Multimedia Marketing/Marketing.iso/market/chapter7.7p

Text File | 1996-08-22 | 20KB | 408 lines

SECTION 7.7  Sales Management--Initial Steps

INSTRUCTIONS Try to imagine what are the major areas to consider in managing
a sales force. Then pursue this section for more insights.

EXAMPLE

The sales force for a computer producer is the envy of the industry.
One major reason for this is that they are so highly trained. College
graduates with top grades and other accomplishments are recruited
by the company. The new hires go right back to school. They are
sent to a training center where they live in dorms, attend classes,
and have homework. They are trained in selling, computers, and
finance, so that they can be competent representatives of the company
and problem solvers for customers. The training is so good that
some competing companies try to recruit those who have just finished
the training program.

DETAILS

While sales work often provides an excellent background for a person
to later move into management, many managers will progress in a
different direction. All managers, nontheless, must be concerned
about the effectiveness of personal selling. Perhaps more importantly,
most successful managers will eventually be exposed to sales force
development and training decision making, either directly or indirectly,
at some point in their careers, making this activity of vital interest
to all.

In developing a sales force, management decides on its size, how
to recruit, and how to structure the sales force. These are the
subjects of this section.

Determining the size of the sales force is an important decision
for management to make. Too small a force results in sales that
are too low, too large a force results in excessive costs.

Most companies use a method called the workload approach in
establishing the size of the sales force. The steps are as follows:

1. Group customers into classes according to their relative value
to the company. The "A,B,C"system is often used, where A customers
are large and valuable prospects, B are intermediate size less
valuable prospects, and C are small and are the least valued
prospects.

2. Determine the call frequency per year for each class of customer.
The judgment of management and of the sales force are useful here.

3. Multiply the number of accounts in each class by the call
frequency to yield the firm's total annual sales force workload.

4. Determine the average number of calls that each sales rep can make.
This requires considering geographic dispersion, the average time
per call, waiting time, and other time-consuming factors. Usually
reps can make a different number of average calls to each class.

5. Calculate the number of reps needed by dividing the annual
workload by the average number of calls.

PROBLEM 1

Which of the following is not a step in the workload approach to
calculating the size of the sales force:

A. Determine the average number of calls each salesperson can make.
B. Group customers into classes.
C. Determine the call frequency.
D. Determine the total sales of customers in each class.

WORKED

A food wholesaler uses the A,B,C system, where large accounts are
designated as A, medium sized as B, and small as C. The details are
as follows:

Class  Number Call frequency Needed Calls  Calls per rep  Reps needed

 A      20        50            1,000         50           20.0
 B      30        20              600         70            8.5
 C      40        10              400         90            4.4
                                                           ____
Total                                                      32.9

In this case, the company needs 33 reps

ANSWER  D

INSTRUCTIONS Try to imagine what are the major areas to consider in managing
a sales force. Then pursue this section for more insights.

EXAMPLE

The sales force for a computer producer is the envy of the industry.
One major reason for this is that they are so highly trained. College
graduates with top grades and other accomplishments are recruited
by the company. The new hires go right back to school. They are
sent to a training center where they live in dorms, attend classes,
and have homework. They are trained in selling, computers, and
finance, so that they can be competent representatives of the company
and problem solvers for customers. The training is so good that
some competing companies try to recruit those who have just finished
the training program.

DETAILS

Recruitment decisions are another major area of concern for sales
managers. The difference between a poor or even average sales
performance and a good one can be dramatic. It is estimated that
less than 30 percent of all sales representatives account for
over half of a typical company's sales. There is strong motivation,
then, for management to recruit the best qualified people once
they have determined a sales force's size.

The first step in recruiting is to determine the specific abilities
that good candidates should have. Studies have indicated that
important characteristics of good salespeople are ability to ask
questions and stimulate answers, enthusiasm, a sense of humor,
human relations leadership, optimism, and above all persistency.
Selling is not a job for quitters. Most sales do not materialize
until the fourth, fifth, or even later calls.

Beyond these generalities, managers need to specify factors such
as education, maturity, and experience. Some technical companies
require that candidates have formal schooling in technical subjects.
For others, such as food processors, a degree in business administration
is valuable.

PROBLEM 2

A producer of kitchen and bathroom cabinets is in the process of hiring
sales representatives. A critical characteristic of successful
applicants should be:

A. A degree in business administration or economics.
B. Past experience in cabinet-making.
C. Persistency.
D. Past experience in selling other products.

WORKED

A producer of kitchen and bathroom cabinets is in the process of hiring
sales representatives. A critical characteristic of successful
applicants should be persistency. Sales representatives may have to
call on a prospect many times before they receive an order. And they
may have to call on many prospects before they find some that are
interested in company products. Often, prospects will say "no" to
suggestions of the sales representative and he or she will have to
possess the ability to react to negative responses. Many experts in
selling argue that persistency is the number one ingredient to
success in this field.

ANSWER  C

INSTRUCTIONS Try to imagine what are the major areas to consider in managing
a sales force. Then pursue this section for more insights.

EXAMPLE

The sales force for a computer producer is the envy of the industry.
One major reason for this is that they are so highly trained. College
graduates with top grades and other accomplishments are recruited
by the company. The new hires go right back to school. They are
sent to a training center where they live in dorms, attend classes,
and have homework. They are trained in selling, computers, and
finance, so that they can be competent representatives of the company
and problem solvers for customers. The training is so good that
some competing companies try to recruit those who have just finished
the training program.

DETAILS

In determining needed characteristics, most managers consult the job
description. This is a written account of the job duties and
responsibilities and gives an indication of what kinds of people are
needed. Another useful technique is to divide the sales force into
two classes: (A) those who are superior and (B) those who are
inferior, based on some criterion such as how often they equal or
exceed their sales quotas. Then the personal characteristics of
individuals in (A) can be compared with those in (B) and differences
noted. A company might discover, for instance that most of those in
(A) have a degree in business administration and have strong
references from previous employers, whereas most in class (B) have
changed jobs frequently and have a record of excessive debt.

Obtaining applicants is the second step in recruiting. The task is
often quite difficult, especially for entry-level positions, as
some people feel that sales work is low in prestige. Many college
graduates, for example, would rather take a 9 to 5 routine job
with limited advancement potential so that they will be labeled a
"junior executive".

Personal selling offers many advantages. These include considerable
freedom, with each person in effect running his or her own business.
Further there is often considerable turnover in sales positions,
especially in low-level jobs where the compensation is modest.
Consequently, many managers feel that recruiting is an ongoing
continuous activity.

In large companies, personnel departments usually handle the matter
of locating applicants after working with the head of sales to
determine the types of people to seek. Operating management usually
must get involved in the process in smaller companies. Applicants
can be located in a number of ways, including newspapers, college
campus interviews, and from employee references. For senior and mid-
level positions many companies have a policy of hiring from within
the organization. Some experts argue, however, that outside sources
should also be considered. And it seems that numerous companies do
look outside, as many are filling even the topmost positions from
outside sources.

The next recruiting step is screening and hiring applicants. The
annual turnover rates (resignations and dismissals combined) in
some successful companies approach a low of 5 percent. This largely
results from carefully designed, formalized means of screening and
hiring applicants. Specific procedures vary but often include the
use of detailed application forms, formal assessments of experience,
reference checks, and formally evaluated interviews.

Some companies use psychological exams (aptitude, intelligence, and
personality inventories) in the screening process. While costly to
use and evaluate, some organizations are avid users of such tests
because they can provide insight into a candidate's motivation. But
interpreting the tests requires highly trained specialists.

A common mistake during screening is to have several persons vote,
as a committee, on who should receive an offer. While several
people (such as supervisors, other managers, and personnel officers)
should talk to candidates, the successful candidate's immediate
supervisor should be the one to decide who is hired, since the
supervisor is the one who is ultimately held responsible for the
department's operations.

Finally, once a candidate is selected, the company should be marketed
to the person. Good candidates are likely to be attractive to other
firms as well, and the effort is necessary to solidify their interest.
This can be done by portraying the person's role in the company,
remuneration possibilities, benefits, and other highlights.

Managers should take care in not overselling the company. An honest
appraisal of what the candidate can expect is the best long-run
policy. Further, follow-up procedures should be used once the
candidate comes aboard, involving introducing the new person to
others, making sure that all forms are properly filled out, and
getting to know the new employee. Lasting impressions of a company
are often formulated by employees during their first few days.

PROBLEM 3

A department store manager is concerned that the store hire only
high-calibre salespersons. What technique could be useful in this
regard?

A. Evaluate the backgrounds of those who have applied for sales
   jobs with the company in the past.
B. Review application blanks submitted by candidates for sales
   jobs.
C. Compare the characteristics of successful and unsuccessful sales
   representatives.
D. Make an assessment of the marketing mission and objectives of
   the company.

WORKED

A department store manager who wants to hire high calibre sales
personnel should compare the characteristics of successful and
unsuccessful sales representatives. This can be done by reviewing
personnel files and sales records. First the sales force is
divided into two groups--the successful and the unsuccessful. The
basis for this subdivision could be their sales records or their
evaluations by superiors. Then, the personnel records are examined
in search of characteristics that differentiate each group from the
other. It could be that better sales representatives are better
educated, have a better credit rating, have a better record of stable
employment, and other factors. Once these characteristics have been
uncovered, they can be employed for recruiting decisions.

ANSWER  C
INSTRUCTIONS Try to imagine what are the major areas to consider in managing
a sales force. Then pursue this section for more insights.

EXAMPLE

The sales force for a computer producer is the envy of the industry.
One major reason for this is that they are so highly trained. College
graduates with top grades and other accomplishments are recruited
by the company. The new hires go right back to school. They are
sent to a training center where they live in dorms, attend classes,
and have homework. They are trained in selling, computers, and
finance, so that they can be competent representatives of the company
and problem solvers for customers. The training is so good that
some competing companies try to recruit those who have just finished
the training program.

DETAILS

Another critical development task involves determining the "sales
force structure", which is the deployment of individuals among
potential customers. Three factors are considered here: territory
design, territory shape, and other structure decisions.

The simplest way of deploying a sales force is to structure it
around exclusive geographical territories. Territory design requires
assigning each person a particular territory to cover along with
the responsibility of representing all of the company's products
to every current and potential customer located in that area.
Morever, each representative is restricted to selling exclusively
within an assigned territory.

This structure has several advantages. For one, it encourages the
development of strong customer/representative interpersonal ties.
Particular sales representatives know who their customers are and
can work to build lasting relationships. Another is that it simplifies
the problem of evaluating performances, as management can easily
determine who is to receive credit for which sales. Finally, the
structure encourages coverage of all types of customers. If sales
persons were free to sell anywhere, most would concentrate their
efforts in large cities and forget about prospects in smaller
locations.

Territory shape is another factor to consider. Territories really
represent the sum of smaller units, such as counties, which, when
combined, comprise a desired sales potential or workload. Sales
managers combine the smaller units after considering several factors,
such as the location of natural boundaries, transportation ease
between prospects, and city locations.

Companies typically try to achieve a certain geographical shape for
each territory, as this can influence the cost of calling on prospects,
ease of calling on them, and the sales force's overall morale.
Headquartering representatives at the center of a circular territory
helps to reduce wasted travel time. If reps follow a circular pattern
of calling on accounts, they lose little time when backtracking to
the office. Moreover, representatives are headquartered as near as
possible to all customers, which helps in expediting any special
trips.

A cloverleaf pattern is quite similar, because it divides the total
territory into smaller circles. If the leaves are of the right size,
representatives can cover each in a circular pattern in a week of
travel. In a month they can cover all accounts with minimal
backtracking by penetrating succesive leaves each week.

Firms often employ a wedge shape in metropolitan areas too large
for one sales representative to handle. Its virtue is in balancing
urban, suburban, and rural accounts among all representatives in
the area. But each salesperson becomes headquartered a greater
distance from some accounts than with other shapes, resulting in
greater wasted time in backtracking.

Finally, companies sometimes utilize a rectangular territory,
especially in rural areas where highways and other travel routes
tend to parallel latitudinal and longitudinal coordinates. Sales
managers use this shape to conform to natural boundaries.

Other sales force structures deserve consideration. Structuring
a sales force solely around geographical territories works best
when a company markets a relatively narrow product mix to relatively
homogeneous prospective customers. But consider a large producer
that sells everything from light bulbs to electric generators to
many different companies, from small retailers to large utilities.
It would be impossible for a single sales rep to know much about
all company products and all customer needs in one geographic area.

Whenever large differences exist between customers and/or products,
it is usually best for management to structure the sales force
around predominant groups of similarities, such as by customer type
or major product group, or both.

There are two major disadvantages of nongeographic sales forces,
however. Some travel may overlap, leading to additional costs,
and two or more salespeople could call on one account for different
items. If customers think of both sets of items as being parts of
the same line, the structure is undesirable as it can lead to confusion
and lost sales. Like other elements of the marketing mix, the
appropriate sales force depends on both market and cost factors.

PROBLEM 4

Sales representatives for a producer of consumer electronics products
call on wholesalers. Which of the following is not an advantage of
using geographical territories

A. This pattern is useful if the company has a very wide product mix.
B. It encourages the development of strong customer/representative
   interpersonal ties.
C. This pattern simplifies the problem of evaluating performance.
D. It encourages coverage of all sizes of customers.

WORKED

Sales representatives for a producer of consumer electronics products
call on wholesalers. Some advantages of using geographical territories
are available. It encourages the development of strong customer/
representative interpersonal ties. Representatives call on customers
repeatedly over time and get to know them. The two parties develop
relationships that can be invaluable to the supplier. Further,
the plan simplifies the problem of evaluating performance. Since each
rep is assigned to a territory, company success in that territory is
attributed to the assigned salesperson. If the company does not fare
well in the territory, the sales rep is held responsible. Also,
geographic territories encourage coverage of all sizes of customers.
Sales reps are responsible for calling on all of the prospects in
their territories, not just the big ones. This means that a firm can
get full market penetration in these territories.

ANSWER  A