Sales Force Management

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1 Churchill/Ford/Walker's Sales Force Management Tenth Edition Mark W. Johnston Crummer Graduate School of Business Rollins College Greg W. Marshall Crummer Graduate School of Business Rollins College draw Hill McGraw-Hill Irwin

2 Contents Chapter One Introduction to Sales Management in the Twenty-First Century 1 Change Is the Central Theme in Sales Management Today 1 Learning Objectives 3 Sales Management in the Twenty-First Century 3 Innovation Fuels Success in Selling Today 4 Sales Effectiveness Is Enhanced through Technology 5 Leadership Is a Key Component in Sales Management Success 7 Sales Management Is a Global Endeavor 8 Ethics Underlies All Selling and Sales Management Activities 8 What Is Involved in Sales Management 9 Selling Process 10 Sales Management Process 10 Environmental Factors Impact Success in Selling 11 External Environment 12 Economic Environment 12 Legal and Political Environment 14 Technological Environment 15 Social and Cultural Environment: Ethics 16 Natural Environment 18 Summary: Impact of the External Environment 19 Internal (Organizational) Environment 20 Goals, Objectives, and Culture 20 Human Resources 21 Financial Resources 21 Production and Supply Chain Capabilities 21 Service Capabilities 22 Research and Development (R&D) and Technological Capabilities 22 Impact of the Environment: The HP Experience 22 Summary 23 PART ONE FORMULATION OF A SALES PROGRAM 28 Chapter Two The Process of Selling and Buying 30 The Case for a Focus on the Sales Process 30 Learning Objectives 31 Drivers of Change in Selling and Sales Management 32 Overview of Selling as a Career 33 Why Sales Jobs Are So Rewarding 34 Key Success Factors in Selling 39 Selling Activities 42 Types of Selling Jobs 45 Selling in Business-to-Consumer versus Business-to- Business Markets 45 Classifying Types ofb2b Sales Jobs 46 Stages in the Selling Process 46 Prospecting for Customers 47 Opening the Relationship 48 Qualifying the Prospect 49 Presenting the Sales Message 49 Closing the Sale 50 Servicing the Account 51 Participants in the Organizational Buying Process The Buying Center 52 Selling Centers and Buying Centers 53 Organizational Buying Decision Stages 54 Stage One: Anticipation or Recognition of a Problem or Need 54 Stage Two: Determination and Description of the Characteristics and Quantity of the Needed Item(s) 56 Stage Three: Search for and Qualification of Potential Suppliers 56 Stage Four: Acquisition of Proposals or Bids 56 Stage Five: Evaluation of Offerings and Selection of Suppliers 56 Stage Six: Selection of an Order Routine 57 Stage Seven: Performance Evaluation and Feedback 58 XII

3 Contents xiii The Nature of Organizational Buying Situations 58 Summary 59 Chapter Three Linking Strategies and the Sales Role in the Era of Customer Relationship Management 64 The Importance of Integrating Sales with Other Business Functions 64 Learning Objectives 66 What Is Customer Relationship Management? 66 From Mass Marketing to One-to-One Marketing 68 CRMProcess.Cycle 70 Toward a Relationship-Based Enterprise 71 The Importance of Market Orientation 72 How Market Orientation Affects Performance 73 Internal Partnering to Create a Market Orientation 74 The Process of Strategy Development 74 Company Mission and Goals 74 SBU Strategy 76 Personal Selling's Role in Marketing Strategy 80 Role of the Relationship 80 Personal Selling in the Relationship Era 82 Stage One: Exploration 82 Stage Two: Expansion 84 Stage Three: Commitment 85 Personal Selling's Role in the Marketing Communication Mix 86 Company Resources, Goals, and Marketing Strategy 87 Characteristics of the Target Market 88 Product Characteristics 88 Distribution Practices 88 Pricing Policies 89 Computerized Ordering and Customer Alliances 89 Improving Customer Satisfaction and Loyalty through Feedback 90 Major Account Teams 91 Summary 92 Chapter Four Organizing the Sales Effort 97 Organize the Sales Force around Customers, Not Products 97 Learning Objectives 98 The Increasing Importance of Sales Organization Decisions 98 Purposes of Sales Organization 99 Division and Specialization of Labor 99 Stability and Continuity of Organizational Performance 100 Coordination and Integration 100 Horizontal Structure of the Sales Force 101 Deciding on a Company Sales Force or Independent Agents 101 Geographic Organization 105 Product Organization 107 Organization by Customer Types or Markets 108 Organization by Selling Function 109 The Role of Telemarketing 109 Organizing to Service National and Key Accounts 111 Team Selling 113 Multilevel Selling 114 Co-Marketing Alliances 114 Logistical Alliances and Computerized Ordering 115 Vertical Structure of the Sales Organization 116 Selling Responsibilities 117 Sales-Related Functions 117 The Impact of New Technologies 118 Staff Support and Outsourcing 118 Additional Sales Organizational Issues 119 Summary 120 Chapter Five The Strategic Role of Information in Sales Management 126 Putting Information Technology into Perspective 126 Learning Objectives 127 Using Information in Managerial Decision Making and Planning 128 Introduction to Market Opportunity Analysis 128 Methods of Sales Forecasting 129 Subjective Methods of Forecasting 130 Objective Methods of Forecasting 133 Choosing a Forecasting Method 137 Developing Territory Estimates 137

4 xiv Contents Purposes and Characteristics of Sales Quotas 139 Purposes of Quotas 139 Characteristics of a Good Quota 139 Setting Quotas 141 Types of Quotas 141 Quota Level 142 Determining Sales Force Size 143 Breakdown Method 144 Workload Method 144 Incremental Method 147 Designing Sales Territories 148 Stages in Sales Territory Design 148 Sales Analysis for Managerial Decision Making 156 Type of Evaluation System 156 Sources of Information for Sales Analysis 157 Type of Aggregation,of Information to Be Used in Sales Analysis 159 Illustration of a Hierarchical Sales Analysis 161 Summary 165 Comprehensive Cases for Part One 173 Case 1.1 The Valley Winery 174 Case 1.2 Health Care Office Solutions, Inc. 179 PART TWO IMPLEMENTATION OF THE SALES PROGRAM 182 Chapter Six Salesperson Performance: Behavior, Role Perceptions, and Satisfaction 184 The Changing Role of the Sellers 184 Learning Objectives 185 Understanding Salesperson Performance Why Is It Important for Sales Management? 186 The Model 187 The Role Perceptions Component 187 The Aptitude Component 188 The Skill-Level Component 188 The Motivation Component 189 The Personal, Organizational, and Environmental Variables Component 190 Rewards 193 Satisfaction 193 The Salesperson's Role Perceptions 195 Stages in Developing the Salesperson's Role 195 Stage 1: Role Partners Communicate Expectations 195 Stage 2: Salespeople Develop Perceptions 195 Stage 3: Salespeople Convert Perceptions into Behaviors 196 The Salesperson's Role is Vulnerable 197 Boundary Position 197 Large Role Set 198 Innovative Role 198 Role Conflict and Ambiguity 200 Common Expectations and Key Areas of Conflict and Ambiguity 200 Consequences of Conflict and Ambiguity 202 Managing Conflict and Ambiguity in a Salesperson 204 Role Accuracy 204 Nature of Role Accuracy 205 Summary 207 Chapter Seven Salesperson Performance: Motivating the Sales Force 214 Salesperson Motivators 214 Learning Objectives 216 The Psychological Process of Motivation 216 Major Components of the Model 217 Expectancies Perceived Links between Effort and Performance 217 Instrumentalities Perceived Links between Performance and Rewards 220 Valences for Rewards 222 Can the Motivation Model Predict Salesperson Effort and Performance? 223 The Impact of a Salesperson's Personal Characteristics on Motivation 224 Satisfaction 224 Demographic Characteristics 225 i'job Experience 225 "" Psychological Traits 226 Performance Attributions 227 Management Implications 228 Career Stages and Salesperson Motivation 228 Career Stages 228 The Problem of the Plateaued Salesperson 232 The Impact of Environmental Conditions on Motivation 235 The Impact of Organizational Variables on Motivation 235 Supervisory Variables and Leadership 236 Incentive and Compensation Policies 237 Summary 238

5 Contents xv Chapter Eight Personal Characteristics and Sales Aptitude: Criteria for Selecting Salespeople 244 The War for Talent 244 Learning Objectives 245 Are Good Salespeople Born or Made? The Determinants of Successful Sales Performance 246 A Review of Past Research 247 The Costs of Inappropriate Selection Standards 248 Characteristics of Successful Salespeople 249 Characteristics Sales Managers Look For 249 Research Concerning the Personal Characteristics of Successful Salespeople 250 Overview of Findings 251 Job-Specific Determinants of Good Sales Performance 259 Selling Different Types of Products and Services 259 Different Types of Sales Jobs 260 Implications for Sales Management 261 Summary 261 Chapter Nine Sales Force Recruitment and Selection 268 The Real Value of Hiring Good Employees 268 Learning Objectives 269 Recruitment and Selection Issues, 269 Who Is Responsible for Recruiting and Selecting Salespeople? 272 Job Analysis and Determination of Selection Criteria 273 Who Conducts the Analysis and Prepares the Description? 273 Content of the Job Description 274 Determining Job Qualifications and Selection Criteria 276 Methods for Deciding on Selection Criteria 276 Recruiting Applicants 277 External Sources 281 Selection Procedures 283 Application Blanks 284 Personal Interviews 285 Physical Examinations 287 Tests 287 Concerns about the Use of Tests 288 Guidelines for the Appropriate Use of Tests 289 Equal Employment Opportunity Requirements in Selecting Salespeople 289 Requirements for Tests 290 Requirements for Interviews and Application Blanks 290 Summary 291 Chapter Ten Sales Training: Objectives, Techniques, and Evaluation 297 Military Training and Sales Success 297 Learning Objectives 298 Issues in Sales Training 299 Objectives of Sales Training 300 Increase Productivity 300 Improve Morale 300 Lower Turnover 300 Improve Customer Relations 301 Improve Selling Skills 301 The Development of Sales Training Programs 302 Creating Credibility in Sales Training 303 Training New Sales Recruits 306 Training Experienced Sales Personnel 307 Sales Training Topics 308 Product Knowledge 309 Market/Industry Orientation 309 Company Orientation 310 Time and Territory Management 310 Legal/Ethical Issues 311 Technology 311 Specialized Training Topics 312 Sales Training Methods 313 On-the-Job Training 315 Classroom Training 316 Electronic Training Methods 316 Measuring the Costs and Benefits of Sales Training 317 Sales Training Costs 317 Measurement Criteria 318 Measuring Broad Benefits 319 Measuring Specific Benefits 319 Recent Trends in Sales Training Evaluation 320 Summary 321 Chapter Eleven Salesperson Compensation and Incentives 327 Characteristics of Great Sales Compensation Plans 327 Learning Objectives 329 Overview of Compensation and Incentives 329

6 xvi Contents Straight Salary, Straight Commission, and Combination Plans 332 Straight Salary 332 Straight Commission 333 Combination Plans 334 Sales Contests 337 Contest Objectives 338 Contest Themes 338 Probability of Winning 338 Types of Contest Rewards 338 Contest Promotion and Follow-through 339 Criticism of Sales Contests 339 Nonfmancial Rewards 340 Recognition Programs, 341 Expense Accounts 341 Direct Reimbursement Plans 342 Limited Reimbursement Plans 342 No Reimbursement Plans 343 Making Compensation and Incentive Programs Work 343 Assessing the Relationship Selling Objectives 343 Determining Which Aspects of Job Performance to Reward 345 Deciding on the Most Appropriate Mix and Level of Compensation 346 Dangers of Paying Salespeople Too Much 347 Dangers of Paying Salespeople Too Little 348 Summary 348 Comprehensive Cases for Part Two 355 Case 2.1 California Credit Life Insurance Group 356 Case 2.2 On-Time Package Delivery 364 PART THREE EVALUATION AND CONTROL OF THE SALES PROGRAM 370 Chapter Twelve Cost Analysis 372 Real Cost Analysis Leads to Real Benefits 372 Learning Objectives 373 Cost Analysis Development 375 Full Cost versus Contribution Margin 375 ABC Accounting 379 Procedure 380 The Process Illustrated 384 Direct Selling 387 Advertising 387 Warehousing and Shipping 389 Order Processing 389 Transportation 389 Promise and Problems 391 Return of Assets Managed 391 Summary 394 Chapter Thirteen Evaluating Salesperson Performance 403 The Case for a Focus on Sales Force Performance Management Systems 403 Learning Objectives 404 Performance versus Effectiveness 405 Objective Measures 407 Output Measures 408 Input Measures 408 Ratio Measures 410 Summary of Objective Measures 412 Subjective Measures 413 Forms Used for Subjective Measurement 414 Avoiding Errors in Performance Evaluation 419 Using a BARS System Degree Feedback in Performance Evaluation 422 Summary 424 Comprehensive Cases for Part Three 431 Case 3.1 Wentworth Industrial Cleaning Supplies 432 Case 3.2 Hanover-Bates Chemical Corporation 444 Endnotes 449 Case Index 466 Name Index 467 Subject Index 471

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