sales force management

sales force management

sales force management can be considered part of the promotion and place aspects of the firm s marketing mix customer product competitors collaborators segment position target differentiate place sales force management promotion context price company the 5 c s the marketing strategy the marketing mix aka the 4 p s

agenda process compensation structure skills

your task in 2000, fedex merged their traditional air shipping sales force with their newlyacquired ground shipping business (roadway packaging, or rps) instead of having two salespeople (one ground, one air) calling on each client, now we would have one salesperson selling both products to each customer. selling air shipping was very different as it had come with the fedex brand behind them while rps had to fight and claw for every sale in competition with ups and the post office. the question is how to now pay this new sales organization comprised of 1,500 former air salespeople and 900 ground salespeople, each of whom would now be asked to sell both ground and air.

the sales strategy drives outcomes via its impact on salesperson behaviors (i.e., the sales process) culture structure skills sales process sales outcome compensation plays a similar (and equallycritical role) as does the positioning buying marketing process strategy

sales process what do salespeople do? prospecting pre-approach approach presentation the first step in sales strategy is to define specifically the desired set of behaviors at each step handle objections closing follow-up

sales process using the funnel to manage and monitor the process prospecting pre-approach prospect approach presentation lead handle objections closing customer follow-up

the four questions of compensation plan design shape? metrics? power? total pay? what is the impact of sales effort? how rare are the sales skills needed?

the optimal power of the plan reflects a tradeoff between insurance and incentives travel machinery pharmaceuticals 100% salary ( low power ) real estate media financials services 100% commission ( high power ) insurance incentive how risky is the outcome? how cleanly is it measured? q?: at which end will people make more comp? 9 what is the expected change in the outcome if I work harder?

metrics vary from behavior-based to outcome-based behavior sales behavior is typically not easily observed option 1: manage behaviors option 2: pay on outcomes 10

sales is (of course) the most-common compensation metric Customer Satisfaction Account Retention Control of Sales Expenses Sales of New Products Mean Weight Percent Using Sales from New Customers Division Profits Overall Sales 0% 20% 40% 60% 80%

but most firms use some element of behavior management as well example: avaya coverage ratio: ratio of total dollars in the funnel to target it is a condition of employment at avaya that a ce has a 3.5 funnel coverage with respect to the future quarter charlie ill, avaya s sales vp funnel Distribution: stage 1: 5% stage 2: 17% stage 3: 47% stage 4: 14% stage 5: 17%

but most firms use some element of behavior management as well example: avaya backlog: closed, but not recognized, business upon entering quarter target = 50% days in: how long an opportunity has spent in a given stage <$500K >=$500K stage 1 14 days 14 days stage 2 30 days 45 days stage 3 45 days 70 days stage 4 30 days 60 days stage 5 14 days 14 days

compensation plans come in all shapes and sizes how many (if any) discrete cut points should the plan have? sales executives paid a straight salary financial advisors paid an increasing proportion of generated commissions salespeople earned discrete bonus for insta pak installations account reps earn bonuses for production above a specific goal

issue 1: different territories ed sells payroll processing services in manhattan (population 1.6mm in 23 square miles) how could the comp plan reflect these differences? ted sells payroll processing services in davenport, iowa (population 98,000 in 65 square miles)

issue 2: end-of-quarter decisions bella has had a great quarter, selling $500K in payroll services so far (well beyond her goal) how hard do they work during the last week of the quarter? how does the comp plan affect this? grace has had a sub-par quarter, selling $75K in payroll services so far (far short of her goal)

bonuses advantages compensation plan shapes generic benefits and drawbacks relatively easy to apply across heterogeneous territories; the quota level may serve as an effort-increasing goal disadvantages severe risk of gaming (note: true of any non-linear plan) have to figure out the goal straight commission advantage: no gaming disadvantage: relatively hard to apply across heterogeneous territories 17

the sales force structure defines what each salesperson is responsible for how many salespeople do we have? what support staff do we offer? technology sales support marketing support how are the salespeople organized? how many layers of management do we have?

common approach 1: geography-based structure benefits very simple Maryland customer California customer very efficient customer has a single contact point cogs sprockets cogs sprockets drawbacks no benefits of specialization Maryland Salesperson California Salesperson great deal of leeway for salespeople management oversight essential Firm 19

common approach 2: product-based structure benefits salespeople can focus and develop expertise potentially better integration with production important in contexts with high need for customization control problem is less difficult Maryland customer cogs Cogs Salesperson California customer sprockets Sprockets Salesperson drawbacks duplication of effort and cost coordination across product lines customer confusion Firm 20

the necessary skills of a salesperson vary greatly across context variables industrial consumer goods services goods personal history and weak weak strong family background marital/family status weak moderate strong sales aptitude strong moderate weak dominance weak weak moderate self esteem strong moderate moderate presentation skills strong moderate weak interpersonal skills moderate moderate weak ford et al: selecting successful salespeople: a meta-analysis of biographical and psychological selection criteria, in review of marketing, michael j. houston ed., 1988, pp. 90-131.

and depending on whom you re asking what makes for an (in)effective salesperson? top five reasons for salesperson failure: 1. poor listening skills 2. failure to concentrate on top priorities 3. lack of sufficient effort 4. inability to determine customer needs 5. lack of planning/preparation for sales presentation Mail survey of U.S. sales managers

are great salespeople made or born?

are great salespeople made or born? is this true more generally? key salesperson characteristics: aptitude: inherent ability (enduring personality traits, e.g.) personal characteristics: physical traits, experience, family, etc. skill: learned proficiency at performing job role perception: perceptions of responsibilities and expectations motivation: desire to work (both intrinsic and extrinsic) organizational and environmental factors (market size, company s position) question: which are most/least important predictors of success?

are great salespeople made or born? is this true more generally? meta-analysis of over 1,600 studies yielded the following ranking (correlations in parentheses) role perception (.294) skill (.268) motivation (.184) personal characteristics (.161) aptitude (.138) organizational and environmental factors (.104) great salespeople can be made! The determinants of salesperson performance: A meta analysis Gilbert A Churchill Jr; Neil M Ford; Steven W Hartley; Orville C Walker Jr JMR, Journal of Marketing Research (pre 1986); May 1985; pg. 103 25