Evaluating Sales Performance: Evaluating The Performance Results of The Field-Selling Effort

EVALUATING
SALES PERFORMANCE
Evaluating the
performance results of
the field-selling effort
PERFORMANCE EVALUATION
Looking Backward
Looking Ahead
Interrelationship of planning,
implementation, and evaluation
Planning
Set goals
Determine strategies & tactics
Evaluation Implementation
Compare goals and results Organize
Explain variances Staff

Operate
MARKETING AUDIT
• … A Comprehensive, Periodic Review
and Evaluation of the Marketing
Function – Marketing Goals, Strategies
& Performance
• Includes an Appraisal of the

Organization, Personnel & Tactics
employed to implement Strategies and
achieve goals
Sales Management Audit…..
• In a sales-management
audit, the Sales Objectives,
Strategies & Tactics are
appraised.
EVALUATION
1. Whether the plans have worked
3. To what degree, they have been

successful, & what are the gaps?
5. What are the reasons for the

plans’ success or lack of it?
The Evaluation Process
To Find Out:
What Why What

happened it happened to do about it
Mis-directed Marketing Effort
80-20 Principle
•80 percent of the orders,
customer, territories, or
products contributes only 20
percent of the sales volume
or profit.
Total Sales Figures May Hide
Significant Problems
Total
Sales Volume
Territory B
Territory A
Time (years)
Evaluation of Sales Force Performance
1.Analysis of Sales
Volume
3.Marketing Cost
Analysis & Profitability
Analysis
Analysis of
Sales Volume
Bases for Analyzing Sales
Volume
• Total Sales Volume
• Sales by Territories
• Sales by Products
• Sales by Customer Classifications

Marketing Cost and
Profitability Analysis
MARKETING-COST ANALYSIS
• It is a detailed study of a company’s
Marketing Costs
• It is not part of a usual Accounting
system
• But the normal accounting system may
provide all data needed for MC
analysis
• The company must set up & maintain a
detailed system of Account
Classification
MARKETING-COST ANALYSIS
3 ways of analyzing Marketing Costs:
• As they appear in ledger a/cs, and in P & L;
• After they are grouped into Activities;
• After they have been allocated to

Territories, Products or other marketing
units
Challenges in MC analysis
• Direct vs Indirect Costs
• Allocation of Indirect Costs in respect of
Territories, Products, and Customer
segments
• Contribution Margin vs Full-Cost
• ROI
• ROAM (Return on Assets Managed)
A Comparison of Marketing Cost
Analysis and Production Cost
Comparison Accounting
Marketing (Fig. 15-1)
Production
Factors Cost Analysis CostA/cing
Bases for Marketing unit: Unit of product
computing costs territory, customer
group, order size, as
well as product
More complex Relatively simple
Source of cost Salespeople in the field Machines and closely

incurred supervised workers
Less exact More precise
Cost-volume Volume is a function of Cost is a function of

relationship cost V=f( C ) volume C=f(V)
Difficult to measure Relatively easy to
measure
DIRECT INDIRECT
• Incurred in connection • A body of costs that
with a single unit of cannot be directly
Sales Operation ascribed to a segment
Eg: Eg
Salaries or Travelling Salaries for a Product or
expenses in a territory Customer segment
Methods Used to Allocate Indirect
Costs
Method
(Fig.Easy to do, but inaccurate and usually unfair
15-6)
Divide cost equally among territories or
Evaluation
whatever market segments are being to some market segments.
analyzed.
Allocate costs in proportion to sales Underlying philosophy: apply cost burden
volume obtained from each territory (or where it can best be borne. That is, charge a
product or customer group). highvolume market segment with a large
share of the indirect cost. This method is
simple and easy to do, but may be very
inaccurate. Tells very little about a segment’
Allocate indirect costs in same proportion
Again, easy to do but can be inaccurate and
as the total direct costs. Thus if product A
misleading. Falsely assumes a close
accounted for 25 percent of the total relationship between direct and indirect
costs, then A would also be
direct expenses.
charged with 25 percent of the
indirect
expenses.
Difficulties in Allocation
• At 2 levels:
3. While allocating Ledger items of expenses

to Activities
5. While allocating activity costs to different

Territories / Products / Markets
Contribution Margin: Full Cost:
• only direct expenses • both direct & indirect
are allocated to each costs are allocated
segment • Sales, less
• Sales, less, • Cost of Goods sold,
• Cost of goods sold, less
less • Direct Expenses, less
• Direct Expenses = • Indirect Expenses, =
• Contribution Margin • NET PROFIT
Return on Assets Managed (ROAM)
Sales $ 10,000,000
Cost of goods sold 7,000,000
Gross margin 3,000,000
Salaries 150,000
Commission 850,000
Travel 150,000
District office expense 400,000
Total direct expenses 150,000
Contribution margin $ 1,450,000
Accounts receivable 2,200,000
Inventories 2,000,000
Total assets $ 4,200,000
Contribution margin 1,450,000

Profit on sales % = Sales volume = 10,000,000 x 100 = 14.5%
Sales volume $10,000,000

Asset turnover = Accounts = $ 4,200,000 = 2.38
receivable + Inventories
ROAM = Profit on sales % x Asset turnover

1,450,000
= x 10,000,000
4,200,000
10,000,000
= 14.5% x 2.38 = 34.5%
Evaluating a
Salesperson’s
Performance
Procedure for Evaluating Salespeople
1. Establish 2. Select
basic evaluation
policies bases
3. Set 4. Compare
performance performances
standards standards
5. Discuss
results with
salespeople
Output Factors Used as Evaluation Bases
• Sales volume
– In dollars and in units
– By products and customers (or customer groups)
– By mail, telephone, and personal sales calls
• Sales volume as a percentage of:
– Quota
– Market potential (i.e., market share)
• Gross margin by product line, customer
group, and order size
Output Factors Used as Evaluation Bases
• Orders
– Number of orders
– Average size (dollar volume) of order
– Batting average (orders / calls)
– Number of canceled orders
• Accounts
– Percentage of accounts sold
– Number of new accounts
– Number of lost accounts
– Number of accounts with overdue payment
Quantitative Input Factors Used as
Evaluation Bases
• Calls per day (call rate)
• Days worked
• Selling time versus nonselling time
• Direct selling expense
– In total
– As percentage of sales volume
– As percentage of quota
Quantitative Input Factors Used as
Evaluation Bases
• Nonselling activities
– Advertising displays set up
– Emails/letters written to prospects
– Telephone calls made to prospects
– Number of meetings held with dealers and/or
distributors
– Collections made
– Number of customer complaints received
Qualitative Input Factors Used as
Evaluation Bases
• Personal efforts of the sales reps
– Management of their time
– Planning and preparation for calls
– Quality of sales presentations
– Ability to handle objections and to close sales
• Knowledge
– Product
– Company and company policies
– Competitor’s products and strategies
– Customers
Qualitative Input Factors Used as
Evaluation Bases
• Customer relations
• Personal appearance and health
• Personality and attitudinal factors
– Cooperativeness
– Resourcefulness
– Acceptance of responsibility
– Ability to analyze logically and make
decisions
Ratio Measures
Sales =
Days worked X Calls Orders Sales

Days worked X Calls X Orders
Days worked X Call rate X Strike Rate X Average order size

Evaluation vis-à-vis Sales Control
• Control is not an isolated Managerial fn. It
permeates all managerial activities.
• Management controls Sales Force through:
• Compensation Plan
• Sales Quotas
• Territorial structure
• Training Programs
• Sales Contests
• Expense Payment Plan
• Supervision
Ethical and Legal
Responsibilities of
Sales Managers
Evaluating the Ethical
Status of a Business Decision
• Questions to help a sales executive:
– Is this sound from a long-run point of view?
– Would I do this to a friend?
– Would I be willing to have this done to me? (The
Golden Rule)
– Would I want this action publicized in national
media?
– Would I tell others about it?
– Who is damaged by the action?
THE
PERSONAL SELLING
PROCESS
The Steps….
• PROSPECTING
• PRE-APPROACH
• APPROACH
• NEED ASSESSMENT
• PRESENTATION
• MEETING OBJECTIONS
• GAINING COMMITMENT
• FOLLOW-UP
PROSPECTING
• Identifying Leads
• Qualifying the Leads

PRE-APPROACH
• Customer Research
• Planning the Sales Presentation

THE APPROACH
• Entry into the room….
• Facial expression…
• Attire
• Handshake
• Greetings…….
• Eye contact
• Introduction….
NEED ASSESSMENT
• Situational Questions
• Problem discovery Questions
• Problem Impact Questions
• Solution Value Questions
• Confirmatory Questions
THE PRESENTATION
• Product demonstrations
• Prepared Sales Presentations
• Developing effective presentations

MEETING OBJECTIONS
• PRICE or VALUE Objections
• PRODUCT/SERVICE Objections
• PROCRASTINATING Objections
• HIDDEN Objections
-------------------------------------------------------
6. Listen to the Buyer
7. Clarify the Objection
8. Respect the Buyer’s concern
9. Respond to the Objection
GAINING COMMITMENT
• ….the Salesperson must ask the
buyer to commit to some action
that moves the sales forward……
FOLLOW - UP
• The Sale is not over just after
getting the Order
• Focus on Relationship Marketing
• With loyal customers, Salespeople
need to revisit ‘need assessment’

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EVALUATING

Explain variances Staff

• Includes an Appraisal of the

3. To what degree, they have been

5. What are the reasons for the

What Why What

• Total Sales Volume

• Sales by Customer Classifications

• After they are grouped into Activities;

• After they have been allocated to

Source of cost Salespeople in the field Machines and closely

Cost-volume Volume is a function of Cost is a function of

3. While allocating Ledger items of expenses

5. While allocating activity costs to different

Contribution margin 1,450,000

Sales volume $10,000,000

ROAM = Profit on sales % x Asset turnover

Days worked X Calls Orders Sales

Days worked X Call rate X Strike Rate X Average order size

• Qualifying the Leads

• Planning the Sales Presentation

• Prepared Sales Presentations

• Developing effective presentations

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