENT LIBRARY 35 ETHICS IN SALES MANAGEMENT Stuck in AOHell 36 Summary 37 Key Terms 37 Questions and Problems 38 Role Play: Mechanix Illustrated 38 Sales Manager's Workshop: Promedia Technology (PMT) 39 CASELET 2.1 Hereford Promotions 40 CASELET 2.2 Marchetti Machines: One Big Happy Family 41 Reference 42 PART TWO Sales Leadership 43 Chapter 3 Leadership and the Sales Executive 44 What Is Leadership? 46 Leading versus Managing 46 Understanding Leadership: An Historical Perspective 47 The Behavioral Approach: "This is How a Leader Behaves" 49 B GLOBAL SALES MANAGEMENT Marketplace 50 SELF-ASSESSMENT LIBRARY 51 Identifying Leaders in a Global Situational Approaches "Assess the Situation, then Adjust Behavior to It" 52 Contemporary Perspectives of Leadership: "Motivate Your Followers Through Leadership" 53 Emerging Leadership Concepts: "Develop Your Followers" 54 ETHICS IN SALES MANAGEMENT Ethical Leadership at Ken Vance Motors 55 Leadership Challenges for the Sales Executive 56 Summary 57 Key Terms 58 Questions and Problems 58 Role Play: Jackson Kramer Clothiers 58 CASELET 3.1 "I Never Thought About It" 59 CASELET 3.2 "Coach" Charlie Hustle 60 References 60 Chapter 4 Ethics, the Law, and Sales Leadership 62 Approaches to Ethics 65 The Golden Rule 65

4 CONTENTS XI SELF-ASSESSMENT LIBRARY 66 The Conventionalist Approach 66 The Protestant Ethic 67 The Market Imperative 67 The Libertine Ethic 67 The Utilitarian Ethic 68 The Salesperson as a Boundary Spanner 68 ETHICS IN SALES MANAGEMENT Done Right 69 Common Ethical Issues Facing Salespeople 70 Creating an Ethical Sales Climate 72 GLOBAL SALES MANAGEMENT The Caux Round Table 74 Sales-Related Laws 76 Laws for Sales Managers 79 Summary 80 Key Terms 81 Questions and Problems 81 Role Play: Magnum Performance 83 CASELET 4.1 Patman Paper Co. 83 CASELET 4.2 Callahan Car Parts 84 References 84 PART THREE Analyzing Customers and Markets 87 Chapter 5 Business-to-Business (B2B) Sales and Customer Relationship Management 88 Understanding B2B Purchasing Decisions 90 The Buyer's Decision-Making Process 90 Organizational Buying Situations 90 Understanding the Buyer's Criteria 92 Buying Center, or Group, Purchases 92 Team Selling and Multi-Level Selling 94 SELF-ASSESSMENT LIBRARY 95 B2B Customer Relationship Management 96 TECHNOLOGY IN SALES MANAGEMENT Technology Can Help Ensure a Firm's Sales Are Profitable 97 The Nature of B2B Relationships 98 GLOBAL SALES MANAGEMENT Forming Business Relationships in Other Cultures 100 Customer Lifetime Value (CLV) Strategies 100 The Stages of B2B Customer Relationship Management 102 Maximizing the Buyer's Value 102 Risk and the Organizational Buyer 103 Important Salesperson Behaviors 104 Why Business Relationships End 104 Summary 105 Key Terms 106 Questions and Problems 106

5 XII CONTENTS Role Play: Managing a Sales Team at Alamance Associates 107 Sales Manager's Workshop: Adjusting the Territory Sizes within a Sales District 108 CASELET 5.1 Managing Buying Dynamics at Hughes Aircraft 108 CASELET 5.2 Choosing a CRM System for Burlington Mechanical Solutions 109 References 110 Chapter 6 Leveraging Information Technologies 112 Commonly Used Technology 114 Sales Management Software 115 Knowledge Management, Proposal Writing, and Pricing Software 115 Sales Force Automation Systems 116 Customer Relationship Management Software 118 GLOBAL SALES MANAGEMENT Global Issues in Sales Technology 119 The Challenges of Implementing CRM and SFA Systems 124 O SELF-ASSESSMENT LIBRARY 125 Salesperson/Sales Manager Issues 125 Encouraging Salespeople to Use Technology Effectively 125 ETHICS IN SALES MANAGEMENT Ensuring Salespeople Derive the Benefits of CRM Systems 127 Summary 128 Key Terms 128 Questions and Problems 129 Role Play: Blackburg Technologies 129 Sales Manager's Workshop: Promedia Technology: Familiarizing Yourself with Aplicor 130 CASELET 6.1 Frisco Solutions 130 CASELET 6.2 Zeron Corporation 131 References 131 PART FOUR Designing and Developing the Sales Force 133 Chapter 7 Designing and Organizing the Sales Force 134 How a Firm's Goals Affect the Design of Its Sales Force 136 Organizing the Members of the Firm's Sales Force 137 The Size of the Sales Force 137 Specialists versus Generalists 139 Geographical, Product, and Market Structures 140 Key Account Structures 143 GLOBAL SALES MANAGEMENT Sales Structures in Global Markets 144 D SELF-ASSESSMENT LIBRARY 145 Telemarketing and Computerized Sales Structures 146 GLOBAL SALES MANAGEMENT Some Offshore Call Centers Go Back Home 147 Reporting Relationships within a Firm's Sales Force 149 Span of Control 149 Adding Independent Sales Reps to the Sales Structure 150 ETHICS IN SALES MANAGEMENT Ethical Dilemmas with Partners 152 Company Salesperson or Sales Agent? 152

6 CONTENTS XIII Summary 154 Key Terms 154 Questions and Problems 154 Role Play: Structuring the Sales Effort at Green River Software 155 CASELET 7.1 Jefferson Pilot Reorganizes Its Sales Force 156 CASELET 7.2 IMC Considers Offshoring Its Call Center 157 References 157 Appendix 7A Computing the Point When It Is Time To Switch From a Company Salesperson To a Sales Agent 159 Chapter 8 Recruiting and Selecting the Right Salespeople 160 Successful Hiring Requires Sales Managers to Follow a Process 162 Planning to Hire 162 Calculating the Turnover Rate 163 Conducting a Job Analysis 164 Writing a Job Description 165 Finding and Recruiting Applicants 166 Recruiting Internal Applicants 166 External Applicants 167 ETHICS IN SALES MANAGEMENT When Should a Sales Manager Raid Her Competitors'Sales Force? 167 Selection Procedures 170 Application Forms 171 SELF-ASSESSMENT LIBRARY 173 The Personal Interview 174 Background Verification 177 Physical Exam 177 Making the Job Offer 177 Transitioning New Hires 178 Why a Diverse Sales Force Is Important 179 Avoiding Common Hiring Mistakes 180 GLOBAL SALES MANAGEMENT Who Should You Hire to Represent Your Company Abroad? 181 Evaluating the Success of the Firm's Sales Force Recruiting and Selection Efforts 182 Summary 183 Key Terms 183 Questions and Problems 183 Role Play: WRT Plans for Salesperson Interviews 184 CASELET 8.1 Southeastern Industrial 185 CASELET 8.2 Harmony International 185 References 186 Chapter 9 Training and Developing the Sales Force 188 How Important Is Sales Training? 190 The Training Process 193 Identifying the Firm's Sales Training Needs 193 GLOBAL SALES MANAGEMENT The Challenges of Training a Global Sales Force 196

7 XIV CONTENTS D SELF-ASSESSMENT LIBRARY 198 Designing and Developing the Sales Training Program 198 ETHICS IN SALES MANAGEMENT Can You Teach Sales Ethics? 199 Delivering the Training 205 Assessing the Firm's Training Efforts 206 Completing the Sales Training Cycle 208 Summary 210 Key Terms 211 Questions and Problems 211 Role Play: Home Fire Lights 211 Sales Manager's Workshop: Identifying Training Needs 212 CASELET 9.1 Justifying the Cost of a Firm's Sales Training 212 CASELET 9.2 Good, Good Enough, or Not Good Enough? 213 References 214 PART FIVE Process Management 217 Chapter 10 Supervising, Managing, and Leading Salespeople Individually and in Teams 218 Supervising 220 Managing 221 Sources of Power 222 ETHICS IN SALES MANAGEMENT What Are the Traits of a Bad Leader? 224 The Up-Close Perspective: Becoming the Boss 225 The Sales Representative's Perspective: What It Takes to Be a Good Sales Manager 226 Leading 227 A New School of Managerial Thought? 227 What Leadership Competencies Do Sales Managers Need? 229 Coaching 229 Mentoring 230 The Ability to Organize and Work Effectively with Teams 231 D SELF-ASSESSMENT LIBRARY 231 Being a Team Member 232 The Future of Sales Management 233 GLOBAL SALES MANAGEMENT Developing Global Leaders 233 Summary 234 Questions and Problems 235 Key Terms 235 Role Play: Outside Escapes 236 CASELET 10.1 Friend or Mentor? Deciding When to Take Action 236 CASELET 10.2 Teamwork? 237 References 238 Chapter 11 Setting Goals and Managing the Sales Force's Performance 240 Why Are Sales Goals Important to an Organization? 242

8 CONTENTS XV Using Goals to Guide and Manage the Performance of a Firm's Sales Force 243 GLOBAL SALES MANAGEMENT Goals Are Goals, Right? Not Quite. 244 Different Types of Goals or Quotas 244 Choosing the Right Metrics to Track 248 Choosing the Right Time Period to Track 248 D SELF-ASSESSMENT LIBRARY 248 What About Almost Meeting a Goal? 249 Should Salespeople be Involved in Setting Their Own Goals? 249 When is a Sale a Sale? 249 Should Everyone Achieve Their Sales Goals? 250 Do Goals Ever Get Changed or Altered? 250 What Happens When Salespeople Do Not Achieve Their Sales Goals? 251 The Process of Setting Good Goals 251 ETHICS IN SALES MANAGEMENT When Do Difficult Goals Become Too Difficult? 252 Summary 253 Key Terms 254 Questions and Problems 254 Role Play: Oval Track Promotions 255 Sales Manager's Workshop: Setting Threshold, Actual, and Stretch Goals 256 CASELET 11.1 All in a Day's Work 256 CASELET 11.2 Sandwiched In 257 References 257 Chapter 12 Motivating and Rewarding Salespeople 260 What Motivates Salespeople? 262 D SELF-ASSESSMENT LIBRARY 263 Generational Motivational Issues 264 Matures 266 Baby Boomers 266 Generation X'ers 266 Millennial 268 The Dos and Don'ts of Motivating Your Sales Representatives 268 Financial and Nonfinancial Rewards 269 GLOBAL SALES MANAGEMENT "We're All In It for the Money, Right?" 270 The Components of a Reward Program 270 Compensation 272 ETHICS IN SALES MANAGEMENT What Do You Do If Your Company's Compensation System Encourages Unethical Behavior? 276 Benefits 279 Work-Life Rewards 279 Recognition Programs 280 Expense Accounts 282 Personal Development and Career Opportunities 282 Summary 283 Key Terms 284

9 XVI CONTENTS Questions and Problems 285 Role Play: BiolDs 286 CASELET 12.1 Adjusting Your Compensation Plan to Motivate Your Sales Representatives 287 CASELET 12.2 Which Is Better? A Market Share-Based Incentive System or a Revenue-Based Incentive System? 288 References 289 PART SIX Measurement, Analysis, and Knowledge Management 291 Chapter 13 Turning Customer Information Into Sales Knowledge 292 Knowledge Generated by the Firm's Sales Force 294 Sales Forecasting 297 Estimating Market Potential 299 ETHICS IN SALES MANAGEMENT 300 Forecasting Methods 301 The Limitations of Forecasting 306 SELF-ASSESSMENT LIBRARY 306 GLOBAL SALES MANAGEMENT Forecasting or Fortune Telling? 307 Guidelines for Forecasting 308 Summary 309 Key Terms 310 Questions and Problems 310 Sales Manager's Workshop: Making Forecasts 311 CASELET 13.1 Englander Container 312 CASELET 13.2 Freud Testing Services 313 Chapter 14 Assessing the Performance of the Sales Force and the People Who Comprise It 314 Evaluation Helps the Sales Manager Know What Is Working and Why 316 Evaluating the Performance of the Sales Force as a Whole 317 Sales Analysis 317 Cost Analysis 319 Profit Analysis 321 Ratio Measures for Evaluating the Sales Force 321 Relating the Performance of the Sales Force to the Firm's Salespeople 323 Evaluating Individual Sales Representatives 323 Leveraging Technology to Manage Sales Rep Performance 324 Input Measures 328 Outcome Measures 329 Profitability Measures 330 Ratio Measures for Performance Appraisals 331 The Four-Factor Model of Evaluation 333 Qualitative Performance Measures 333 GLOBAL SALES MANAGEMENT Evaluating Salespeople Working Overseas 335

10 CONTENTS XVII The Problem of Evaluation Bias 336 Informal Evaluations 336 Reducing Sales Management Errors in Performance Evaluations 337 D SELF-ASSESSMENT LIBRARY 337 What Happens When Salespeople Don't Achieve Their Sales Goals? 338 Developing and Reallocating Salespeople's Skills and Efforts 338 Modifying the Performance Setting 338 Summary 339 Key Terms 339 Questions and Problems 340 Role Play: Johnson Controls Considers Changing Its Assessment Criteria 340 Sales Manager's Workshop: Promedia Technology (PMT) Analyzing the Performance of Your Sales Representatives 341 CASELET 14.1 "Happy Hannah": Did the Sales Reps Meet Their Goals? 341 CASELET 14.2 Ligon Industrial 342 References 343 Chapter 15 Internal and External Cultural Forces That Affect a Firm's Sales Performance 344 How the Corporate Culture of a Firm Affects Its Sales Force 346 The Firm's Marketplace Orientation 346 Low- versus High-Performance Cultures 348 Achieving Internal Alignment 349 Misalignment and Entropy 350 ETHICS IN SALES MANAGEMENT What Constitutes a Bribe? 351 Sales Managers as Culture Creators 351 How External Cultures Affect a Firm's Sales Force, 353 The Different Levels of Culture 353 The Components of Culture 355 Communication Style 355 Religion 357 Educational Levels 357 Aesthetics 357 Social Organizations 358 Technology 358 Time 358 Values and Norms 359 Managing the Global Sales Force 360 Designing the Global Sales Force 360 Selecting Sales Personnel 361 D SELF-ASSESSMENT LIBRARY 361 Training Global Salespeople 362 Motivating Global Sales Personnel 362 Compensating Global Sales Personnel 363 Evaluating Global Sales Personnel 363 Changing Demographics and Diversity in the Sales Force 363 The Benefits of Embracing Diversity 364

11 XVIII CONTENTS Summary 365 Key Terms 366 Questions and Problems 366 Role Play: Expatriate Pay and Benefits at RPG, Inc. 367 CASELET 15.1 Long Island Manufacturing 368 CASELET 15.2 China Enterprises N.A. 368 References 369 PART SEVEN Case Study 1 Case Study 2 Case Study 3 Case Study 4 Case Study 5 Case Study 6 Case Study 7 Case Study 8 Case Study 9 Case Study 10 Case Study 11 Cases 373 The Plantation Planning, Setting Goals, and Team Selling 374 Lexington Industries Conducting Business Ethically in the Pacific Rim 380 The San Francisco Giants A CRM Case Analysis 382 TIP Financial Services Corporation Managing a Field Sales Force 386 Wellco Distributors Considering a Diversity Program 391 Pacific Medical Supply Company Hiring, Motivating, and Retaining Good Salespeople 394 Southeastern Sales Associations Evaluating and Coaching Salespeople to Improve Their Performance 399 Afgar Corporation Managing Multi-channel Sales 401 Freedom Telecom Setting New Sales Goals to Turn the Sales Force Around 406 The Sarasota Journal Inevitable Change and the Restructuring of the Sales Force 412 Concord and Associates Evaluating a Sales Territory 417 Case Study 12 Force 421 Name Index 424 Subject Index 427 Cannon Associates Achieving Internal Alignment among Your Old and New Sales