Module - 2

Compensating Sales
Force
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
Compensation Plans -
Characteristics
Fairness to all
Flexibility
Provide incentive and motivation
Lead to direction of efforts towards company objectives
Ease of administration and comprehension
Compensation Plans - Types
Straight Salary

Straight Commissions

Combination Salary Plans

Compensation Plan - Designing
Determining specific objectives
Income & security
Equity
Flexibility
Economy
Establishing desired level of earnings
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
Compensation Plan -
Implementation
Pre-testing

Periodic monitoring

Sales contest
Planning sales contests
Evaluating sales contest
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
Fringe Benefits
Elements in Fringe Benefits
Social security
Pension and retirement program
Insurance
Holiday
Time-off with pay
Other benefits
Advantage of Fringe Benefits
Motivating Sales Force
Concept of Motivation

Motivation deals with the force within a person, or

which acts on a person, to initiate desired behavior and
directs it towards the attainment of organizational goals
Motivational Theories

Maslow’s Hierarchy
of Needs
Herzberg’s Two-Factor Theory

Hygiene Factors
Working conditions
Job security
Salary
Company policies
Quality of technical supervision
Interpersonal relations
Herzberg’s Two-Factor Theory

Motivational Factors
Responsibility
The work itself
Promotion
Recognition
Achievement
Goal Setting Theory

By Edwin Locke
To fulfill specific needs and aspirations setting of certain
goals
Setting higher goals produces higher output
Setting goals encourages to work persistently towards
achieving goals
Expectancy Theory
By Victor Vroom
The perceived consequences of actions motivate an
individual
Motivation is a function of three factors
Expectations
Valence
Instrumentality
Job Design Theory

These theories correlate motivation with job satisfaction

Job satisfaction
Feeling of pleasure that one derives from one’s
experience in job
Job Enrichment
Job Rotation
Job Enlargement
Motivation and Productivity of the
Sales Force
Productivity
The ratio of output to input and is represented in the
form of the following equation

Productivity = Output
Input

Sales productivity = Sales revenues

Sales expenses
Effects of Personal Characteristics on
Sales Force Motivation
Competitor

Achiever

Ego-driven

Service-oriented
Sales Motivational Mix

Sales culture
Sales training
Leadership
Basic compensation
Special financial incentives
Non financial rewards
Performance evaluation
 Exploration
stage

Establishment stage

Maintenance stage

Disengagement stage
Different Stages of Their Career
Motivating the Sales Personnel
at
Time and Territory
Management
Time Management and Its
Importance
Better market coverage
Reduce selling costs
Improved customer services
More accurate evaluation of sales force personnel
Territory Management and Its Importance

Benefits of Territory Management

Better customer coverage
Increased sales
Equitable rewards
Reduced traveling costs
Territory Design - Criteria
Sufficient potential

Reasonable size

Adequate coverage

Minimum impediments (Less physical hurdles like

traffic and bridges)
Territory Design - Methods
Build up Method
Assessing the potential or attractiveness of both current
and prospective customers
Breakdown Method

Incremental Method
Developing territories - Procedures
Identify objectives and criteria for territory formation
Bases for developing territory
Geography
Service requirements
Potential
Workload
Assigning sales personnel territories
Operating the Territory Management
System
Routing
Scheduling
Territory coverage by sales personnel
Sales Quota
Sales Quota - Meaning
Quotas are quantitative sales goals assigned to
salespeople
A standard of measurement of performance in a sales
organization
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
Sales Quotas - Importance
Provide performance targets
Provide standards
Provide control
Provide change of direction
Tool for motivating sales people
Sales Quotas - Types
Sales volume quota
Profit quota
Expense quota
Activity quota
Characteristics of A Good Sales
Quota
Fair
Challenging
Flexible
Easily understandable
Help marginal coordination
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
Sales Quotas - Administration
Minimizing acceptance problems
Briefing
Conference
Periodical meetings
Managing and controlling people through quota
Coaching
Non-monetary incentives
Sales Quotas - Limitations
Time consuming process
Reduce risk taking among salespersons
Sometime give birth to unethical practices
Difficulty in comprehending if complicated statistical
calculations have been used
Focusing on attaining sales volumes at the cost of
ignoring important selling activities
Estimating Market Potential &
Forecasting Sales
Analyzing Market Potential
Ability to Buy
Willingness to Buy
Sources of Data
Primary data sources
Secondary data sources
Sales Forecasting Method
Qualitative Methods
User Expectations
Sales Force Composite
Jury of Executive Opinion
Delphi Technique
Market Test
Sales Forecasting Method
Quantitative Methods
Time Series Analysis
Moving Average
Exponential Smoothing
Regression and Correlation Analysis
Multiple Regression Model
Selecting a Forecasting Method
Accuracy
Cost
Types of Data Available
Requirements of the Software
Experience of the Company
Criteria for Effective Forecasting
Accuracy
Plausibility
Durability
Flexibility
Availability of Statistical Indexes
Organizational Participation
Demand patterns in the Market for the Product
Difficulties Associated with
Forecasting
Lack of Adequate Sales History
Lack of Time, Money and Qualified Personnel
Changing Customer Attitude
Fashions and Fads
Evaluating Sales Force
Performance
Determinants of Sales Force
Performance
Internal Factors
Motivation
Skill Level
Job Satisfaction
Role Perception
Personal Factors
Ego Derive
Empathy
Determinants of Sales Force
Performance
External Factors
Environmental Factors
Organizational Factors
Sales Management Function
 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

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
Information Source for Evaluation
Company records
Reports from salespersons
Customers
Manager’s field visit
Manager’s personal insight
Other sources
Criteria for the Evaluation of Sales
Force Performance
Qualitative Criteria
Sales Skills
Territory Management
Personality
Criteria for the Evaluation of Sales
Force Performance
 Quantitative Criteria
 Sales volume

 Average calls per day

 Sales orders

 Ratio of selling costs to sales

 Gross profit obtained from new

customer
Establishing Performance Standards
Quantity standards
Quality standards
Time-based standards
Cost-based standards
Method of Sales Force Evaluation
Essays
Rating 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
Monitoring and Reviewing Sales Force
Performance
Sales force performance can be measured with the help
of…
Sales reports
Invoices
Order forms
Accounting records
Direct interaction
Sales and Cost Analysis
Sales Control - Nature
Objectives of Sales Control
Performance measurement
Problem identification
Identifying opportunities

Sales Control Process

Setting goals
Comparing actual with targets
Taking necessary measures
Sales Analysis
Elements of Sales Analysis
Purpose of evaluation
Comparison standard
Reporting and control system
Hierarchical sales analysis
Sales Analysis - Steps

Determining the Sources of Sales

Information

Collection of Sales Data

Processing of Sales Data

Studying the Results

Sales Analysis - Variations
Variations
Sales analysis by region
Sales analysis by sales representatives
Sales analysis by customers
Sales analysis by product line
Sales analysis by distribution channels
Sales analysis by unit sold

Problems in Sales Analysis

Sales Audit
Elements of Sales Audit
Sales management environment
Sales management planning system
Sales management organization evaluation
Sales management functions
Marketing Cost Analysis
Types of Costs
q 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 Audit
Procedure for Marketing Audit
Setting 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
Break-even analysis
Capital budgeting tools