Sales Management
Chapter 12
Chapter 12
Sales Force Control
Learning Objectives
• Understand the meaning of sales force control
• Know why sales force control is important
• Explain the difference between sales audit and marketing audit
• Discuss the evaluation process of sales organization
• Understand the evaluation process of sales force performance
Introduction
• A good sales management program needs systematic control
mechanism to monitor the sales force performance and keep the
costs under control
• No sales plan is effective in the absence of a sales control
mechanism
• Sales force control mechanism keeps costs within budgeted
limits but also brings discipline to organizational processes of
implementation
• Sales force control helps in budget modifications and additional
recruitment if so required to achieve sales objectives
Circulatory Nature of Sales Management
Function
Planning Organizing
Sales
Management
Process
Controlling Coordinating
Controlling Sales Force Performance –
Input-Output Based Approach
Analyze market situation, competition to set performance
evaluation and control policy
Decide the criteria for salespeople’s performance evaluation
Set performance standards (both qualitative & quantitative )
Compare and contrast actual performance with set standards
Review and communicate performance evaluation
Decide sales management action
Sales force performance evaluation and control process
Controlling Sales Force Performance –
Input-Output Based Approach
Analysis of market situation and competition to set performance
evaluation and control policy the policy document should answer the
following questions:
Who will evaluate sales people?
How frequently sales people will be evaluated
What sources of information should be used for evaluation
What should be the degree of evaluation
Controlling Sales Force Performance –
Input-Output Based Approach
Criteria for Sales Performance Evaluation
Input based criteria
Output based criteria
Behavioral criteria
Efforts expended criteria
Controlling Sales Force Performance –
Input-Output Based Approach
Setting Up Performance Standards
Sales quota
Call frequency ratio
Calls per day
Order call ratio
Average cost per call
Average order size
Controlling Sales Force Performance –
Input-Output Based Approach
Compare and contrast actual performance with set standards
Define the information need
Determine the source of information
Collect the desired information
Call reports
Call progress report
Expense reports
Sales work plan
Controlling Sales Force Performance –
Input-Output Based Approach
Review and Communicate Performance Evaluation Reports with
sales people
Open system of performance evaluation
Formal system of performance evaluation
Informal system of performance evaluation
Communicate through
Verbal channels
Formal channels
Human resource channel
Controlling Sales Force Performance –
Input-Output Based Approach
Decide Sales Management Action
Positive actions Negative Actions
Incentives Demotion
Promotion Withdrawal
Higher job responsibility Transfer
Job enrichment Termination
Sales Audit
• It comprises a systematic process of appraising sales objectives
and policies by aggregating individual inputs into organizational
performance
• Helps in evaluating overall performance of the organization against
sales goals, objectives, methods, procedures and sales staff
motivation
• It helps in focusing on overall sales strategy rather than on
individual components of evaluation and suggests corrective
actions
• It helps in unearthing opportunities for improvement in sales force
performance
Marketing Audit
• This is a systematic and objective method of studying the total
marketing efficiency of an organization
• It evaluates the marketing policies and activities of the firm and
measures the directions and levels of growth
• It evaluates long term business growth in terms of strategy,
structure and policies followed by the firm
• It is called ‘control of controls’ as it covers both business and
market aspects of the organization
• It helps in reviewing assumptions used in developing strategy. It
serves as an indicator for future direction that firm plans to take
Sales Force Expense Analysis
• This is the most rudimentary form of sales force control
• Companies do this analysis by looking into sales expenses
reimbursement policy of the organization
• It should be seen as a fair and equitable justice done to all the
people across the territories
• While deciding on a compensation policy for sales people,
expense planning constitutes a major decision and it should take
into account the size of the territory, sales quota and efforts
expended by sales person to achieve sales goals
Measurement of Sales Organization
Effectiveness
• Sales Analysis
Across Organizations
At national level
At regional level
At division level
At state level
At district level
At branch level
Measurement of Sales Organization
Effectiveness
By Types of sales
Cash
Credit
Shipment
Order size
Product category
Market
Type of distribution channel
Size of customer order
Measurement of Sales Organization
Effectiveness
By types of Analysis
Comparing with Sales quota
Comparing with Previous Time Period
Comparing with industry average
Comparing with Strategic Competitors
Comparing with Sales Department
Comparing with Sales Forecast
Measurement of Sales Organization
Effectiveness
Marketing Cost Analysis Process
Classify Marketing Expenses
Transform accounting expenses data to activity
expense groups
Develop Bases for allocating Common Expenses
Calculate Contribution Margin
Finalize the Corrective Actions Required for The
Situation
Measurement of Sales Organization
Effectiveness
Credit Control
Companies sale both in terms of cash and credit
Cash sales are vital to organization’s liquidity
Credit control is important as it restricts flow of cash back to
the system
How much and how often credits are given to customers
should be criteria
Credit scoring is done to find out the customer who are
cash/credit deal oriented and so also for the sales people
who sell on cash/ credit as a percentage to their total sales
Measurement of Sales Organization
Effectiveness
• Market Share Analysis
Market share is firm sales divided by industry sales
It tests how the organization is doing in relation to the rest
• Budgetary Control
It involves sales planning, sales forecasting, sales budgeting
and profit planning
Measurement of Sales Organization
Effectiveness
• Ratio Analysis
Sales to Capital Employed ratio
Inventory Turnover Ratio
Gross Profit to Sales ratio
Net Profit to Sales Ratio
Return on Marketing Investments
Return of Assets
Return on Capital Employed
Working Capital Turnover Ratio
Distribution Cost Turnover Ratio
Measurement of Sales Organization
Effectiveness
• Management by Objectives (MBO)
Determine the objectives in each significant area of business
Measuring performance against predetermined objectives
Managing the business with boundary of set of objectives
