Sales Management: Shaping Future Sales Leaders Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall. 11-1 Copyright © 2009 Pearson Education,

Sales Management: Shaping Future Sales Leaders

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.11-1Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Setting Goals and Managing the Sales Force’s Performance

Chapter 11


Learning Objectives

Describe how sales managers use goals to guide and control the efforts of their sales forces

Summarize the elements of an effective goal

Distinguish when different outcomes and behavioral sales goals should be used

Identify different resources available to capture information used for making effective decisions on goals

Apply goal-setting theory in order to improve managerial and motivational practices

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.11-3

What’s Involved with Goal Setting?

Monitoring Salespeople

Market Conditions

Following Up

Competitor Reactions

Instituting Corrective Actions


Why Set Sales Goals (Quotas)?

Sales goal (quota): performance standard by which salespeople are measured

Sales goals are useful for several reasons Synchronize direction and efforts of sales force

with plans developed by top managers

Benchmark performance Achievement of goals

can be motivating and is usually tied to compensation


Using Goals to Guide and Manage Performance of a Sales Force

Assess ROI

Ensure the effort put into selling products earns good return

When sales are short of expectations, may need to revise marketing mix variables

Focus SellingEfforts

Goals help direct efforts toward certain sales activities

Example: growing markets

MotivateSales Force

Achievable goals can help motivate the sales force Goals serve as benchmarks to help gauge how reps

are doing

CompareResults

Comparing results helps determine what factors cause sales to be lower or higher in one area than another

Example: competition, customer demographics, etc.

S o u th A tla n tic O c e a n S o u th P a c if ic O c e a n

N o rth P a c if ic O c e a n

N o rth A tla n tic O c e a n

In d ia n O c e a n

A rc tic O c e a n A rc tic O c e a n A rc tic O c e a n

N o rth P a c if ic O c e a n

U n ite d S ta te s o f A m e ric a

U .S .A .

C a n a d a

M e x ic o

B ra z il

U . S . A .

F re n c h P o ly n e s ia (F r.)

A rg e n tin a U ru g u a y

P a ra g u a y

C h ile

B o liv ia

P e ru

E c u a d o r

C o lo m b ia

Ve n e z u e la F re n c h G u ia n a (F r.)

S u rin a m e G u y a n a

T h e B a h am a s

C u b a D o m in ica n R e p u b lic

P a n a m a C o s ta R ic a

N ica ra g u a

H o n d u ra s G u a te m a la

E l S a lv a d o r

Trin id a d a n d To b ag o

Ja m . H a iti P u e rto R ic o (U S )

G re e n la n d (D e n .)

Ic e la n d

M a d a g a sc a r

S o u th A fr ic a L e so th o

S w a z ila n d

M o z a m b iq u e

Ta n z a n ia

B o tsw a n a N a m ib ia Z im b a b w e

A n g o la

Z a ire

Z a m b ia

M a la w i

B u ru n d i

K e n y a R w a n d a

U g a n d a

C o n g o

G a b o n

S o m a lia

E th io p ia

S u d a n

D jib o u ti

B e liz e

E g y p t L ib y a

C h a d

N ig e r

A lg e r ia

M a li

Tu n is ia

N ig e ria

C a m e ro o n C . A . R .

B e n in

To g o G h an a

B u rk in a F a so B a rb a d o s

D o m in ica

C ô te D ’Iv o ire

L ib e r ia

S ie rra L e o n e

G u in e a G u in e a -B iss a u

S e n e g a l T h e G a m b ia

M a u rita n ia

W este rn S ah ara (M o r.)

M o ro c c o

F in la n d N o rw a y

S w e d e n E sto n ia L a tv ia

L ith u a n ia

P o lan d

R o m a n ia

B u lg a r ia

T u rk e y G re e c e

C z ec h .

H u n g .

I ta ly A lb a n ia

P o rtu g a l

F ra n c e

S p a in

A u s . S w itz .

U n ite d K in g d o m

Ire la n d

D e n .

G e rm an y N e th .

B e l.

C y p .

Ye m e n

O m a n S a u d i A ra b ia U . A . E .

Q a ta r

I ra n I ra q

S y ria

Jo rd a n

Isra e l L eb . C h in a

M o n g o lia

R u ssia

A fg h a n is ta n

P a k is tan

In d ia

S ri L an k a M a ld iv e s

N e p a l B h u .

M y a n m a r (B u rm a ) B a n g .

A n d a m a n Is la n d s (In d ia )

T h a ila n d

In d o n e s ia

M a la y s ia

B ru n e i

P h ilip p in e s

Taiw a n

C a m b o d ia

V ie tn a m

L ao s

A u stra lia

P a p u a N ew G u in e a

N e w Z ea la n d

F iji

N e w C a led o n ia

S o lo m o n Is la n d s

K ir ib a ti

M a rsh a ll Is lan d s F e d e ra te d S ta te s o f M ic ro n es ia

G u am (U S A )

Ja p a n

N . K o re a

S . K o rea

K u ril Is la n d s

W ra n g e l Is la n d

A leu tian Is lan d s (U S A )

N e w S ib e r ia n Is la n d s

S e v e rn a y a Z e m ly a

N o v a y a Z e m ly a

F ra n z Jo se f L a n d S v a lb a rd (N o r.)

Ja n M a y en (N o r.) B a n k s Is lan d

Vic to r ia Is la n d B a ff in Is la n d

E lle sm e re Is lan d

Is lan d o f N e w fo u n d lan d

A n ta rc tic a

Î le s C ro ze t (F ra n ce )

Tas m an ia

S o u th G e o rg ia (a d m . b y U K , c la im e d b y A rg e n tin a )

F a lk la n d Is la n d s (Is la s M a lv in a s) (a d m . b y U K , c la im e d b y A rg e n tin a )

K u w a it C a n ary Is la n d s (S p .)

S a o To m e & P rin c ip e

S in g a p o re E q . G u in e a

F a ro e Is . (D en .)

K a z a k h s ta n

B e la ru s

U k ra in e

M o ld o v a

G e o rg ia A rm e n ia A z e rb a ijan

Tu rk m e n is ta n

U z b e k is ta n K y rg y z sta n

Yu g o .

M a c.

S lo v. C ro .

B o s .

S lo v a k .

E ritre a

Taj ik is ta n

H aw a iian Is lan d s

G a lap ag o s Is la n d s (E cu a d o r)

M a u ritiu s

S e y c h e lle s

6 0 °


Global Sales Management:Goals Are Goals, Right? Not Quite.

Most people agree on the big picture, but their implementation of sales management practices reflects nuances unique to their home cultures

Some researchers believe that globalization is causing sales management practices to converge

There is still variation Short-term goals in US Long-term goals in Japan “God willing” in Middle East

Sources: Cravens, David W., Nigel F. Piercy, and George S. Low (2006). “Globalization of the Sales Organization: Management Control and Its Consequences,” Organizational Dynamics (35)3: 291–303; T. Garrison (2001). International Business Culture. 3rd ed. Cambridgeshire, England: ELM Publications; and Honeycutt, Earl D., John B. Ford, and Antonis C. Simintiras (2003). Sales Management: Global Perspective. London: Routledge.


Different Types of Goals or Quotas

Input-Based Goals(Activity-Based Quotas)

Relate to the observable selling efforts a salesperson must make Number of sales calls Number of presentations Number of proposals Number of new clients

contacted Ensure the reps are performing

core selling activities

Output-Based Goals(Outcome-Based Goals)

Selling results a rep is expected to achieve Number of orders received Revenue generated Sales volumes Profits


Using a Combination of Goals

Sales volume traditionally most frequent measure Advantage: easily counted and analyzed Advantage: reps understand these goals Disadvantage: sole metric may not accurately provide

complete picture

Input + output goals Ensure certain customer

service activities are performed

And certain amount of profitable sales are made


Pipeline Analysis

Pipeline analysis: how well rep maintains stream of customers at different stages in sales process

Broken into the list of the top 5measurements in recent years


Typical Input and Output Goals

Where Should Your Salespeople Find Their Leads?


Source: CSO Insights


Metrics Related to Customer Service

<15% include customer retention and satisfaction metrics in their goals

Customer satisfaction can be difficult to measure

Sometimes easier to count number of customer complaints than gauge the service customers are getting More accurate but time-consuming approach is to

develop customer satisfaction measure consisting of a number of metrics

Example: student advising

Discussion Question

Customer service receives a lot of lip service and press, but when it comes down to using it as a sales goal, it presents some problems

Develop a possible customer service goal that could be used in a B2B setting



Expense Quotas

Keep the costs associated with rep’s sales in line with what the firm thinks the rep should spend in order to be successful

Often calculated as % of sales


Assigning Weights to Goals


Choosing the Right Metrics and Time Period to Track

Too many measures makes it more difficult to focus on the “critical few” metrics More than 7-9 metrics becomes difficult to manage

Most sales organizations establish their sales goals on a yearly basis Break down yearly figure into quarters and sometimes

monthly units Short or rapid sales cycles, such as in-bound call

centers or retail establishments, might use weekly or hourly units


Self-Assessment Library

Go to http://www.prenhall.com/sal/ Access code came with your book

Click the following Assessments

I. What About Me?D. Decision-Making Insights

5. What’s My Decision-Making Style?


What About Almost Meeting a Goal?

All-or-nothing approach

vs.

Reward for reaching part of a goal 90% threshold goal 100% actual goal 110% stretch goal


Should Salespeople Be Involved in Setting Their Own Goals?

>60% solicit input from sales force about goals set for them

Helps improve rep morale because managers better understand obstacles

Disadvantage: reps have incentive to lowball goals


When Is a Sale a Sale?

Count the sale when the product is either shipped or paid for

Difficult with long sales cycle

Compromise: offer partial credit (30%) when order is placed, remainder (70%) when order ships

Must clearly communicate this info to reps


Reasons for Not Reaching Sales Goals

Flawed sales projections based on limited marketing research

Changes in marketing mix variables resulting in inferior products or services

Increase in cost of supplies passed on to buyers via higher product prices

Promotional campaigns don’t produce projected results

Delays or other problems with distribution of products

New competitors and competing products entering marketplace

Environmental factors affect customer demand and cause customers to postpone or cancel their purchases

Change in laws and regulations preventing or restricting use of products and services or making them more expensive

Changes in the way firms do business, for example, as a result of new technology

False Reporting of Activities

Recently 2 inside salespeople had erroneously reported the number of leads that they had counted as part of their goals; their manipulation of these reports cost the company over $100,000 in lost opportunity costs

Their sales manager found their reporting inaccuracies

If you were the sales manager what would you do?

In this case, they were fired on the spot. Do you think this was too harsh?


For more details see, “The Right Path,” Gwen Moran, Selling Power, Nov./Dec. (2008), 28/9, 30-33.


Do Goals Ever Get Changed or Altered?

Most companies adjust goals yearly

Also common to adjust during the year

Shouldn’t adjust too many times through year Confusion Reps feel cheated


The Process of Setting Good Goals

SMART format for establishing goals

S pecific

Measurable

A chievable, yet challenging

Realistic

T ime-based


The Process of Setting Good Goals

Difficult goals lead to higher levels of performance Reps will put forth more effort when their goals are

somewhat difficult vs. too easy or too difficult

Specific, difficult goals lead to higher levels of effort than general ones Specific, difficult goals–for example, calling on 8 clients

a day–will lead to higher levels of performance


Ethics in Sales Management: When Do Difficult Goals Become Too Difficult?

Setting quotas so high that the average rep thinks it’s unobtainable can result in unethical behavior Example: dot-com ad sales, “just get the job done,” led

to rep lying to customers Example: Sears Automotive Centers, reps overcharged

for repairs and recommended unnecessary repairs

Damages reputations, sometimes causes businesses to close

Sources: Strout, Erin (2002). “To Tell the Truth,” Sales & Marketing Management (154)7: 40–47; andMitchell, Carol Vallone, Patricia M. Schaeffer, and Katherine A. Nelson (2005). “Rewarding EthicalBehavior,” workspan magazine (July), Vol. 48, No. 7.


Goal-Setting Impacts Performance

AffectPersistence

Harder goals will prolong effort Tight deadlines lead to meeting completion dates,

which helps work get accomplished

EnergizeReps

Goals are energizing Higher goals produce more effort than lower goals Knowing what’s expected gives reps a target

DirectEfforts

Goals provide focus and direction Direct attention and efforts toward goal-relevant

behaviors and away from less relevant behaviors

IncreaseProblem-Solving

Goals affect problem-solving skills People will seek new ways to accomplish difficult

goals


Practical Guidelines for Setting Goals

Set goals that are easy for sales representatives to understand,difficult to achieve, and have exact deadlines for completion

1

Important tasks not included as a goal may get ignored; if it’s important, then set a goal for its accomplishment

2

Having too many goals can create stress, keep the number of goals to a reasonable number; clarify importance for prioritization

3

Get reps to commit to their goals by explaining how they have been set

4


Practical Guidelines for Setting Goals

Clearly indicate how the sales performance will be measured and rewarded

5

Provide feedback as frequently as possible; encourage reps to use alternative approaches to sell if initial approaches don’t work

6

Make sure people know you have confidence in their ability to achieve their goals

7

Failing to achieve a goal should not be viewed as failure, it should be considered progress on the road to success

8


Role Play: Oval Track Promotions

OTP publishes magazine about NASCAR and other auto races

Offers 6 geographic versions of magazine

Each geographic area has own sales force

OTP has 7 years of growth, want next year to be better Research indicates more will spend $$ on auto racing

Sales goals set by managers, agreed to give reps resources and expense accounts commensurate with goals


Role Play (continued): Assignment

Divide into pairs 1 person is sales rep KR 1 person is KR’s sales manager Your district has the least interest in racing

Selling promotions here is harder than elsewhere

KR hired by previous mgr, works hard, driven by compensation, routinely meets goals, has abrasive personality Clients generally pleased, struggles with winning new clients

KR email, feels taken advantage of, goals are unrealistic

Conduct a goal-setting meeting with KR Discuss the new goal from your character’s perspective Explain why or why not you think it’s fair


Sales Manager’s Workshop

Your boss wants to incorporate more input from sales mgrs and reps before establishing goals

Rep territories vary by number of opportunities You’ve always voiced concern about increasing goals

by straight % across the board

Examine performance of your reps over last 24 months

Develop series of threshold, actual and stretch goals recommended for each rep for each product line


Caselet 11.1: All in a Day’s Work

“Helpful Hannah” sales manager

Hannah accidentally learns from a large client that rep Ella is using webcams to do half her sales calls instead of biweekly visits Client isn’t sure she likes this system Ella is doing her part environmentally, believes video visits

are as effective as face-to-face, claims sales to prove it

Syd Vance needs to increase new accounts, improve “adequate” customer service ratings Syd says he’s been very busy and really working hard Syd would like Hannah’s help in establishing new goals to

improve performance


Caselet 11.1 (continued): Questions

1. If you were Hannah, how would you handle your meeting with Ella?

2. If you were Hannah, how would you approach your session with Syd?

3. What specific goals would you suggest for Ella and Syd to improve their performance?


Caselet 11.2: Sandwiched In

Devin taking care of grandparents, children of his own (sandwich generation)

Devin’s not meeting his goal this quarter

Loyal customer could buy enough if he presses them to place large order

Seeking your advice Could use the money, worried that he could upset client

and lose account

Question: if you were Devin’s sales manager, what would you recommend?

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Sales Management: Shaping Future Sales Leaders Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall. 11-1 Copyright © 2009 Pearson Education,