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CSUDH Sales Management Exam 3
CSUDH Sales Management Exam 3
Terms in this set (55)
Issues in Sales Training - Who should be trained?
New sales recruits receive a combination of training and orientation to the company policies and procedures.
Depending upon how the market or competitive changes may have altered the nature of sales tasks, training for different stages of the same salesperson's career.
Issues in Sales Training - What should be the primary emphasis in the training program?
Product knowledge, company knowledge, customer knowledge, or selling skills.
All are important but differed in importance based on the selling situation, costs of training, and nature of the company marketing strategy.
Issues in Sales Training - How should the training process be structured?
On-the-job training and experience versus a formal and more consistent centralized program, web-based or instructor-based and in-house training versus outside expertise
Objectives of Sales Training - Increased Productivity
Provide valuable skills that will have a positive effect on selling performance.
Objectives of Sales Training - Improve Morale
Prepare trainees to improve their productivity as quickly as possible.
If trainees know what is expected of them, they will perform better without frustration
Objectives of Sales Training - Lower Turnover
Improved moral and greater job satisfaction, should equal lower turnover
Objectives of Sales Training - Improve Customer Relations
Promotes customer loyalty, especially when the salesperson can handle customer: questions, objections and complaints.
Objectives of Sales Training - Improved Selling Skills
Improved selling skills leads to improved performance. Additionally, improved selling can lead to new approaches to selling.
Development of sales training programs - Obstacles #1
- Top Management not dedicated to sales training
- Lack of buy-in from frontline sales managers and sales people
- Salespeople lack of understanding of what the training is supposed to accomplish
- Salespeople lack of understanding regarding the application of the training to their everyday task (lack of connection between training and tasks)
Development of sales training programs - Obstacles #2
Management expects sales training to solve all company sales problems
Sales training function: namely, the evaluation of sales training programs (without measuring the benefits)
Analyze Needs (Exhibit 10.2)
Sales force and marketing
Evaluation of previous training programs customers
Determine objectives (Exhibit 10.2)
Consider short-term and long-run issues
Compare training objectives with the company goals
Develop program and implement (Exhibit 10.2)
Evaluate previous training program methods
Consider costs/benefits of various training methods
Establish Training budget
Develop training materials
Train the sales trainers
Evaluate and review program (Exhibit 10.2)
Develop monitoring systems
Analyze reactions and learning behavior, and measure results
Conduct cost/benefits analysis
Revise program if needed before the next session
Training new sales recruits
Specific programs for new sales recruits. Usually a fix period of time that is formal training.
Customer is #1
1. Pride and confidence in product quality
2. Self-assurance emanating from technical knowledge of product makeup
3. Communication with customers through the use of the operational vocabulary peculiar to the industry
4. Understanding of product functioning that allows effective diagnosis of the customers problem
All benefit salesperson customer interaction (motivation)
Sales training methods
Most common: on-the-job training, individual instruction, in-house classes, and external seminars.
"learning by doing"
3. Customer Interactions
5. Peer-to-peer communication
Electronic Training Methods
Electronic training methods, and more specifically the internet, have revolutionized the delivery of training, not just in sales but across the entire organization. Companies find the internet to be effective in delivering just-in-time information but also efficient.
Online training can be very effective in delivering certain kinds of information but will not likely eliminate thinned for one-on-one training for salespeople
Measuring the Costs and Benefits of Sales Training
If done properly, sales training can be one of the most helpful tools used to increase the satisfaction and performance of salespeople.
Improving selling skills, increased productivity, improved morale, lower sales force turnover, better customer relations, and better time and territory management.
Very little research has been done to determine what effect, if any, sales training has on the sales force
Measuring Specific Benefits
Evaluating the benefits of sales training is difficult.
Multiple measurements of the effectiveness of the training program are then a necessary part of the evaluating the benefits.
Most sales training evaluation measures are simple, consisting primarily of reactions to the program.
Recent Trends in Sales Training Evaluation
Evidence of salespersons reactions or testing what learned is useful but no longer sufficient proof.
Managers want value from the cost of sales training. Evidence that supports the value of training require a control group, a rare activity in most companies.
Problems - To many variables have a effect on sales: new product, failure of competitor, increase in advertising, improved price competitiveness.
Compensation and Incentives
3 parts of Compensation Plan:
1. Which Compensation method is most appropriate for motivating specific kinds of selling activities in specific selling situations?
2. How much of a salesperson's total compensation should be earned through incentive programs?
3. What is the appropriate mix of financial and non financial compensation and incentives for motivating the sales force?
encourage good performance, which is tied to sales volume or profitability or bonus for meeting or exceeding performance targets.
Salary (Exhibit 11.1)
Fixed sum of money paid at regular intervals
-Motivate effort on non selling activities
-Adjust for difference in territory potential
-Reward experience and competence
Commission (Exhibit 11.1)
Payment based on short-term results, usually salespersons dollar or unit sales volume.
-Motivate a high level of selling effort
-Encourage sales success
Bonus (Exhibit 11.1)
Payment made at the discretion of management for achieving or surpassing some set level of performance.
-Direct effort towards strategic objectives
-Provide additional rewards for top performers
-Encourage sales Success
Sales Contest (Exhibit 11.1)
Encourage extra effort of the sales team for short-term results.
-Stimulates additional effort targeted at specific short-term objectives
Benefits (Exhibit 11.1)
Used to satisfy the basic needs for security.
-Satisfy salespersons security needs
-Match competitive offers
Often the min amount for a salesperson to earn a bonus.
Payment for achieving a given level of performance.
Paying commissions on the profitability of sales to motivate sales force and expand effort.
Variable Commission Rate
Direct the sales force effort towards other straight sales objectives, such as paying a higher commission on a new product line being introduced.
Limitations (Draw Account)
To combat the inherent instability of commission plans, some firms provide their salespeople with a draw, or drawing account. In a draw, money is advanced to a salesperson in months when commission are low to ensure he or she will always take home a specific min amount of pay.
Cap or ceiling for payments to commission for salespersons.
Low-paying industries being more likely to impose caps that higher-paying lines or trades.
Favor of using ceilings include that they ensure top salespeople will not make such high earnings than other employees in the firm, sometimes even managers. Which suffer resentment or low moral.
Ceilings make a firms maximum potential sales compensation expense more predictable and controllable.
Counterargument is ceilings ultimately have a bad effect on motivation and dampen the sales force enthusiasm.
Steps to Executing the Compensation Plan (Written Portion)
1. Research - Look at past sales and relationships to compensation structures.
2. Define Objectives - What are the goals? Increased profit, increased productivity, etc?
3. Develop Plan - Choose pay plan type, target pay, results to be rewarded, and pay formula. The pay formula will involve the mix of base pay and commission. The decision to bar by product should be made.
4. Test - Test the plan on a spreadsheet using realistic sales results. Analyze different scenarios.
5. Document - This should be easy read and understood by your sales force.
-Clearly defined, specific objectives
-An exciting theme
-Reasonable probability of reward for all salespeople
-Promotion and follow-throughs
Probability of Winning
Every member of the sales force should have a chance of winning an award.
Low level sales people will think top performers will win which results in low level sales people to not even try.
Incentive programs, including contests, seek to reward more rather than fewer salespeople
Guidelines for Effective Formal Recognition Programs (Exhibit 11.3)
Regardless of its size or cost, any recognition program should incorporate the following features:
-The program must be strictly performance based: With no room for subjective judgments. If people suspect that it is in any way a personality contest, the program will not work. The winners should be clear to anyone looking at the data.
-It should be balanced: The program should not be so difficult that only a few can hope to win or so easy that just about everyone does. In the first case, people will not try; in the second, the program will be meaningless.
-A ceremony should be involved: If rings are casually passed out of plaques sent thought the mail, a lot of the glamour of the program will be lost.
-The program must be in good taste: If not, it will be subject to ridicule and, rather than motivate people, it will leave them uninspired. No one wants to be a part of a recognition program that is condescending or tacky. The program should make people feel good about being part of the company.
-There must be adequate publicity: In some cases, sales mangers do such a poor job explaining a program or promoting it to their own salespeople that no one seems to understand or care about it. Prominent mention the program in company publications is the first step to overcome this handicap.
Direct Reimbursement Plans
One popular type of expense reimbursement plan involves direct and unlimited reimbursement of all "allowable and reasonable" expenses.
Gives some control to the salesperson.
Used as a motivational tool for salespeople
Determining Which Aspect of Job Performance to Reward
It is a mistake to try to motivate salespersons to do too many things at once. Rewards are tied to numbers aspects of performance.
1. becomes difficult for a salesperson to focus on improving performance dramatically in any one area.
2. Salespeople are more likely to be uncertain about how total performance will be evaluated and about what rewards can be obtained as a result of that performance.
Complex compensation and incentive programs may lead to confusion.
Satisfaction-based incentives improve customer service by salespeople, some managers worry that such incentives may distract sales reps from the tasks necessary to capture additional sale volume in the short term.
Deciding on the Most Appropriate Mix and Level of Compensation
All salespeople do not find the same kinds of rewards equally attractive.
Money is not the top motivator.
A mix of reward that is effective for motivating a sales force at one time may lose its appeal as the members personal circumstances and needs change and as new salespeople are hired.
Dangers of Paying Salespeople Too Much
Overpaying salespeople unnecessarily increase selling cost and reduces profit.
Also, it an cause resentment and low moral among the firms other employees and executive when salespeople earn more money than top management.
It become impossible to promote good salespeople to managerial positions because of the financial sacrifice they would have to make.
It is not clear that offering unlimited opportunities to earn higher pay is always an effective way to motivate salespeople to increase the selling effort.
If poor salespeople are hired at low pay, poor performance will almost result.
Cost Analysis Development
Profitability Analysis, firms are more likely to conduct product profitably analyses and less likely to do it for customers.
About half of all companies do it at all, and less than a third analyst cost by products, territories, salespeople and customers.
There are 3 approaches to cost allocation: full costing, contribution analysis, and actively-based costing (ABC)
Full Cost versus Continuation Margin
A direct cost can be specifically identified with a product or a function.
A indirect cost is a shared cost because it is tied to several functions or products.
Expenses can be classified into two board categories: Specific and general expenses.
Specific is a direct cost.
General expense is a indirect cost.
Procedure (Several Questions)
Sales cost or expenses are to be treaded as fixed, semi fixed, or variable and how various costs should be allocated to segments must be made.
Steps in conducting a marketing profitability analysis (Exhibit 12.7)
Step 1. SPECIFY purpose and determine functional cost centers.
Step 2. SPREAD natural account costs to fungal cost centers.
Step 3. ALLOCATE fungal costs to appropriate segments using some reasonable basis.
Step 4. SUM allocated costs to determine contribution of the segment.
Promise and Problems
Real benefit is the opportunity it provides managers to isolate segments of the business that are most profitable as well as those that generate losses.
Information allows those involve to improve their planning and control of the firms activity.
Sales analysis request that data be available in the proper detail, some of the data can be costly.
The benefit outweighs the cost and more companies are doing cost analysis.
Performance Versus Effectiveness #1
Key issue in evaluating performance of salespeople is the distinction among the concepts of behavior, performance, and effectiveness.
Quotas are a measurement of performance.
Behavior: what salespeople do, tasks which they expend effort.
Performance: normative element reflecting a salespersons behavior is good or bad.
Effectiveness: outcomes for which an individual is at least partly responsible.
Performance Versus Effectiveness #2
Salespeople fall into two board categories
1. Objective measures - Reflects statistics the sales manager can gather from the firms internal data.
2. Subjective measures - Typically rely on personal evaluations by someone inside the organization, usually the supervisor.
Are important for two reasons:
Efforts or desirable behaviors are much more directly controllable than results in the short term.
In relationship selling a time lag frequently exist between inputs and outputs which results in the sales manager evaluating and coaching to positively affect the output.
Refer Exhibit 13.1
Quantitative measures of performance focus on the output and inputs of what salespeople do, whereas qualitative measures reflect behavioral or process aspects of what they o and how well they do it.
In many ways it is more difficult to assess the quality rather than the quantity of a salespersons performance.
Common Evaluation Performance
1. Sales Results - Volume performance, sales to new accounts, and selling the full product line.
2. Job Knowledge - Knowledge of company policies, prices and products
3. Management of Territory - Planning of activities and calls, controlling expenses, and handling reports and records.
4. Customer and Company Relations - The salesperson standing with customers, associates and company
5. Personal Characteristic - Initiative, personal appearance, personality, resourcefulness, etc.
Problems with Subjective Performance Measurements
1. Lack of an outcome focus - Most useful type of performance appraisal, key behaviors in accomplishing tasks assigned must be identified.
2. Ill-defined personality traits - personality is include with rating system
3. Halo effect - One aspect of the rating system will reflect the entire rating
4. Leniency or harshness - extreme either very good or very bad
5. Central tendency - middle of the road rating system
Outcome bias occurs when a sales manager allows the outcome of a decision or a series of decisions made by a salesperson to overly influence the performance rating made by the manager.
360- Degree Feedback in Performance Evaluation
Concept opens the door to a new era in using the performance appraisal process as an effective tool for salespersons development and improvement.
Feedback that would be useful to salesperson are external customer, internal organization members who server as resource in serving external customers, or members of the selling team and directly reports to the sales manager.
Self-evalutaoin, honest assessment of their own performance.
Sales organizations need to focus on developing a performance management system. Requiring a commitment to integrating all the elements of feedback on the process of serving the customer. Information is timely, accurate, and relevant to the customer management aspect of the firm.
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