Post on 10-Apr-2018
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Compensating Sales
Force
Module - 2
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Compensation Plans - Objectives
Balancing the needs of personnel
Secure income and security
Desire for personal recognition and status
Reinforcement for doing good work
Managing effects of time
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Compensation Plans -CharacteristicsFairness to all
Flexibility
Provide incentive and motivation
Lead to direction of efforts towards company objectives
Ease of administration and comprehension
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Compensation Plans - Types
Straight Salary
Straight Commissions
Combination Salary Plans
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Compensation Plan - Designing
Determining specific objectives
Income & security
Equity
Flexibility
Economy
Establishing desired level of earnings
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Compensation Plan - Designing
Methods of payment
Salary
Commission
Bonus
Employee stock option
Specialize prizes
Drawing account
Special cash incentives
Non cash incentives
Fringe benefits
Sales force expenses
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Compensation Plan -ImplementationPre-testing
Periodic monitoring
Sales contest
Planning sales contests
Evaluating sales contest
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Sales Force Expenses
Expense plans
Beneficial to sales person
Beneficial to organization
Easy to administer
Easy to understand
Types of expense plans
Company pays all expenses
Sales person pays all expenses
Company partially pay expenses
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Fringe Benefits
Elements in Fringe Benefits
Social security
Pension and retirement program
Insurance
Holiday
Time-off with pay
Other benefits
Advantage of Fringe Benefits
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Motivating Sales Force
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Concept of Motivation
Motivation deals with the force within a person, orwhich acts on a person, to initiate desired behavior anddirects it towards the attainment of organizational goals
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Motivational Theories
Maslows Hierarchyof Needs
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Herzbergs Two-Factor Theory
Hygiene Factors
Working conditions
Job securitySalary
Company policies
Quality of technical supervision
Interpersonal relations
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Herzbergs Two-Factor Theory
Motivational Factors
Responsibility
The work itselfPromotion
Recognition
Achievement
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Goal Setting Theory
By Edwin Locke
To fulfill specific needs and aspirations setting of certaingoals
Setting higher goals produces higher outputSetting goals encourages to work persistently towardsachieving goals
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Expectancy Theory
By Victor Vroom
The perceived consequences of actions motivate anindividual
Motivation is a function of three factorsExpectations
Valence
Instrumentality
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Job Design Theory
These theories correlate motivation with job satisfaction
Job satisfaction
Feeling of pleasure that one derives from ones
experience in jobJob Enrichment
Job Rotation
Job Enlargement
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Motivation and Productivity of theSales ForceProductivity
The ratio of output to input and is represented in theform of the following equation
Productivity = Output
Input
Sales productivity = Sales revenues
Sales expenses
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Effects of Personal Characteristics onSales Force Motivation
Competitor
Achiever
Ego-driven
Service-oriented
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Sales Motivational Mix
Sales culture
Sales training
Leadership
Basic compensation
Special financial incentives
Non financial rewards
Performance evaluation
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Motivating the Sales Personnel atDifferent Stages of Their Career
Exploration
stage
Establishm
entsta
ge
Maintenanc e
stag
e
Disengagem
entst
age
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Time and TerritoryManagement
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Time Management and ItsImportanceBetter market coverage
Reduce selling costs
Improved customer services
More accurate evaluation of sales force personnel
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Territory Management and Its Importance
Benefits of Territory Management
Better customer coverage
Increased sales
Equitable rewards
Reduced traveling costs
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Territory Design - Criteria
Sufficient potential
Reasonable size
Adequate coverage
Minimum impediments (Less physical hurdles liketraffic and bridges)
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Territory Design - Methods
Build up Method
Assessing the potential or attractiveness of both currentand prospective customers
Breakdown Method
Incremental Method
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Developing territories - Procedures
Identify objectives and criteria for territory formation
Bases for developing territory
Geography
Service requirements
Potential
Workload
Assigning sales personnel territories
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Operating the Territory ManagementSystem
Routing
Scheduling
Territory coverage by sales personnel
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Sales Quota
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Sales Quota - Meaning
Quotas are quantitative sales goals assigned tosalespeople
A standard of measurement of performance in a salesorganization
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Sales Quotas - Objectives
To provide quantitative performance standard
To obtain tighter sales and expense control
To motivate desired performance
To use in connection with sales contests
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Sales Quotas - Importance
Provide performance targets
Provide standards
Provide control
Provide change of direction
Tool for motivating sales people
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Sales Quotas - Types
Sales volume quota
Profit quota
Expense quota
Activity quota
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Characteristics of A Good SalesQuotaFair
Challenging
Flexible
Easily understandable
Help marginal coordination
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Setting Sales Quota - Methods
Quota based on sales forecast and market potential
Quota based on sales forecast alone
Quota based on past experience
Quota based on judgment
Quota based on sales force compensation
Quota set by sales force themselves
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Sales Quotas - Administration
Minimizing acceptance problems
Briefing
Conference
Periodical meetings
Managing and controlling people through quota
Coaching
Non-monetary incentives
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Sales Quotas - Limitations
Time consuming process
Reduce risk taking among salespersons
Sometime give birth to unethical practices
Difficulty in comprehending if complicated statisticalcalculations have been used
Focusing on attaining sales volumes at the cost ofignoring important selling activities
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Estimating Market Potential &
Forecasting Sales
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Analyzing Market Potential
Ability to Buy
Willingness to Buy
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Sources of Data
Primary data sources
Secondary data sources
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Sales Forecasting Method
Qualitative Methods
User Expectations
Sales Force Composite
Jury of Executive Opinion
Delphi Technique
Market Test
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Sales Forecasting Method
Quantitative Methods
Time Series Analysis
Moving Average
Exponential Smoothing
Regression and Correlation Analysis
Multiple Regression Model
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Selecting a Forecasting Method
Accuracy
Cost
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Types of Data Available
Requirements of the Software
Experience of the Company
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Criteria for Effective Forecasting
Accuracy
Plausibility
Durability
Flexibility
Availability of Statistical Indexes
Organizational Participation
Demand patterns in the Market for the Product
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Difficulties Associated withForecasting
Lack of Adequate Sales History
Lack of Time, Money and Qualified Personnel
Changing Customer Attitude
Fashions and Fads
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Evaluating Sales ForcePerformance
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Determinants of Sales ForcePerformance
Internal Factors
Motivation
Skill Level
Job Satisfaction
Role Perception
Personal Factors
Ego Derive
Empathy
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Determinants of Sales ForcePerformance
External Factors
Environmental Factors
Organizational Factors
Sales Management Function
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Performance Evaluation
Sales Force Evaluation Process
Determine Factors that Influence Sales Force Performance
Select the Criteria for Sales Force Evaluation
Establish the Performance Standard
Compare Sales Force Performance
Performance Review and Feedback
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Performance Evaluation
Purpose and reason
To be aware of company objectives
To improve motivation skills
To appraise the past performance
To develop a sales plan to increase future sales
Who should evaluate
When to evaluate
f i f l i
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Information Source for Evaluation
Company records
Reports from salespersons
Customers
Managers field visit
Managers personal insight
Other sources
C i i f h l i f S l
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Criteria for the Evaluation of SalesForce Performance
Qualitative Criteria
Sales Skills
Territory Management
Personality
C i i f h E l i f S l
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Criteria for the Evaluation of SalesForce Performance Quantitative Criteria Sales volume Average calls per day
Sales orders Ratio of selling costs to sales Gross profit obtained from new
customer
E bli hi P f S d d
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Establishing Performance Standards
Quantity standards
Quality standards
Time-based standards
Cost-based standards
M h d f S l F E l i
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Method of Sales Force Evaluation
EssaysRating scales
Forced Choice Method
Ranking
New Methods of Evaluation
Critical incident appraisal
Work standard method
Management by objectives
Behavioral anchored rating scale
Family measures as a method of sales force performance evaluation
M it i d R i i S l F
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Monitoring and Reviewing Sales ForcePerformance
Sales force performance can be measured with the helpof
Sales reports
Invoices
Order forms
Accounting records
Direct interaction
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Sales and Cost Analysis
S l C t l N t
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Sales Control - Nature
Objectives of Sales ControlPerformance measurement
Problem identification
Identifying opportunities
Sales Control Process
Setting goals
Comparing actual with targets
Taking necessary measures
S l A l i
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Sales Analysis
Elements of Sales Analysis
Purpose of evaluation
Comparison standard
Reporting and control system
Hierarchical sales analysis
S l A l i St
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Sales Analysis - Steps
Determining the Sources of SalesInformation
Collection of Sales Data
Processing of Sales Data
Studying the Results
S l A l i V i ti
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Sales Analysis - Variations
VariationsSales analysis by region
Sales analysis by sales representatives
Sales analysis by customersSales analysis by product line
Sales analysis by distribution channels
Sales analysis by unit sold
Problems in Sales Analysis
S l A dit
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Sales Audit
Elements of Sales AuditSales management environment
Sales management planning system
Sales management organization evaluation
Sales management functions
M k ti C t A l i
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Marketing Cost Analysis
Types of Costsq Natural and functional cost
q Direct and indirect cost
q Fixed and variable cost
Procedure for Cost Analysis
Spread of natural cost
Functional cost allocation
Determining the efficiency and profitability of sales units
Initiation of action
Marketing A dit
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Marketing Audit
Procedure for Marketing AuditSetting objectives
Collecting data
Report preparation and presentation
Components of Marketing Audit
Marketing environment audit
Marketing strategy audit
Marketing organization audit
Marketing system audit
Marketing productivity audit
Marketing function audit
Profitability Analysis
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Profitability Analysis
Break-even analysisCapital budgeting tools