Unit
– 2: Management of Sales force
Role of a sales
manager
Sales manager occupies middle level position and is
influenced by the expectations from both the levels externally and internally.
They need to perform other functions of marketing too along with sales
management functions which includes planning, directing, controlling, organizing,
recruiting, selecting, training and motivating, allocating resources and
territories, routing and scheduling etc.
a) Forecasts
sales in the role of a sales forecaster.
b) Devices
strategies as a strategic planner.
c) Observes
the behavior of prospective and existing customers in order to plan future
strategies as an observer of buying behavior.
d) He
is a role model for the sales personnel as a super sales person Role of a sales
manager.
e) Analyses
the cost and profit involved in segments as a cost and profit analyst Plays the
role of communicator internally and externally Role of a sales manager.
Functions of a sales
manager:
a) Hiring:
right people and giving careful job description
b) Training:
Formal / Informal, techniques, simple issues to handling objections
c) Exhibit:
Training results – No longer an ROI
d) Coaching:
observing, correcting, make sales person identify the problem ending up with a
solution, follow up and remedial measures
e) Motivating:
Setting targets and tracking the results: new accounts, amount to be generated,
ratio of sales per customer etc. .
f) Additional
targets for the prospecting efforts.
g) Setting
realistic and achievable targets and publicizing on achievement of targets
h) Recognizing
& rewarding performance: tangible incentives (trophy / extra leave / paid vacation
/ memberships etc.) or public appreciation at sales meeting
i)
Providing leads and sales support: hurdles of
sales people are to be cleared (lack of secretarial support / sales aids etc) .
j)
Continuous development of new businesses,
identify leads make the sales task easier for his team
k) Organizing
sales effort: ensures that sales people plan their calls in advance and follow
a systematic process of call reporting and filing expense reports. By
organizing sales efforts of sales peoples their efficiency in meeting targets
can be increased.
l)
Conducting sales meetings: prime responsibility
as it works as great morale booster, Frequency depends on the requirements.
m) Agenda
to be sent before hand to ensure participants come prepared.
n) Review
of organizational, individual sales performance, recognize and reward excellent
performers,
o) Organizing
guest lectures (motivational) .
p) Ensure
that all the issues and problems are resolved by the end of the meeting.
q) Some
times sales meetings become ineffective, so the sales manager needs to ensure
that such things do not happen.
r) Allocation
of scarce resources: aid of sophisticated technology can be taken e.g. general
mills uses “what – if” analysis Responsibilities of a sales manager.
Role of a sales executive
It is a multi faceted job with a variety of roles to be
played. They are
a) A
Persuader
b) A service
provider
c) An
information gatherer and reporter
d) An
advocate
e) A traveler
f) A
coordinator & scheduler
g) A problem
definer
h) A customer
ego builder
i)
A display arranger for wholesalers and retailers
j)
A merchandiser who gives customized products
to industrial customers
k) An
ombudsman who acts as customer's representative when the former faces any
problem Interacts with several role partners from production worker to CEO
Links 4 groups of people they are, own sales team, customers, other departments
and other sales persons.
Fulfilling the demands of all the above mentioned groups is needed
but, often expectations of one group may be in conflict with that of the other
group. And the sales person needs to balance all of them. With the advances in
technology their role extended to business strategy too, where establishment of
mutually beneficial relationship is needed with important customers E.g.
P&G
Functions
of a sales executive/Person
a) Identify
potential customers from currently available data bases like yellow pages.
b) Identifying
prospective accounts and deciding upon the priority and frequency of making
calls.
c) Deciding
upon the selling approach (presentation)
d) Administering
the sales order (deliver in time)
e) Service
provider (installation / warranty problems)
f) Information
gathering and reporting relevant data
g) Skill up
gradation by attending sales trainings and trade shows
h) Administrative
responsibilities like attending sales meetings and conferences, fill in call
and expense reports etc.
MANAGEMENT OF SALES FORCE
Sales management in a business organization has come to be
recognized as the primary and most significant factor in the success of any
business enterprise. This has created new avenues and responsibilities for
sales executives. They are required to participate in the preparation of
information which is important in key marketing decision e.g. budgeting, sales
quota, sales territories etc. Moreover, they are required to participate in
decision-making relating to product marketing channels and distribution
policies, promotion, pricing etc. There is now greater need for the sales
executive to have a broader outlook and more alertness to face the challenge of
the vast changing markets and their buyers.
According to the American Management Association’s Definition
Committee, sales management is “the planning, direction and control of personal
selling, including recruiting, selecting, equipping, assigning, routing
supervising, paying and motivating as these tasks apply to the personal sales
force.” Thus sales management means management of sales force. However, sales
management is not confined to the personal related tasks only (although this is
the primary task), but it has to build formal and informal organizational
structure for effective communication within the department itself and with
other departments as well. Sales management is the key contact with customers,
dealers and retailers. It has to maintain an effective system of distribution
also.
To be effective, a sales manager must understand customers,
appreciate the role of the sales persons and have the respect of the sales
force. Sales force management starts with a qualified sales manager. It is not
easy to find a right person for this job. In many organizations, the common
practice, when a sales management position becomes available, is to reward the
most productive sales person with promotion. This is done with the assumption
that, as a manager, an effective sales person will be able to impart the
necessary wisdom to make others equally successful.
Management of sales
force consists of six steps:
a)
Recruitment
of Sales Personnel.
b)
Selection
of Sales Personnel.
c)
Training
of Sales Personnel.
d)
Motivation
of Sales Personnel.
e)
Compensation
of Sales Personnel.
f)
Controlling
of Sales Personnel.
Recruitment of Sales
Personnel: Recruitment is the process of locating and attracting job
application. Recruiting a new sales force is an important aspect of the sales
manager’s job and part of sales planning. Recruitment includes all activities
involved in securing individuals who will apply for the job. Recruitment
involves identification of the potential sales persons and attracting them to
the company. Management must be aware of the best sources for sales recruits.
One of the greatest challenge being faced by sales management today is to
convince the qualified candidates that selling is an attractive professional
career field. Sales management must strive to attract and retain the qualified
personnel for the various selling jobs.
The sales executive should prepare the job description before
recruiting the new sales force. A systematic job analysis and job description
provides the focal point for the hiring process.The sales job description
should cover the following components:
a)
Title of the job.
b)
Duties and responsibilities expected from the
new sales persons.
c)
Technical requirements.
d)
Experience and Qualification.
e)
Reporting methods.
f)
Territory to be covered.
g)
Degree of authority
Job description acts as a blue print for the personal
specifications which describe the type of applicant the company is looking for.
A detailed job description will save both the company and job applicants’ time
and money. Some applicants will eliminate themselves if the job description and
their own expectations do not coincide. A comprehensive job description also
provides the sales executive with a good understanding of what to look for in
an application. This saves time in preparing for interviews and often results
in more organized interviews.
Sources of sales
Recruits: Many sources for sales recruits exist. Some frequently used
recruiting sources are being discussed:
1. Current Employees: Employees within the
company should not be overlooked as potential sales recruits. Those already
working in manufacturing, maintenance or warehouse job may have latent sales
latent. The employees are well acquainted with the products and company’s
policies. Their values fit with the company culture. The company also knows the
candidates much more intimately that any outsider or external candidate.
Further hiring sales persons from within the company can also be a great morale
booster.
2. Referrals: A referral is a
recommendation by one individual that another may be hired for a position. Most
referrals come from someone who works for the company. They know the job
requirements and the recruit. Referrals are preferred sources of sales recruits
because chances of such recommended candidates to fit within the company
culture are pretty good.
3. Educational Institutions: All types of
institutions for higher training – colleges, universities, business schools
etc. – are fertile source of sales recruits. This is a very cost effective
method of recruiting because college campuses provide large number of
individuals who are educated and looking for jobs. To stimulate student’s
interest in sales opportunities, many companies place recruiting ads in college
newspapers and other college media. They also offer internships or part time
jobs in selling to prospective students.
4. Suppliers and Customers: Company’s
distributors, dealers or customers may provide potential candidates looking for
sales career. If the sales persons of suppliers and customers and dissatisfied
with their current jobs, they can always offer themselves before the recruiters
as the potential salesman.
5. Competitors: Some of the best
candidates may be there working for competitors. These people can be contacted
at conventions, trade shows and customers locations. Having competitors
salesperson in our company has the advantage that they require less training.
Being already in field sales, they have a knowledge of the company’s products,
the over all industry and the customer base.
6. Internet: Many companies are using
Internet Recruiting Sites to fill sales positions. The largest such site is
Monster.Com, a non-profit recruitment and human resource database for jobs.
Many voluntary applicants submit their resumes on website. Here the company has
to put significant efforts in sorting out large number of applications to find
those who qualify for the job.
7. Advertisements: Advertisements placed
in newspapers, professional news letters and trade journals may produce many
qualifies sales applicants. Advertisement in trade and professional
publications should usually be located in their employment sections. Sales
recruitment ads must be appealing and informative. The body of ad should
include information about the company, the nature of the job, the specific
qualifications required, the amount of compensations offered and any
opportunity for advancement.
8. Employment Agencies: Employment
agencies provide bio-data of potential candidates for a fee. Many agencies
specialize in sales jobs and render a valuable recruiting service. Normally,
these agencies screen applicants for their suitability to various levels of
sales position. If the employment agency is carefully selected by the company
and goods long term relationships are established with it, it pays the
recruiters by getting the most potential candidates.
9. Professional and Trade Associations:
Technical, trade and professional associations usually maintain informal
employment listings for their members. They also publish and distribute
listings of job opportunities. Their data profile can be a potential source of
recruitment.
10. Job fairs and seminars: Job fairs and
seminars are organized and sponsored by chambers of commerce, government
agencies, professional organizations and civic groups. They provide a large
number of initial contacts at a very little cost. Interested candidates are
provided with general and specific job information and are screened for further
consideration. The more serious candidates express their interest in the job
through their questions and are likely to pursue the opportunity further.
Selection of Sales
Personnel
Recruitment and selection are closely related terms. Yet,
there is sea of difference between the two. Recruitment is the process to find
out potential candidates and encourage them to apply for jobs. On the other
hand, selection is the process of choosing the required candidate out of the
large reserviour provided by recruitment. Selection is the process of offering
jobs to one or more candidates from among those who have applied for jobs in
the organization. Selection is the process of weeding out or rejecting the misfits.
Thus recruitment is positive in its approach while selection is negative.
Recruitment builds the reserviour of potential candidates and the selection
matches the main specifications with job specifications.
Good selection is vital to the firm. Good sales personnel
bring revenues for the company. Selecting sales personnel is the most important
managerial activity in any organization. The selection process should be
strategically integrated with all aspects of sales force management. Selection
system for sales personnel range from simple one-step system consisting of
nothing more than an informal personal interview, to complex multiple-step
systems incorporating diverse mechanism to gather information about the
potential of the candidates. Each company designs its selection system to fit
its own information needs and to meet its own budgetary limitations.
Selection Process
Selection process involves several steps to be followed in a
sequence. As the applicant passes through each successive step, the chances of
his selection become brighter. But the applicant must be aware of this fact
that he can be rejected at any stage. From the highest step of the ladder, he
can fall down in the rejection sea. The various steps in the selection process:
1. Application Blank and Resume: The
application blank or resume is an important source of information about the
candidate’s background and qualifications. It enables sales manager to review
the applicant’s background without being influenced by the individual’s
appearance or personality. It also provides insights to the sales managers, to
prepare for the personal interviews.
2. Preliminary Interview: Preliminary
interview is conducted to eliminate obviously unqualified applicants to save
the time of both the interviewers and applicants. The basic purpose of
preliminary interview is to weed out those applicants whose qualifications do
not meet the job’s basic requirements. This can be done by briefly describing
the job and by asking each applicant a few pertinent questions. Such interviews
are often handled by personnel specialists and higher level sales executives
enter the selection process only after the initial screening.
3. Selection Interview: After candidates
have progressed through the preliminary selection steps, they are interviewed
in depth. Interview is conducted to judge an individual as to his ability in
oral communication, his attitude toward selling and life in general, his
personal impact upon other, his personal appearance and manners etc. The
interviewer should review the completed application blank before the interview
and refrains from asking same questions already answered in the resume. The
interviewer should begin interview by asking questions on the candidate’s
family and educational background and subjects about which people talk freely.
Then he should go ahead by judging his intelligence, education and experience
to do the job. There are several techniques used for selection of a candidate
at the time of interviews. The most common are:
a) Background Interview: Hence the
interviewer asks the questions like the education, work experience, interest
and outside activities of the applicant.
b) Job-Question Interview: It involves
posing a job problem to the applicant and asking him how it should be handled.
c) Stress Interview: Stress is placed on
the applicant through criticism, interruptions or silence. Then the reaction of
applicant is studied by the interviewer to determine how the applicant respond
to the stress on the job. The interviewer must be experienced and well prepared
in advance to get the maximum results out of the interview.
4. References: References provide
information about the applicant not available from other sources. References
are usually checked while the application form is being processed and before
the final interview takes place. The information provided by application form
can be verified by checking the applicant’s references. References check may
also provide some indication of the candidate’s future sales performance. Reference
checks also have public relations value. They indicate that a company has a
sincere interest in picking up right people for job openings. The company’s
name becomes familiar to key persons in the community. References from teacher
and former employees are generally more helpful that other types of references.
5. Psychological Testing: A psychological
test is designed to measure such skills and abilities in a sales person as are
found to be essential for successful job performance. It is an attempt to measure
the candidate’s behaviour. Psychological testing is considered to be a
representative of the person’s past behaviour and a valid predictor of future
employment behaviour. Following tests are used by sales executives while
selecting the prospective sales persons:
a) Intelligence Tests: To determine the
reasoning, thinking and understanding power of sales persons, certain types of
intelligence tests (like speed of learning, fluency of ideas, verbal skills and
accuracy of memory etc.) are used by the executives.
b) Aptitude Tests: Aptitude tests judge
the interest and desire of the applicant to succeed in selling. These tests
measure whether or not an individual has the capacity or latent ability to
learn a given selling job quickly and efficiently.
c) Interest Tests: Interest tests
determine whether a person is willing to do a job or not. An applicant who has
little interest in selling as a career can not be expected to perform up to the
potential.
d) Stimulation Tests: A stimulation
exercise is a test which duplicates many of the operations and problems
confronting the sales job.
6. Physical Examination: Since good health
is important to a sales person’s success, most companies require physical
examination to be conducted for the sales recruits before offering them jobs.
Sales persons often travel for long periods of time, make numerous calls and
may be required to perform stressful physical work. Physical examination test
reveals whether or not a candidate possesses the required stamina, strength and
tolerance needed under hard working conditions. The basic purpose of a physical
examination is to place selected candidates on jobs which they can handle
without any delay on health grounds. Many companies also require physical
examinations because the insurance companies handling their group insurance
programmes offer lower rates of premium if such examination are performed.
7. Job Offer: Once the candidate passes
through all the steps in the selection system, the company must offer him a
job. The applicant’s goals and ambitions must match with the present and future
opportunities and rewards offered by the job and the company. When the job
offer is made, it is wise to review the details like compensation, benefits,
company vehicles etc,. as well as the job’s starting date, time, place and
training program schedule.
Training of Sales
Personnel
The purpose of sales training is to achieve improved job
performance. In the absence of training, job performance improves with
experience. Training substitutes for job experience to enable trained sales
personnel to achieve high job performance faster. Virtually, all companies put
new and inexperienced sales people through an orientation towards sales
training program. Even experienced sales people need continual training to
improve their selling skills, learn about new products and improve their time
and territory sales management practices. There are two distinct forms of sales
training: formal and informal. Formal sales training involves carefully planned
programs complete with training schedules, lesson plans, visual aids and other
teaching devices. Informal sales training involves continual professional
development of sales people. Sales persons are guided on their daily activities
and advised to improve their selling skills.
Objectives of Sales
Training
Both new and experienced sales people must be trained in
order to develop right work habits. If sales recruits are trained properly,
they learn the right work habits and patterns, at the right time and from the
right learning sources. Effective training serves number of objectives:
a) It
motivates salespersons to develop their skills and raise their morale.
b) It
makes salespersons more adaptable and creative and enables them to meet
changing competitive conditions.
c) It
improves salespersons’ relationships with the customers by showing them the
right way to do business.
d) It
reduces the cost of supervision and controlling sales activities. Well trained
sales persons require less attention from their executives.
e) It
helps in increasing sales revenue.
f) It
reduces high turnover of sales people.
Training Techniques
Since sales people have varied educational backgrounds,
experience levels, learning abilities and so forth, they have different
training needs. Different training techniques can be adopted to meet the
special purposes and applications. A combination of training techniques can
also be used.
Following are the
commonly adopted training tools:
1. Lectures: A lecture is a formal verbal
presentation of information to be trainees by expert company executives or
professional lecturers. It is very effective in transmitting straight factual
information. It is economical in terms of time required to cover a given topic.
The version of lecture increases attention, retention and comprehension if
supported by demonstrations, visual aids projectors, screens etc. To get better
results out of lecture method, the lecture must be prepared, planned and
rehearsed.
2. Demonstrations: Demonstrations become
essential while introducing new products or new selling techniques. Physical
characteristics of the product are described to gain attention and to arouse
desire for the product being offered. To be more effective, demonstration aids,
like booklets, flip charts, slides, moving, product samples etc. can be adopted
by the trainers.
3. Discussions: Group discussions and
panel discussions can be arranged for the trainees. Discussions should be
thoroughly planned to ensure due success. Group discussions involve 15-25
persons coming together to exchange their ideas, pool their experiences and
work out solutions to the common problems. As far as possible, the attendance
to group discussions should be voluntary and only experienced sales personnel
should be allowed. In a panel discussions, there will be a leader and 4-6
salesmen who follow planned discussions of a sales problem in response to
questions set by the leaders. The leaders presents the sales problem, calls
upon each member to comment. Then he closes the discussion and summarizes the
views of the panel.
4. Role Playing: Role playing is an
excellent method of training a group of salespersons. In role playing, a
realistic situation is stated and several trainees play out the buyer and
salesmen roles in the situation, other trainees, trainers and sales executives
observe the role playing session and give their comments and suggestions at the
end. Here trainees get better understanding of the dynamic of a sales
situation. Those p-laying roles must become actively and emotionally identifies
with the characters they portray and audience interest must be maintained
throughout. The free-wheeling nature of role playing is conductive to generate
new ideas and approaches.
5. Visual Aids: Learners retain more when
they both see and hear instead of hearing only. Various visual aids are
available to the sales executives to train their sales persons. They include
films, tapes, flip charts, closed circuit and playback television, personal
computers overhead slide projectors etc. Visual aids also add colour, motion and
drama to the training sessions. The message can be rechecked and re-enforced by
the trainees.
6. Video-Conferences: The use of high
technology provides time saving and reduced selling expenses techniques like
video-conferences. It enables participants of one location to interact with the
participants of other locations. Video conferences combine the advance of
telephone and tele-communication technologies. It is the latest and innovative
training technique which allows interaction between trainees and trainers, both
working at different destinations. Video-conferencing is also known as
“business TV” (BTV) and does improved transmission of views at lower prices.
Contents of Good Sales
Training Programme
The contents of sales training programme are derived from the
training needs of the sales persons. The training program of sales persons must
cover all key aspects of the sales person’s job, products to be sold, market to
be covered and the selling policies of the company. A comprehensive training
programme aims at giving knowledge about the products, about the market, about
the selling techniques and about the company.
1) Knowledge of Products: Product
knowledge is almost inevitable to any training programme. New sales persons
must know enough about the products, their uses and applications to serve
customer’s information needs. Product knowledge also builds self-confidence and
enthusiasm of the salesperson. The product knowledge covers general information
about the product, its physical dimensions, product performance and after-sale
services.
2) Knowledge of Market: The new sales
person must know who the customers are, their locations, their motives and
buying habits, the particular products in which they are interested etc. He
needs to have demographic profile of the consumers along with psychological,
sociological and economic factors influencing such markets. He also needs to
have clear-cut picture about the strengths and weaknesses of this competitors.
3) Knowledge of Selling Techniques: The
sales personnel need basic instructions in how to sell. Training fills the gaps
of inexperience. To meet the challenges of every changing line of sales, the
sales persons must get training about the various selling techniques he might
use.
4) Knowledge of the Company: Knowledge
about the company is a must. The sales person must know about the past history,
current affairs, structural patterns, procedures of sales activity,
sales-distribution, redressal of customer’s grievances, sales promotion
techniques etc. to project the right image about the company to the prospective
customers.
Motivation of Sales
Personnel
Sales people, especially field sales forces, require high
degree of motivation. Motivation is goal-oriented bahaviour fulfilling certain
needs or desires. Motivation is the force within us that directs our behaviour.
Sales personnel’s require motivational help from management as individuals and
as group members to reach and maintain acceptable performance levels.
Consequently, management faces a challenge in motivating sales people. People
differ in what motivates them and the motivations change over a person’s life.
The motivational needs of different sales persons may be different. A your
sales person is more likely to be motivated by money, while an older
salesperson may be more interested in status and recognition.
To motivate sales personnel, a sales executive is expected to
understand the needs and emotions of his sales force: Why do they work? What do
they want to get from their work? What are their attitudes towards the company?
And so forth. Motivation involves providing sales personnel with incentives to
influence their motives and enable them to contribute their best.
Need for Motivation
The need for motivating sales persons arise from a variety of
reasons. These are:
1. The Inherent Nature of Sales Job: All
sales jobs are a succession of ups and downs. They interact with many pleasant
and courteous people as well as rude and unpleasant personalities. They spend
considerable time away from their families. These conditions cause sales
persons to become discouraged, to achieve low performance levels or even to
seek non selling positions. Hence there is a need for motivation.
2. Role Conflicts: As members of sales
force, they have divergent interests. They have different abilities and
perceptions towards the company, the sales management positions and the
customers. To reconcile different rules, the sales personnel play towards the
customers, the sales management and the company a strong motivation becomes
essential.
3. Tendency towards Apathy: The sales
persons who cover the same territory and same customers may loose interest and
enthusiasm after few-years. Gradually, their sales calls degenerate into
routine order-taking. So they need to be motivated for creative selling.
4. Group Identity: In some cases, sales
persons work alone and there is lack of team spirit, which is very much
required for success. So to improve the entire group’s performance, sales
people must be motivated to develop and maintain team-spirit.
What Motivates Sales
Force
To gear up the productive effort and enthusiasm, the
motivational urges behind the sales persons must be identified. The world-side
studies have been conducted to reveal the following most significant motives:
a) Recognition and Honour Awards: Salesmen,
like any other human beings, seek commendation and recognition for their
achievements. Plaques, certificates or awards can be used to recognize the
accomplishment levels of sales persons. The policy for awards must be
constructively framed. If too many people receive them, the awards lose their
value, if too few receive them, the awards may be viewed too hard to achieve.
The awards should be publicized and presented in public ceremonies, to get more
motivational effects.
b) Fair Pay-Packet: Money is often
considered as an effective incentive for sales people. Surveys have shown that
sales people prefer pay raises and cash incentives over any other type of
motivational program. Fair pay-packet is a dominant motive, because every sales
person is to earn a decent living for himself and his dependents. His
pay-packet must be comparable with his colleagues in his own organization and
the competitive organizations.
c) Opportunity for Advancement: Promotion
and high status can be another source of motivation. Ambitious and efficient
sales persons give top priority to promotion. Promotions fulfil their
accomplishment needs and add to their salary and job security. A company that
fails to provide opportunity for advancement will be responsible for high
sales-force turnover.
d) Job Enrichment: Increase in
responsibility as well as variety is known as job enrichment. Salespersons
thrive on challenge. Challenge can be given by assigning them more
responsibility, authority and control over their activities. Further, most
sales people like to do variety in the job-related tasks. They find bored in
doing same things again and again. Varying sales jobs can provide them stimulus
for increased levels of motivation.
e) Social Acceptance: Every human being
has social and emotional feeling of belongingness to the organization. He wants
to have the satisfaction of being accepted as a member of sales team and sales
organization. His active participation, his voice in company’s affairs, his
cooperation in matters of mutual interest give him the motivation to continue
with selling career.
f) Desire to Excel: Desire to excel
implies increasing sales volume, cutting costs and improving profitability of
the organization. Salesmen must find their jobs as creative, gainful and
respectful. The strong desire of excelling better then others in performance
and achievement is a big motivational tool to the salespersons.
Compensation of Sales
Personnel
Designing and administering an effective sales compensation
plan is a big part of sales manager’s job. Establishing a compensation system
calls for decisions concerning the level of compensation and the method of
compensation. No compensation plan is said to be satisfactory in absolute terms
as it involves conflicting objectives of the pay-masters and pay-receivers. An
ideal compensation plan must reconcile these conflicting objectives. It should
try to meet the expectations and aspirations of the sales-force on the one hand
and the overall objectives of the sales organization, on the other. Sales-force
compensation stands for monetary and non-monetary rewards given by the organization
to its sales-force in return for the services rendered. Though, compensation
stands for contractual payments, there can be non-contractual and adhoc
payments also.
Objectives of
Compensation Plans: A compensation plan for the sales persons serves the
following objectives:
1) To motivate sales persons: Compensation
plans are designed to motivate sales persons to perform better. Companies want
to encourage sales persons to reach and exceed their goals. The companies
reward them by offering various monetary and non-monetary incentives so that
they become contended or satisfied with their jobs.
2) To correlate efforts and results: The
results should commensurate with the efforts. Correlating efforts and results
with rewards is an ideal form of compensation plan. But it is hard to achieve
in real life. We all know the situations where seemingly little efforts has
brought big results and consequently big awards. While in reverse, a sales
person may work very hard but get few results and therefore little rewards. So
equating efforts with results should be a social objective for any compensation
plan.
3) To have longing loyalty: Good
compensation plans attract loyal, trust-worthy and dependable sales force to
serve the organization for longer time. They nourish and flourish the selling
house by being life time associated with the company. Only satisfactory
compensation plants can retain the competent staff for life time.
4) To have sound employer-employee relations:
Brickering, misunderstandings and drags arise mostly due to money matters. The
sales force will be more satisfied when they get adequate monetary and
non-monetary incentives. A sound compensation plan must reconcile the
conflicting interests of management (to pay less and thereby increasing
profits) and sales force (by getting more to be retained and effective).
5) To control sales person’s activities: A
good compensation plan can act an unseen supervisor of the sales force. Sales
persons can cover such varied tasks as full-time selling, missionary work etc.
if they are satisfied with their compensation. Satisfied sales people can put
more balancing selling efforts which can enhance their productivity.
6) To provide customer satisfaction: A
good compensation plan is one that motivates sales people to treat customers
properly, thus providing customer satisfaction. A seller’s ability to maintain
strong, long-term relationships with customers depends upon his satisfaction
out of compensation plans.
Designing a Sales
Compensation Plan
Sales organization must develop a sound compensation plan to
meet its varied objectives as well as to meet the aspirations of the sales
force. Following are the steps in sales compensation plan:
1) Defining the Sales Job: The first step
in designing a new compensation plan or revising the existing one is to
carefully define the detailed job descriptions. The exact nature, scope and
probable difficulties in each job should be defined and analyzed. These job
descriptions indicate the services and abilities for which the company is paying
to its sales force.
2) Identifying specific objectives: The
next step is to identify what each individual sales person is expected to
accomplish. Do we want him to increase the sales volume or improve customer
service or stimulate missionary task or develop a new sales-territory etc.
Compensation plans should be formulated on the basis of the expected
performance of the sales persons in achieving the specific objective assigned
to them.
3) Establishing the level of compensation:
The level of compensation means total rupees income that a sales person earns
over a given period of time. The level of compensation is influenced by the
type of persons required for the job and the competitive rate of pay for
similar positions. To the company, the level of compensation is the direct
selling cost. Management is interested in the compensation level because that
is what attracts most sales persons.
4) Developing the method of compensation:
The method of compensation is the plan or system by which the sales persons
reach to the desired level. Basically there are three method of sales
compensation:
a) Straight Salary Method: A fixed payment
of salary is given to the salesman. A straight salary plan provides security
and stability of earning for a salesman. This plan becomes more suitable when
the selling job requires extensive missionary or educational work; when the
technical or engineering advice needs to be given to the prospects; or when
salespersons do considerable sales promotion task. A straight salary plan is a
fixed cost to the company, unrelated to the sales volume. It does not offer any
incentive for sales people to increase their sales volume.
b) Commission Method: A commission is a
payment tied to a specific unit of accomplishment. It provides considerable
incentive for sales people to sell. It is related directly to the sales
person’s volume of sales or gross margin i.e. say 5 per cent of every rupee of
sales or 8 per cent on each rupee of gross margin. Commission to sales persons is paid according
to productivity. Sales volume is the best productivity measure.
Straight-commission plans work very well when a strong incentive plan is needed
to generate sales or when a company is financially weak and must relate its
compensation expenses directly to sales volume or gross margin. A heavy
emphasis on commissions can cause employees to lose sight of the importance of
customers.
c) Combination Plans: The ideal method of
compensation is to have the best features of both the straight salary and
straight commission plans, with as few as their limitations as possible.
Depending upon the nature of selling job and the company’s marketing goals, the
salary portion and commission portion must be worked out by the sales
executives. Combination plans introduce a component of bonus also. Bonus is a
lump sum payment for an above normal performance. Sales bonuses stimulate sales
force to accomplish given tasks more quickly and efficiently.
5) Pretest the Plan: After selecting the
appropriate method of compensation, the sales executives should pre-test the
sales compensation plan. The expected cost and the generation of income should
be estimated and evaluated. By assuming various levels of sales for each line
of products, sales executives can compute the cost of compensation plan.
6) Introduce the Plan: After determining
the efficiency of proposed plan, the executives will introduce and install the
compensation plan. The reasons for change in the existing plans must be
crucially evaluated before introducing the proposed plan. The proposed plan may
be tested in one or two territories and then installed throughout the entire
sales force. The final step will be to make sure that the entire plan will be
evaluated frequently to prevent it from being outmoded.
Controlling of Sales
Personnel
The last but not the least aspect of sales force management
is the control or performance appraisal of sales personnel. Sales executives
must know what the sales force is doing in order to reward them or to make
constructive proposals for improvement. The performance evaluation of sales
personnel should lead to correct action if deficiencies are spotted in the activities
of sales persons. The goal of evaluation is to improve future sales
profitability and productivity. Few sales persons view control process as
negative attempt on the part of executives to weed out inefficient salesmen.
But performance evaluation should be taken as positive activity for the
personal development of sales people.
Control or evaluation of performance is a very sensitive
issue. A sales evaluation program must be tailored to the individual company’s
sales goals and strategies. For one company, opening of new accounts may be an
important criterion of sales performance, while for another calls per day may
be more critical standard of performance. One company may evaluate its sales
personnel annually, while another may do quarterly. So each company must design
its sales evaluation program based on some generally accepted principles of
good sales evaluation programs.
Sales Control Process:
A sales force control system comprises a set of procedure for monitoring,
directing and evaluating sales personnel. The following outline summarizes the
different phases in the sales control process:
1. The
goals for the company and sales management should be precisely defined.
2. To
facilitate the achievement of objectives, selling plans are designed and
policies formulated.
3. Various
activities of sales department are co-ordinated with each other and other
related activities of the organization.
4. Quantitative
as well as qualitative standards of performance are set for each selling
personnel.
5. Actual
performance of sales personnel is measured and compared with the set standards
to determine deviations, if any.
6. Corrective
actions in the right direction are taken to improve the sales performance. This
phase is the most crucial and significant from control point of view. Sales
executives will take certain policy decisions on the basis of their performance
evaluation.