ABM LESSON QUARTER 1, Essays (high school) of Economics

Download ABM LESSON QUARTER 1 and more Essays (high school) Economics in PDF only on Docsity! 1 Subject: SALES MANAGEMENT Course Code: MM-308 Author: Dr. Surinder Singh Kundu Lesson No.: 01 Vetter: Dr. V.K. Bishnoi SALES MANAGEMENT: AN OVERVIEW STRUCTURE 1.0 Objective 1.1 Introduction 1.2 Definition 1.3 Benefits of selling activities 1.4 Elements of sales management 1.5 Objectives of sales management 1.6 SMBO approach 1.6.1 Process of SMBO 1.6.2 Importance of SMBO 1.7 Organisation of selling unit 1.7.1 Need and Importance 1.7.2 Functions of Sale Organisation 1.7.3 Structure of Sales Organisation 1.7.4 Steps to establish a sales structure 1.8 Summary 1.9 Keywords 1.10 Self assessment questions 1.11 References/suggested readings 2 1.0 OBJECTIVE After going through this lesson, you will be able to- • Discuss the sales, sales management and related concepts. • Explain the structure and objectives of a sales organisation. 1.1 INTRODUCTION In daily life, a layman deals with different transaction in terms of selling and purchasing of goods and services. In these transactions the second one persuades the first person. Therefore, selling may be defined as persuading people to satisfy the want of first one. The person, who does this act, is called as the salesman, the result of this action as sales, while these activities of the person, are supervised and controlled by sales-management. In the present scenario sales executives are professionals. They plan, build and maintain effective organisations and design and utilize efficient control procedures. The professionals approach requires thorough analysis, market-efficient qualitative and quantitative personal-selling strategy. It calls for skilful application of organisational principles to the conduct of sales operations. In addition, the professional approach demands the ability to install, operate, and use control procedures appropriate to the firm’s situation and its objectives. Executives capable of applying the professional approach to sales management are in high demand today. The quality of selling is referred to as salesmanship. In other words, ‘management’ is synonymous with leadership. Managers do the same thing in industry, as ministers do in states and at the centre, i.e., they have to plan, forecast, direct and control their personnel. Here success lies in running together, hand in hand. Managers are the captains of the army of their followers. 5 client’s business or home-situation, examine existing coverage and offer helpful advice, in order to eliminate the gaps or overlaps in coverage, in addition to saving the client’s money. The sales-engineers are qualified to analyse technical-problems, which may be confronting a particular organisation and they can give the right recommendations for developing efficient operations. Like-wise, the medical- representatives may help the busy doctor, by keeping him abreast of new drugs in the market. The list of sales-people who can offer assistance to customers is practically without end. (3) Benefits to business firms; their sales-persons and customers: salespersons are owned by their companies, while customers are the end-users of the company’s product(s) and/or services, all these people, in the chain of marketing, stand to benefit by sales-activities. A business firm can be profitable only if its revenues exceed its costs. The prime responsibility of the salespersons is to sell the goods, produced by the organisation, at a profit. The creative sales-person, tries to penetrate his territory, and adopts suitable means and techniques of profitable-selling of goods and/or services. Business firms, derive various other benefits from, non-selling activities of sales-persons. The sales- person, in the field, is an ideal person, to keep the company abreast, or ahead of competition. He, thus, becomes an important source of field-intelligence by providing important (and sometimes very crucial) information, about the nature of 6 competitive-activities, and also about the changing needs of customers. The sales-force has the additional responsibility of serving the needs of customers that buy the film’s product(s). Most firms cannot survive, only on the basis of one-time sales; repeat-sales are necessary. This is possible only if the customers are served in a professional manner. A customer-oriented sales-person has to perform such activities as: providing customers with ‘product-information’ and ‘demonstration(s); training customers-employees, in product-use; providing customers with sales-advice; and assisting customers in maintaining ‘inventories’. 1.4 ELEMENTS OF SALES MANAGEMENT There are the four basic elements of sales management, discussed below: (1) Planning: a business cannot be taken as a chance. Every salespeople or person concerned have to see for the future, in a planned way like what must be done? And who will do it? The plan must be based on extensive market research, and the facts must be verified at every stage. The plan should also be evaluated, after investigating the total-market, for a particular type of product. Flexibility must be provided by establishing a specialists production line, to allow for variation in production. The plan should also be subject to continued review. The details of the plan should be discussed, with all the departmental heads, concerned, and 7 their sub-ordinates, who bear responsibility for fulfilling their parts of the plan. (2) Co-ordination: Co-ordination is all pervasive and permeates every function of the management-process. For example, ill planning, departmental-plans are integrated into a master. Plan, ensuring adequate co-ordination. Similarly, organising starts by co-ordination wholly, partially inter-departmental and inter-personnel matters. Co-ordination also helps in maximum utilisation of human-effort by the exercise of effective leadership, guidance, motivation, supervision, communication etc. The control-system also needs co- ordination. Co-ordination does not have any special techniques. Nevertheless, there are sound principles, on which to develop skills. It has a special need to help the staff, to see the total picture and co-ordinate their activities, with the rest of the team. The sales manager has to encourage direct personal-contact, within the organisation, particularly where there is lateral-leadership. Harmony, and not discord, should be the guiding mantra. In addition, one has to ensure free flow of information that is selective to the objectives of the business. No personal problems, arising from business- operations are to be ignored, but solved through a free- exchange of ideas. This is especially true in the case of the sales-force of any organisation. (3) Controlling: the sales manager has to check regularly, that the sales activities are moving in the right direction or not. He guides, leads, and motivates the subordinates, so as to 10 be in conflict with each other. For example, suppose you ask a salesman to cut his travelling expenses, and ask him to spend more time, in the field. To make these two requirements, more meaningful, they must be linked with specific time-element. The setting of objectives should not be based only on the judgment of the top-management. Rather, it should be formulated and finalised, with the involvement of the sales-force, at the grass-roots level. In addition, the process of setting of sales-objectives should begin, only after the company has conducted benchmark studies, to find out, as to where it stands in terms of product, brand and market-sales and market share trends (all in measurable terms). 1.6 SMBO APPROACH It is another approach to formulate and accomplish sales-objectives is the sales management by objectives (SMBO) technique. It is formulated combined by sales manager and sales-force (representatives). It aims to focus on (i) results, within a specified set of objectives and (ii) participative style of management. 1.6.1 Process of SMBO The operationalisation of SMBO is a process, comprising of the following steps: (i) Setting goals jointly with the salesman: In this process the goals for sales-man and sales managers are settled simultaneously in the organisation so that they can built a 11 close coordination between them and lastly they achieve the main objective of the organisation. (ii) Planning strategy to reach the objectives: His the participative style of sales. Management proves to be a boon to the top-management, in the sense of the close familiarity of the salesman, with their markets. The outcome of the joint exercise would be the development of a strategy that directs the salesman to his objectives, following a plan, in the correct sequence, with the correct timing, and must be efficient, in the use of resources of time and money. 1.6.2 Importance of SMBO The importance of SMBO for a business firm is as follows: (a) Directing the salesman towards the broader sales and marketing objectives of the Company; (b) Providing abetter approach, from the view-point of the salesman; and (c) Motivating the salesman. 1.7 ORGANISATION OF SELLING UNIT The main objective of any business firm is to sell effectively its goods and services to the consumer at reasonable prices. So long as the business undertaking operates on a small-scale; the proprietor can handle himself, or with the help of a few salesmen, under his direct- control and supervision. But, as the business grows and expands, the 12 size of the target market, to be covered to sell large quantities of goods and services becomes too large to be controlled by the owner of the business firm, personally. Therefore, these activities arises the need of a sales-organisation. Generally, an organisation is a structured-process in which individuals interact with each other for achieving stated-objectives. It is a social and dynamic system. It emphasises human-values. It is the job of management, to integrate and co-ordinate all its constituents. 1.7.1 Need and Importance The sales organisation is required for the following purposes: (i) To enable the top-management, to devote to more time in policy making for the growth and expansion of business. (ii) To divide and fix authority among the sub-ordinates so that they may shirk work. (iii) To avoid repetition of duties and functions so that there may not be any confusion among them. (iv) To locate responsibility of each and every employee so that they can complete the whole work in stipulated time; if not then the particular person must be responsible. (v) To establish the sales-routine in the business unit. (vi) To stimulate sales-effort. (vii) To enforce proper supervision of sales-force. 15 (xiii) Preparation of customer s record-card to the customer loyalty about the products. (xiv) Scrutiny and recording of reports to compare the other competitors and to compare with the past period. (xv) Study of statistical-records and reports for comparative analyses in terms of sales, etc. (xvi) Maintenance of salesman’s records to know their efficiency and to develop them. 1.7.3 Structure of Sales Organisation The structure of sales organisation differs from company to company. There may be a very small and simple one with only a few salesmen. At the other extreme, there may be quite complex, with many sub-organisations, based upon divisions, according to territory, product and marketing-functions. The structure of the sales-organisation, usually depends upon the following factors: (i) Nature and size of the firm. (ii) Methods of distribution, adopted by the firm. (iii) Selling-policies of the firm. (iv) Financial conditions of the firm. (v) Personality of the sales manager. The other dimension of the sales-organisation-structure, is related to 16 (i) What shall be the status of the sales manager? (ii) What functions shall his department perform? (iii) What shall be the strength of the department? etc. These are many issues, which, besides being based on the factors, listed in the procedure shall depend upon the state of the acceptance of the modem marketing concept, within the organisation, and the extent to which, it is found to permeate within it. We have some firms in India, where the sales manager is the head of total marketing and sales- operations of the company; others where the head of the sales-operations of the company, is a functional director of the company’s board of directors, and responsible for total sales-operations of the company. Further, to carry out the functions of the sales-organisation successfully, the sales department is divided into sub-departments. Each sub-department is put under an officer, who is responsible to the sales- manager, who is the head or chief executive officer (CEO) of the company. For example, in the case of a big business firm, these sub-departments could be (i) market-research, (ii) advertising, (iii) sales-promotion, (iv) recruitment and training, (v) credit and collection, (vi) sales-office for receiving the orders and arranging to dispatch goods to their destinations. 1.7.4 Steps to establish a sales structure The following procedure may be adopted to, establish a practical and viable sales-organisational structure: 17 (i) Begin with a historical profile of the company’s allegiance, overall organisation and top-management philosophy of the firm. (ii) Analyse the requirements of the company and the sales- department, particularly in terms of its: size, position in the market, nature of activities, product mix, nature of customers, state of competition, and sales-people and their ambitions. (iii) Appraise the potential of the company, in terms of its impact on the financial, technical, scientific and human resources, existing currently. (iv) Analyse the prevailing working-atmosphere and state of communications, especially from the view-point of relationship and human-feelings involved in such relationships. (v) List the various administrative-details, connected with the company. (vi) Prepare a note, relating to the various administrative-details including aspects like hierarchy, span of control, etc. on the sales-department, and overall organisation of the department. (vii) Describe the procedures and Processes to be followed for executing various tasks. 20 6. Write short notes on: (i) SMBO (ii) Organisational Structure of Call Center (iii) Selling activities of a firm. 1.11 REFERENCES/SUGGESTED READINGS 1. Still, Cundiff, and Govoni, ‘Sales Management’, PHI. 2. Stanton and Spiro, ‘Management of a Sales Force’, McGraw Hill. 3. Anderson, Joseph, and Bush, ‘Professional Sales Management’, McGraw Hill. 4. Roburt J. Calvin, ‘Sales Management’, Tata McGraw Hill. 5. Dalrymple, Cron, and Decarlo, ‘Sales Management’, John Wiley and Sons. 6. Manning and Reece, ‘Selling Today’, Pearson Education. 21 Subject: Sales Management Course Code: MM-308 Author: Dr. M.R.P. Singh Lesson No.: 02 Vetter: Dr. H. Bansal PERSONAL SELLING STRUCTURE 2.0 Objectives 2.1. Introduction 2.2 Personal selling objectives 2.3 Relevant situation for personal selling 2.4 Diversity of selling situations 2.5 Selling process 2.5.1 Prospecting 2.5.2 Preparation 2.5.3 Presentation 2.5.4 Handling objections 2.5.5 Closing 2.5.6 Follow-up 2.6 Summary 2.7 Keywords 2.8 Self assessment questions 2.9 References/Suggested readings 2.0 OBJECTIVES After going through this lesson, you should be able to- • Define personal selling and salesmanship. 22 • Explain personal selling objectives. • Discuss the importance and relevance of personal selling in different situations. • Explain the diversity of selling situation. • Elaborate the personal selling process. 2.1 INTRODUCTION Sales management, personal selling and salesmanship are all related. Sales management directs the personal selling effort, which in turn, is implemented largely through salesmanship. The term personal selling and salesmanship are often used without distinction. However, there are vital differences between two terms. Personal selling is a broader concept than salesmanship. Salesmanship is one of the aspects of personal selling. Salesmanship is one of the skills used in personal selling, it is not all of it. ‘Salesmanship is the art of successfully persuading prospects or customers to buy products or services from which they can derive suitable benefits, thereby increasing their total satisfaction’. Salesmanship is seller initiated effort that provides prospective buyers with information, and motivates them to make favourable decisions concerning the seller’s products or services. ‘Personal Selling’ is a highly distinctive form of promotion. It is basically a two way communication involving not only individual but social behaviour also. It aims at bringing the right products to the right customers. It takes several forms including calls by company’s sales representative, assistance by a sales clerk, an informal invitation from one company executive to another. It is employed for the purpose of 25 7. To provide technical advice and assistance to customers (as with complicated products and where products are especially designed to fit buyers’ specializations). 8. To assist (or handle) the training of middlemen’s sales personnel. 9. To provide advice and assistance to middlemen on management problems. 10. To collect and report market information of interest and use to company management. The basic considerations in setting qualitative personal selling objectives are decisions on sales policies and personal selling strategies and their role in the total promotional program. After this role is defined, qualitative long-term personal selling objectives are set. In turn, the qualitative personal selling objectives become the major determinants of the quantitative personal selling objectives. The quantitative objectives assigned to personal selling are short term and are adjusted from one promotional period to another. The sales volume objective-the rupee or unit sales volume management sets as the target for the promotional period-is the key quantitative objective. All other quantitative personal selling objectives are derived from or are related to the sales volume objective. Thus, discussion here focuses upon the setting of sales volume objectives. Setting the sales volume objective influences the setting of other quantitative personal selling objectives, among them the following: 1. To capture and retain a certain market share. 26 2. To obtain sales volume in ways that contribute to profitability (for example, by selling the “optimum” mix of company products). 3. To obtain some number of new accounts of given types. 4. To keep personal selling expenses within set limits. 5. To secure targeted percentages of certain accounts’ business. 2.3 RELEVANT SITUATION FOR PERSONAL SELLING Let us discuss some of the situations when personal selling in a company becomes more relevant. 1. Product situation: Personal selling is relatively more effective and economical in case: (a) When a product is of a high unit value like Xeroxing machine, computers etc. (b) When a product is in the introductory state of its life cycle and require creation of core demand. (c) A product requires personal attention to match specific consumer needs e.g. insurance policy. (d) Product requires demonstration e.g. most of the industrial products. (e) Product requires after-sales service. 27 (f) Product has no brand loyalty or very poor brand loyalty. 2. Market situation: Personal selling situation can be best utilized when: (a) A company is selling to a small number of large-size buyers. (b) A company sells in a small-local market or in government or institutional market. (c) Desired middle men or agents are not available. (d) An indirect channel or distribution is used for selling to merchant-middlemen only. 3. Company situation: Personal selling is relatively more effective and economical when: (a) The company is not in a position to identify and make use of suitable non-personal communication media. (b) A company cannot afford to have a large and regular advertising outlay. 4. Consumer behaviour situation: Personal selling is more effective when: (a) Purchases are valuable but infrequent. (b) Consumer needs instant answers to his questions. 30 assets. Even time required to sell the product is relatively less than consultative sales. Most of the technical purchasing requires approval of several people but only one or two people with technical knowledge influence decision. If the sales representative is able to satisfy these people with product characteristics, application, installation process, approval from higher management is usually forthcoming. The technical sales persons though not strangers to the process of making a sale, are trained to utilize the rational approach, by going into details of product utility and features. Commercial sales person: This field generally includes non- technical sales to business, industry, government and non-profit organization e.g. office equipment, wholesale goods, building products, business services and others. Unlike the previous two types, it is customary for the commercial sales person to make sales on first or second call. The process stresses approach to right person (decision maker), making a smooth presentation and closing the sales. The field is composed of order takers, to follow up and maintenance of accounts and order getter, to develop new accounts. Since these require different approaches, they normally require different personality traits e.g. the order getter are more aggressive and more highly motivated. Direct sales people: Direct sales are primarily concerned with the sales of products and services to ultimate consumers e.g. restaurants, door to door sales, insurance, encyclopaedias, magazines etc. There is normally some emotional appeal associated with this type of selling, thus 31 sales persons are required to possess strong persuasive ability. Often length of time to close sales is shortest in the case of above product categories. In fact, sales person are trained to close the sales on the first visit because it is felt if consumers are given time, they will either cool off from buying or will buy from competitor. 2.5 SELLING PROCESS All selling process contain the same basic steps, though the detail of each step and time required to complete it will vary according to the product that is being sold. For example: a door to door sales representative may go through all the steps from prospecting to closing of sale in a matter of ten to fifteen minutes in contrast, the selling process for computer or electronic typewriter may take several visits, even years, for getting an order. 2.5.1 Prospecting The selling process begins with prospecting or finding qualified potential customers. Except in retail selling, it is unlikely that customers will come to the sales person. In order to sell the product, the sales person must seek out potential customers, prospecting involves two major activities- (a) identifying potential customers also known as prospects; and (b) qualifying them in order to determine if they are valid prospects. (a) Identifying prospects 32 The identification of potential customers is not an easy job, especially for a new sales person. Rejection rate is quite high and immediate payoffs are usually minimal. In some consumer goods businesses, identification of prospects usually come from friends and acquaintances, other sales people, former customers, present customers etc. Few of the best sources and techniques for finding prospects are discussed below. Present customers: The best source of prospects is usually the sales person’s existing satisfied customers. It is much easier to sell additional goods and services to existing customers than to attract new customers. Indian companies are using this method of selling successfully. For example person or an organization who has purchased a portable typewriter from an office automation product company and is pleased with it is usually more receptive to purchase a bigger typewriter and similar product from the same company than someone else. This is the main reason, present customers should get first priority by the company when new products and services are introduced. Endless chain: This is also an effective prospecting tactics. In this method companies use satisfied customers as source of referrals. Sales representatives ask current customers for names of friends or business associates who might need similar products or services. Then, as the sales person contacts and sells to these prospects, more referrals are solicited. In this way the process continues further. Centre of Influence: Another effective prospecting technique based on referrals is the center of influence approach. A center of influence is a person with information about other people or influence 35 Need: Does the prospect need the product or service? If a sales person cannot establish that the customer will benefit from purchasing a product or service, there is no reason to waste a sales call. The prospect either will refuse the offer or will end up dissatisfied with the purchase. Before proceeding further the sales person should first appraise whether money, authority and need exist with the prospect. 2.5.2 Preparation After a prospect has been identified and qualified, the sales person prepares for the sale of product or service. The preparation stage involves the two key activities i.e. Pre-approach and Call Planning. (a) Pre-approach The pre-approach step includes all the information gathering activities necessary to learn relevant facts about the prospect and his or her needs and situations. Four necessary steps of pre-approach are: 1. It should disclose the party need and ability to buy. 2. It should provide information that will enable the seller to tailor the presentation to the prospect. 3. It should provide information that may keep the sales person from making serious tactical errors during the presentation. 4. Finally, a good pre-approached increases the sales person confidence and makes him confident to handle whatever may arise during the sales. 36 (b) Call planning Call planning involves a specific planning sequence. The sales person defines the objective of the call, devise a selling strategy to achieve this objective, and makes the appointments. The primary objective of any sales effort is to get an order. For some sales call intermediate objectives may be needed. Some examples of intermediate objectives are: • To obtain more information about the prospect. • To relate the prospects needs and concerns to features and benefits of the product or service. • To obtain permission for demonstration of the product. • To introduce a new distributor. The sales person must develop a strategy, or course of action to achieve his or her objective. Careful consideration of the prospect’s background and needs is required in order to able to formulate a tailor made strategy appropriate for the prospect. Since sales calls are costly, they should be arranged in advance. Cold calls i.e. calls without specific appointment may be appropriate for introducing the sales person or dropping off information. This method is generally inefficient for selling most products and services and is not consistent with modern professional selling. 2.5.3 Presentation After establishing rapport with the prospects through calls, the sales person proceeds to the formal sales presentation. The objective of the presentation is to explain how the product meets the special needs of the consumer. The job of the sales person is to inform the prospect about 37 the characteristics, capabilities and availability of goods and services that are for sale. In order to ensure that the presentation is understood by the prospect, the sales person should be clear in his/her communication. Presentation should also be interesting enough to keep the attention of the prospect focused on the proposal. Sales presentations are classified into the different categories: Fully automated, Semi-automated, Memorized, Organized, and Unstructured. Fully automated: The fully automated presentation is the most highly structured approach, based on film or slide presentations. The sales person simply answer questions or clear up doubts. e.g. selling life insurance to the rural or semi-urban prospects. Semi-automated: In this approach, the sales person reads from brochures or literatures, adding comments to the prepared materials when necessary. A common example is selling of pharmaceutical products by medical representatives. Memorized: In memorized presentation, company message is presented, with few changes initiated by the sales person. Organised presentation: The most popular and often the most effective sales presentation method is the organized presentation. With this method the sales person has complete flexibility in oral communication but follows a company prepared outline or checklist. The organized approach best exemplifies the selling process in which customers are moved through four stages to a purchase decision; i.e. attention, interest, desire and action (AIDA). 40 2.5.4 Handling objections All sales person confront sales resistance i.e. actions or statements by a prospects that postpone, hinder or prevent the completion of the sale. Normally sales resistance takes the form of an objection which can be classified as stated or hidden. Prospects may state their objections to a proposition openly and give the sales person a chance to answer them. This is an ideal situation because everything is out in the open and the sales person does not need to read the prospect’s mind. Unfortunately, in many instances prospects hide their real reasons for not buying. Beside having hidden objections, their stated objection may be phoney. Unless one can determine the real barrier to the sale one shall not be able to overcome it. There are two major techniques for discovering hidden objections. One is to keep the prospect talking by asking probing questions. The other is to use insights gained through experience in selling the product, combined with a knowledge of the prospects situation, to perceive the hidden objection. Often objection to price and product are also faced by sales person either in a form of unaffordable or too high price. Product objections can be answered best when sales people have extensive product knowledge of both their own products and competitors. Many times prospects may be misinformed or may not understand some of the technical aspects of the proposition. In this case, the sales person should provide additional information. Even the prospects objections can be met simply and effectively by altering the product to suit the customer. 41 2.5.5 Closing After having answered and overcome objections, it is the stage for sales person to ask for the order from the prospects. The entire effort is wasted unless the sales person can get the prospect to agree to buy the product. There are several closing techniques which are being used by sales person in India. Sales person should select among these technique one that fits the specific prospect and selling situation. Now we would discuss few effective closing techniques. In action close technique the sales person take an action that will complete the sale e.g. in case of high priced products like Motorcar, photocopier or industrial product the sales person may negotiate with the financial institution for financial assistance for the prospects. The gift close technique provides the prospect with an added incentive for taking immediate buying action. In one more yes close techniques, the sales persons restates the benefits of the products in a series of questions that will result in positive responses by the prospects. The process may result in an order. The direct close is clear and simple technique, many sales persons feel that this is the best approach for closing, especially if there are strong positive buying motives, the sales person will summarise the major points that were made during presentation to the prospects prior to asking for the sale. Experienced sales people always try to close early. If they are not successful, they continue the presentation and then try a different closing technique. Good sales person know that if they have successfully 42 completed all of the earlier steps, then the prospect is worth an extra effort at closing. In most cases this simply means switching to a different type of close. Closing is the most important aspect of the sales process. Unless the sales person can close the sale, the other steps in the sales process are meaningless. 2.5.6 Follow-up The selling process is not completed by merely making the sale, as generally assumed by many sales person. After sales activities are important part of the whole selling process. Effective sales-follow-up reduces the buyer’s doubt about the product or services and improves the chance that the person will buy again in the future. In addition to post-sale activities, sales person are also required to maintain good customer relations. Now-a-days many companies are evolving specific policies and practices to ensure that customer’s needs are not neglected. No matter how efficient a company is, there are always some customer complaints. The complaint should be taken seriously and handled with concern. The customer must know that the company cares about maintaining good customer relations. Reasonably frequent contacts with the present customers are, an expected part of the sales person’s job. For important customers, personal visit are appropriate. Letters, notes, phone calls, greetings are also good ways to keep in touch with customers. Many good business house also offer customer newsletter. Successful sales person never stop serving customers. In addition to handling complaints, they keep customer informed about the latest 45 3. Anderson, Joseph, and Bush, ‘Professional Sales Management’, McGraw Hill. 4. Roburt J. Calvin, ‘Sales Management’, Tata McGraw Hill. 5. Dalrymple, Cron, and Decarlo, ‘Sales Management’, John Wiley and Sons. 6. Manning and Reece, ‘Selling Today’, Pearson Education. 46 Subject: Sales Management Course Code: MM-308 Author: Dr. M.R.P. Singh Lesson No.: 03 Vetter: Dr. V.K. Bishnoi RECRUITMENT AND SELECTION STRUCTURE 3.0 Objective 3.1 Introduction 3.2 Recruitment process 3.3 Sources of recruitment 3.4 Selection process 3.5 Summary 3.6 Keywords 3.7 Self assessment questions 3.8 References/Suggested readings 3.0 OBJECTIVE After going through this lesson, you will be able to- • Learn the process of recruitment and various sources of it • Understand the steps involved in selection process. 3.1 INTRODUCTION Recruitment is a positive process in which a company attract a pool of talented people, whereas selection is a negative process through which they screen people and finally select desired number of personnel who are offered appointment. Attracting and selecting new sales 47 personnel is an important aspect of the sales manager's job. Recruitment is the procedure to obtain a good number of people with the potential capability of becoming good sales personnel. After attracting a large number of people, it becomes feasible to select the individuals, which fit the needs of the organization. Appropriate recruiting and selection policies and procedures, and their skilful execution result in greater overall efficiency of sales department. Good selection fits the right person to the right job, thereby increasing job satisfaction and reducing the cost of personnel turnover. In addition training costs are reduced, either because those hired are more capable of absorbing training or because they require less formal training. 3.2 RECRUITMENT PROCESS To ensure the new recruits have the aptitude necessary to be successful in a particular type of sales job, certain procedures should be followed in the recruitment process. The steps in this process are: (a) Conducting a job analysis Before a company can search for a particular type of salesperson, it must know something about the sales job to be filled. To aid in the process, a job analysis should be conducted to identify the duties, requirements, responsibilities, and conditions involved in the job. A proper job analysis involves following steps: 1. Analyze the environment in which the salesperson is to work. For example: (a) what is the nature of the competition faced by the salesperson in this job? (b) what is the nature of the customers to be contacted, and what kinds of problems do 50 potentially effective salespeople. The candidates recruited become the reserve pool of sales staff from which new salespeople will be chosen. The quality of this group will predict the future successes or problems of the sales organization. 3.3 SOURCES OF RECRUITMENT There are many places a sales manager can go to find recruits. Sales managers should analyze each potential source to determine which ones will produce the best recruits for the sales position to be filled. Once good sources are identified, sales managers should maintain a continuing relationship with them, even during periods when no hiring is being done. Good sources are hard to find, and goodwill must be established between the firm and the source to ensure good recruits in the future. Some firms will use only one source; others will use several. The most frequently used sources are persons within the company, competitors, non-competing companies, educational institutions, advertisements, and employment agencies. (a) Persons within the company Companies often recruit salespeople from other departments, such as production or engineering, and from the non-selling section of the sales department. The people are already familiar with company policies as well as the technical aspects of the product itself. The chance of finding good salespeople within the company should be excellent because sales managers know the people and are aware of their sales potential. In fact, most firms turn to non-sale personnel within the company as their first source of new sales recruits. 51 Hiring people from within the company can lift morale because a transfer to sales is often viewed as a promotion. But transferring outstanding workers from the plant or office into the sales department does not guarantee success. In some cases hostility can arise among plant and office supervisors, who feel their personnel are being taken by the sales department. Recommendations from the present sales force and sales executive usually yield better prospects than those of other employees because the people in sales understand the needed qualifications. (b) Competitors Salespeople recruited from a competitor are trained, have experience of selling similar products to similar markets, and should be ready to sell almost immediately. But usually a premium must be paid in order to attract them from their present jobs. Some sales managers are reluctant to hire competitors' salespeople because the practice is sometimes viewed as unethical. But is it? Is it really any different than attempting to take a competitor's customers or market share? No. But it is unethical if the salesperson uses valuable confidential information in competing against the former employer. Recruiting competitors' salespeople may bring other problems. Although these people are highly trained and know the market and the product very well. It is often hard for them to unlearn old practices. They may not be compatible with the new organization and management. Also, recruits from a competitors usually are expected to switch their 52 customers to the new business; if they are unable to do so, their new employer may be disappointed. The potential for these problems to arise may be evaluated with one question: why is this person leaving the present employer? A satisfactory answer to this question frequently clears up many doubts and usually leads to a valuable employee. The difficulty arises, however, in determining the real answer. Often, it is almost impossible to assess accurately why someone is looking for another job. Good sales managers must be able to evaluate effectively the information they get. (c) Non-competing companies Non-competing firms can provide a good source of trained and experienced salespeople, especially if they are selling similar products or selling to the same market. Even though some recruits may be unfamiliar with the recruiting firm's product line, they do have selling experience and require less training. Companies that are either vendors or customers of the recruiting firm can also be an excellent source of candidates. Recruits from these sources already have some knowledge of the company from having sold to or purchased from it; their familiarity reduces the time it will take to make them productive employees. Another advantage of recruits from the sources is that they are already familiar with the industry. (d) Educational institutions High schools, adult evening classes, business colleges, vocational schools, junior colleges, and universities are all excellent sources of sales 55 screening candidates so that recruiters may spend more time with those prospects who are most highly qualified for the job. 3.4 SELECTION PROCESS The recruiting process furnishes the sales manager with a pool of applicants from which to choose. The selection process involves choosing the candidates who best meet the qualifications and have the greatest aptitude for the job. There are numerous tools, techniques, and procedures that can be used in the selection process. Companies typically use initial screening interviews, application forms, in-depth interviews, reference checks, physical examinations, and tests as selection tools. None of these should be used alone. Each is designed to collect different information. While successful selection of sales applicants does not necessitate the use of all the tools and techniques, the more that are used, the higher the probability of selecting successful sales personnel. Selection tools and techniques are only aids to sound executive judgement. They can eliminate the obviously unqualified candidates and generally spot the more competent individuals. However, in regard to the majority or recruits who normally fall between these extremes, the current tools can only suggest which ones will be successful in sales. As a result executive judgement is heavily relied on in selecting salespeople. (a) Initial screening interviews The steps in the selection process vary from company to company, depending on the size of the company, the number of salespeople needed, 56 and the importance of the position to be filled. The purpose of the initial screening interview is to eliminate, as soon as possible, the undesirable recruits. Initial screening may start with an application form, an interview, or some type of test. But no matter which tool is initially used , it should be brief. The shorter it is, the ore it will cut down on costs. But it must not be so brief that it screens out good candidates. (b) Application forms Application forms are one of the two most widely used selection tools (the other is the personal interview). An application form is an easy means of collecting information necessary for determining an applicant's qualifications. Information requested on forms usually includes name, address, position applied for, physical condition, educational background, work experience, participation in social organizations, outside interests and activities, and personal references. Other important questions on an application form relate directly to the sales position for which the application is made. For example: • Why do you want this job? • Why do you want to change jobs? • What minimum income do you require? • Are you willing to travel? • Are you willing to be transferred? • Are you willing to use your car for business? • What do you want to be doing five years from now? Ten years from now? 57 Application forms will differ from company to company. On all forms, however, it is illegal to include questions that are not related to the job. Some companies use a weighted application form that has been developed from the regular application form by analyzing the various items that help distinguish between good and poor salespeople. If companies can show that items such as educational level, and years of selling experience tend to be more related to success than are other items, then more weight (importance) can be placed on them in making hiring decisions. Thus, applicants who rate higher than an established minimum number of points on these items are considered, and those who fail to reach the cutoff point are usually rejected. An important function of application forms is to help sales managers prepare for personal interviews with candidates for sales positions. By looking over the application form before the interview, the sales manager can get an initial impression of the applicant and can prepare a list of questions to ask during the interview. (c) In-depth interviews The interview is the most used of the various tools for selecting employees. A salesperson is seldom hired without a personal interview. In fact, as many as three or four interviews are usually conducted with the most desirable candidates. No other selection tool can take the place of getting to know the applicants personally. The personal interview is used to help determine if a person is right for the job. It can bring out personal characteristics that no other 60 In general, the quality of reference checks as a selection tool is questionable. Checking on the names supplied by a candidate is often seen as a waste of time because it is unlikely that serious problems will be uncovered. Therefore, many firms try to talk with people who know the applicant but were not listed on the application form. For reference checking to be a useful selection tool, the sales manager must be resourceful and pursue leads that are not directly given. If only one significant fact is uncovered, it usually makes the effort worthwhile. References from teachers and former employers are generally more helpful than other types of references. Teachers can usually give an indication of intelligence, work habits, and personality traits. Former employers can be used to find out why the person left the job and how well he or she got along with others. Reference checks can uncover information about an applicant that may alter a sales manager's perceptions of the person's sales ability. (e) Physical examinations Many sales jobs require a degree of physical activity and stamina. Poor physical condition can only hinder a salesperson's job performance; therefore, a company should insist on a thorough medical examination for all its sales recruits. The results from the examination should be interpreted by a doctor who is familiar with the demands of the sales job, and the sales manager should be notified of the results. Because of their expense, physical examinations usually are not given until a recruit has passed most of the steps in the selection process. (f) Tests 61 Tests are the most controversial tools used in the selection process. The need for application forms, reference checks, and personal interviews is seldom disputed, but there are differences of opinion about whether tests are necessary in the hiring of salespeople. Questions regarding the legality of testing have increased the complexity and the controversy surrounding the use of tests as a screening tool. But research has shown that test profile data can be useful to management in the process of selecting and classifying sales applicants who are likely to be high performers. There are some basic tests used in the selection process of sales personnel. Intelligence tests: These tests measure raw intelligence and trainability. Recent research has indicated that a salesperson's cognitive ability or intelligence is the best indicator of future job performance. Thus, although once looked down upon, the intelligence test is slowly regaining status as the most effective tool for selecting salespeople. Knowledge tests: These tests are designed to measure what the applicant knows about a certain product, service, market, and the like. Sales aptitude test: These tests measure a person's innate or acquired social skills and selling know-how as well as tact and diplomacy. Vocational interest tests: These tests measure the applicant's vocational interest, the assumption being that a person is going to be more effective and stable if he or she has a strong interest in selling. 62 Personality tests- these tests attempt to measure the behavioural traits believed necessary for success in selling, such as assertiveness, initiative, and extroversion. 3.5 SUMMARY Recruiting applicants in today's business environment is a very important and challenging task for the sales manager. Companies use several sources to find qualified applicants. The search can begin within the company by seeking individuals from other departments such as production, marketing etc., some of the external sources include competitive and non-competitive firms, educational institutions, advertisements, and employment agencies. Recruiters must recognize the top rated candidates can come from any source. However, with the increasing costs of recruiting, sales managers must be careful to devote their time to the most productive sources. Selecting good applicants is an extremely important and challenging task for the sales manager. It is critical that the sales manager select the candidate who best meet the qualification established by the company. Some of the tools companies use during the selection process include screening interviews, application forms, in-depth interviews, reference checks, physical examinations, and tests. Once the process of recruiting and selection is complete, the new salesperson must be integrated into the sales force. 3.6 KEYWORDS Recruitment: It is a positive process in which a company attract a pool of talented people, who can be future sales force. 65 Subject: Sales Management Course Code: MM-308 Author: Dr. Surinder Singh Kundu Lesson No.: 04 Vetter: Dr. H. Bansal SALES TRAINING STRUCTURE 4.0 Objective 4.1 Introduction 4.2 Sales force training 4.3 Sales force development 4.4 Methods of improving sales-force productivity 4.5 Summary 4.6 Keywords 4.7 Self assessment questions 4.8 References/Suggested readings 4.0 OBJECTIVE After going through this lesson, you will be able to- • Discuss the sales force and its training, and development processes to achieve the objectives and good results in a business unit. • Explain the methods of improving the productivity of sales force. 66 4.1 INTRODUCTION For effective operation of selling activities, sale force in terms of manpower and womanpower is necessary for a business concern. For attaining predetermined objectives; it is imperative that entire manpower should be in place. Manpower i.e. in this case salesforce is one of the most precious resources of a business unit. It takes a lot of years to build-up and to develop itself for efficient and effective working. As we know that the effective sales organisation is the antipathy of any competitor. However, it must be emphasised that the Sales-Force can be effective only when the other ingredients of the Marketing-Mix: product, price, place and promotion are equally sound and intact. To expect sales- people to become more productive; it is hardly fair. Each ingredient of this Mix has to be emphasised equally so that its productivity may be improved. Thus, the Sales-Force is the infantry that has to visit customers, and/or channels of distribution to impart information and knowledge; actually obtain orders from specific customers, and ensure that existing customers are happy and satisfied with the company and its service provided to them apart from, of course, looking for new prospects. 4.2 SALES FORCE TRAINING Training is very much important for salesforce to ensure that the contents related to the product are described to the potential customer and exiting customers efficiently and effectively. Generally, training means to train the employees i.e. to improve their productivity to face the challenges created by competition. The art of selling lies in presenting the benefits and multi-uses of the product so that the buyer gets the feeling of satisfaction to his needs. 67 Not only, it is expected from a successful salesman that he must be well informed/intelligent in terms of knowledge but also he must be skilled in the presentation of information/knowledge of himself. A salesforce training programme, thus, aims at providing the required knowledge about the products and the effective ways presentation to the customers in the market. The nature and scale of both these skills should be specified, in advance, so that the programme so conceived is directed towards predetermined and definite goals. The Training-Programme may be for the-newly recruited salesmen as well as those already in employment with the company to refresh their knowledge. So, the first task for the Sales Manager/Training Manager is to set objectives for such type of training programmes. For this purpose, the first step is to identify the gap between the standard of skills required and Salesman’s current standard in the organisation/company. The level, they are supposed to achieve can be known easily by reference to job specifications. Current-levels of skills, in the case of existing Salesmen, can be determined through observations of their actual working i.e., their knowledge about Product, Competition, selling- skills etc. Though, a good Training-Programme should clearly state what the Trainees are expected to do, after their Training and the period within which they should be able to do it. For guidance, the Training Manager, may include Knowledge-Areas, viz. the Company, its Products, Practices and Procedures; as well as the Product/Services and their Competition. The Skill-Areas include (i) Sales-techniques, (ii) Work-Organisation, and (iii) Reporting-System. Depending on the nature of a Company, there may be certain other exclusive, supplementary areas, where Training may also be needed. 70 training-programme ends with the achievement of basic-objectives laid down for it. By this time the trainee is expected to have acquired basic grounding in (i) product-knowledge, (ii) the company and (iii) the desired level of skills in sales-techniques, and maybe considered to be fit to be exposed to actual field conditions, i.e., then starts the on-the-job training. It is here, that he applies the principles enunciated during his training. It is absolutely necessary that the supervisor looks after each new entrant; and ensures their proper seasoning. Sometimes, a new entrant is assigned to an experienced senior salesman, for a couple of weeks, so that he gets practical training; before-assuming charge of his independent territory. It is sometimes said, if the trainee has not learnt, the trainer has not taught. In fact, it is true; because, as we know that after a series of tests, analysis etc.; a person of below average qualities cannot get selected for the job. So, unless the training-methods are devised and planned well in advance, it would result in a huge waste of valuable resources of the company. A good training schedule may be prepared on the basis of ACMEE principle, where’ A’ = Aim of the Training; ‘C’ = Content of the Training; ‘M’ = Method of the Training; ‘E’ = Execution of the training-programme, and ‘E’ = Evaluation. A Training- Programme should be executed scientifically, and a post-evaluation should be made after each kind of Training. 4.3 SALES FORCE DEVELOPMENT It is assumed that the newly trained salesmen charge of his territory after initial-training freely. But, the sales manager must ensure the ways for their continuous development. The standards of performance that the salespeople have learnt during their training must 71 be properly channelised. It has been noticed that even the seniors, with good performance-records, need assistance, to give continued good performance. And it must be remembered that the development is a continuous process and is the key to make the sales-force really more and more productive/efficient. Development-process could be carried out in two ways: (1) Field, i.e., on-the-job training, where sales-executive develops each individual new-entrant salesman, under his charge, during his day-to-day working, and (2) Through sales-meetings, refresher courses and development programmes, at the office. Field- training aims at rendering continuous help to the salesman, to get over his initial difficulties; and perform better on an on-going- basis. For this, the sales-executive in-charge has to follow the points: (i) Compares his charge’s field-performance regularly, (compared with the set standards) and reasons for variances are established. (ii) Weak areas are also identified, and the salesman is educated, on how to overcome them. The new-entrant salesman is encouraged to incorporate offered suggestions in his work. (iii) The weak areas observed by the sales-executive in-charge, should be tabulated on corporate basis. This will reveal general weaknesses of initial training, and would help set 72 objectives of the refresher course for the future. It will also help in improving the quality of training for future batches. 4.4 METHODS OF IMPROVING SALES-FORCE PRODUCTIVITY In the ensuing lines, it is tried to explore a few important areas, in which Marketing- . Oriented Companies can help their sales- force, to act and perform in a more productive manner. (1) Identifying the Perfect Customer Every time the company must do the task of personal selling’s sales-force. The salesman haste call on prospects and tries to convert them into customers. One of the drawbacks of asking salespeople to carryout a number of calls-per-period is the danger that one tends to concentrate on the number, rather than on the quality of calls. However, it is more sensible, to target one’s effort on a smaller number of better calls. At this point, they can plan their day in a more effective way, by allowing more of their time and effort upon A=Excellent or B=Good Customers; some time on the C=Fair and none on the D=Poor. That would mean that the ‘Call-rate’ can be better targeted on promising- prospects, and little time is wasted on contacts, which are less likely to yield results i.e. sales. The preparation 0fahit-list designating levels of attractiveness to potential-customers, can thus, be a powerful tool to spur productivity, in the selling-effort. In the case of industrial goods, one can use the standard industrial classifications (sics), as the basis for categorisation of customers. This is particularly valuable, if market research has established which group/class, in the classification, offers promising-pickings. However, the company may adopt its own basis to 75 programme with DMU-members of these Companies. It is rather surprising to note that a large number of firms do not bother to collect the most elementary information about the client-company, even where the total catchments market consists of only not more than a couple of dozen companies. (3) Learning from the Star Performers Sales-Force is a heterogenic lot of numerous personalities. That makes it rather impossible to achieve total homogeneity of behaviour; attitude; and performances. There are the high-flyers at one extreme, and sloggers at the other; the former are enthusiastic, creative and effective; 1he latter may work hard, but results do not come easily to them. However, by analysing the level of performance of individual sales-people, one can easily designate, the top ten percent as the stars; the next twenty percent as good; the next thirty as adequate; and the remaining forty percent are treated as ‘problem children’. Once the sales-force has been categorised into clearly defined Groups, based on their performance quality, ‘one can ask a simple question: “What does the ‘Star ‘do, which is so very different from that of others?” If one could identify, in some detail, how the ‘Star’ behaves, in front of a “Customer”, the way he (or she) communicates the message, plans and manages time, uses Sales-Aids etc., one would know how to develop new training-methods, for the rest of the force. Thus, an insight would be gained, into the Selling and Buying-Environment, and this should help in discovering areas, in which Productivity could be improved. 76 (4) Sales-Meetings (Conferences) This is another, important avenue for the development of the sales- force. The “objectives” of such sales-meetings are: (i) training and development of individuals; (ii) to inform and get the feedback- information; (iii) to stimulate and motivate, and (iv) to provide a common platform for exchange of experience. A sales meeting to be successful, should have the following in-built ingredients: (a) Location: It should be held at a place, where any additional information, can be easily made available. Company’s Headquarters; Head Office of the Sales Manager; or that of the Regional Manager, are ideally suitable. Adequate arrangement should be made for the seating of the participants, and proper and “business-like atmosphere” should be created. (b) Audience: The level of intelligence of participants should be considered. This will help in selecting and assigning the subjects for discussion, to suitable hands. (c) Agenda: A proper Agenda should be framed, keeping in view the needs, for which the Meeting is being held. The agenda should be made known to the participants in advance. (d) Periodicity: The sales meeting should have a definite periodicity. National-level sales-meetings/conferences, are usually an annual affair. This ensures that the participants are well prepared. (e) Activities: There should be proper allocation of work, so that each participant knows what to expect from whom. The Convener should 77 do well to ensure a “participative atmosphere” in the Meeting. A little ‘Creativity’, on his part, will go a long way, in ensuring success of the meeting. (5) Kerb-Side Conferences These conferences aim at a random appraisal of the performance of a sales-man, and is usually done on a monthly basis, taking a day’s work into consideration. It should be ensured that (i) the salesman is not calling on his friendly customers on that day, and (ii) the presence of the appraiser, does not influence the sales-person’s work-pattern. The appraiser has to watch the salesman, during the day and keep a mental note of his strong and weak areas. After the call(s) is/are over the day, the appraiser and the salesman deferred to a quiet place, where the work is systematically appraised; and properly recorded and graded, on an appraisal-form. It is essential that the agreement of the salesman be obtained to such an appraisal-form. This will put him in a proper frame of mind, and he will be receptive to suggestions. The sequence of this appraisal, could be like this: (i) the appraiser appreciates the skills that have been employed; (ii) the salesman is now asked to analyse the call(s), identify the problems not properly tackled, and reasons thereof; (iii) if the salesman fails to identify his weak areas, even after questioning, the appraiser tells him about these, in very clear terms; (iv) once the deficiencies have been isolated, salesman’s concurrence, on his weaknesses is obtained; (v) the appraiser, then gives instructions, on how to overcome these weaknesses. The salesman, may in some cases be asked to rehearse these, to reduce the element of any doubt; (vi) any follow-up action is then specifically pointed out; (vii) before 80 perfect customer, his decision-making unit (DMU), and learning from star-performers. Further, national and regional conferences and sales bulletins etc. Also help in this process/activity. 4.6 KEYWORDS DMU: Sales persons deals with a number of customers– deciders, buyers, influencers, users etc. This concept of Decision Making Unit suggests that sales personnel must understand the way this unit, as a whole, functions. Star Performers: Sales force is heterogenic lot of numerous personalities. Star performers are the top lot of sales force based on performance. Sales Force: Common nomenclature for sales personnel, sales executive, salesman etc. Sales Bulletins: It is a medium to keep salesman educated about day-to-day matters of interests for their development. 4.7 SELF ASSESSMENT QUESTIONS 1. What do you mean by sales-person and sales-force? How these two have become so important in success of firm? 2. What are the objectives of a sales-organisation? What are their essential requirements? How would you set them, as a sales manager, of a cotton textile company? 3. Explain the following: 81 (i) Recruitment and selection of a sales-force, its importance and the processes. (ii) Job-requirements of a salesman. (iii) Kerb-side conferences; (iv) Refresher courses, conferences and sales bulletins; their use and importance. 4. How to improve sales-force’s productivity. Explain. 5. “A well-organised and developed sales-force is the envy of your competitors.” Comment and discuss, with examples. 4.8 REFERENCES/SUGGESTED READINGS 1. Still, Cundiff, and Govoni, ‘Sales Management’, PHI. 2. Stanton and Spiro, ‘Management of a Sales Force’, McGraw Hill. 3. Anderson, Joseph, and Bush, ‘Professional Sales Management’, McGraw Hill. 4. Roburt J. Calvin, ‘Sales Management’, Tata McGraw Hill. 5. Dalrymple, Cron, and Decarlo, ‘Sales Management’, John Wiley and Sons. 6. Manning and Reece, ‘Selling Today’, Pearson Education. 82 Subject: Sales Management Course Code: MM-308 Author: Dr. M.R.P. Singh Lesson No.: 05 Vetter: Dr. V.K. Bishnoi COMPENSATION AND MOTIVATION OF SALES PERSONNEL STRUCTURE 5.0 Objectives 5.1 Introduction 5.2 Requirements of a good sales compensation plan 5.3 Devising a sales compensation plan 5.4 Types of compensation 5.5 Factors influencing compensation 5.6 Dimensions of sales motivation 5.7 Importance of motivation 5.8 Motivation theories 5.9 Motivational tools 5.10 Summary 5.11 Keywords 5.12 Self assessment questions 5.13 References/Suggested readings 5.0 OBJECTIVES After going through this lesson, you will be able to- • Explain the importance of compensation and motivation. 85 of company operations are considered in relation to their impact upon the sales job. Sales department objectives are analyzed for their effect on the salesperson’s job. The impact of sales-related marketing policies is determined. Distribution policies, credit policies, price policies, and other policies affect the salesperson’s job. Current and proposed advertising and sales promotional programs assist in clarifying the nature of the salesperson’s goals, duties, and activities. Most large companies, and many smaller ones, use job evaluation system to determine the relative value of individual jobs. Job evaluation procedure is not scientific; it is an orderly approach based on judgement. It focuses on the jobs, without considering the ability or personality of individuals who do the work. Its purpose is to arrive at fair compensation relationships among jobs. Traditionally, sales executives have opposed using formal job evaluations to determine the compensation levels of sales personnel. They contend that compensation levels for sales personnel are more closely related to external supply-and-demand factors than to conditions inside the company. Because compensation levels for sales personnel are related to external supply-and-demand factors, it is important to consider prevailing compensation patterns in the community and industry. Management needs answers to four questions- (1) What compensation systems are being used? (2) What is the average compensation for similar positions? (3) How are other companies doing with their plans? and (4) What are the pros and cons of departing from industry or community patterns? 86 A programme for setting compensation of sales personnel is sound only if it considers the relation of external compensation practices to those of the company. Effective sales executives maintain constant vigilance against the possibility that the pay of sales personnel will get out of line with that paid for similar jobs in the community or industry. Management must determine the amount of compensation salesperson should receive. Although the compensation level might be set through individual bargaining, or on an arbitrary judgement basis, neither expedient is recommended. Management should ascertain whether the caliber of the present sales force measures up to what the company would like to have. Management weights the worth of individual persons through estimating the sales and profit that would be lost if particular salespeople resigned. Another consideration is the compensation amount the company can afford to pay. A sales compensation plan has as many as four basic elements: (1) a fixed element, either a salary or a drawing account, to provide some stability of income; (2) a variable element (for example, a commission, bonus, or profit-sharing arrangement), to serve as an incentive; (3) an element covering the fringe or “plus factor”, such as paid vacations, sickness and accident benefits, life insurance, pensions, and the like; and (4) an element providing for reimbursement of expenses or payment of expense allowances. Not every company includes all four elements. Management selects the combination of elements that best fits the selling situation. Management should consult the present sales personnel. Management should encourage sales personnel to articulate their likes 87 and dislikes about the current plan and to suggest changes in it. Criticisms and suggestions are appraised relative to the plan or plans under consideration. For clarification and to eliminate inconsistencies the tentative plan is put in writing. Then it is pre-tested. The amount of testing required depends upon how much the new plan differs from the one in use. The greater the difference, the more thorough is the testing. Pretests of compensation plans are almost always mathematical and usually computerized. The plan is then revised to eliminate trouble spots or deficiencies. If alternations are extensive, the revised plan goes through further pretests and perhaps another pilot test. At the time the new plan is implemented, it is explained to sales personnel. Management should convince them of its basic fairness and logic. The sales personnel are made to understand what management hopes to accomplish through the new plan and how this is to be done. Details of changes from the old plan, and their significance require explanation. Provisions for follow-up are made. From periodic checkups, need for further adjustment is detected. Periodic checks provide evidence of the plan’s accomplishments, and they uncover weaknesses needing correction. 5.4 TYPES OF COMPENSATION Direct: The direct compensation package for a salesman is more or less the same in all companies. However, as you must have also seen in your experience, a company employing technical person as salesman for 90 The relation with product life cycle The amount of selling effort is directly related with the stage at which a product is in its life cycle. The compensation structure is a function of selling effort. When the product is in the introductory stage the company needs a dynamic salesforce which can establish the product in the desired market. The salesforce must be enterprising, willing to travel, take criticism easily, have a good knowledge of the product, have good communication skills and last but not the least, have tremendous stamina to work. To keep such a salesforce motivated, adequate compensation is the basic need. In the growth stage, the motivation of the salesforce has to be sustained to exploit all the opportunities available in the market. They have to approach the market with renewed vigour. At this point indirect compensation schemes which are incentive linked play an important role. When the product has firmly established itself, the salesforce also needs a break from the monotony. Other indirect benefits like training programmes in good environmental locations; foreign trips for training and understanding markets; promotions to much responsible positions are the requirements at this stage. When the product is in the decline stage some fresh incentive schemes may be introduced in the compensation scheme to generate fresh interest in the product. The number of people involved with the product has also to increase marginally. Compensation related with demographic characteristic 91 The compensation package preferred by the salespeople depends upon their demographic characteristics also. Their age and size of family or number of dependents play an important part in the preference for a basic salary and/or incentives. However, this cannot be generalized and depends largely on the individual. Role of selling in marketing strategy of the company, and competitor’s practices are other important factors influencing compensation. 5.6 DIMENSIONS OF SALES MOTIVATION Motivational effort is generally thought to include three dimensions- intensity, persistence, and choice. Intensity refers to the amount of effort the salesperson expends on a given task; persistence refers to how long the salesperson will continue to put forth effort; and choice refers to the salesperson’s choice of specific actions to accomplish job-related tasks. For example, a salesperson may decide to focus on a particular customer (choice). He may increase the number of calls he makes on this customer (intensity) until he gets the first order (persistence). The choice of a specific action may affect the intensity and persistence. Likewise, intensity and persistence may affect the choice of specific actions. The sales job consists of a large variety of complex and diverse tasks. Because of this, it is important that the sales person’s efforts be channeled in a direction consistent with the company’s strategic plan. Therefore, the direction of the salesperson’s effort is as important as the intensity and persistence of that effort. 92 5.7 IMPORTANCE OF MOTIVATION The nature of the sales job, the individuality of salespeople, the diversity of company goals, and the continuing changes in the marketplace make motivating sales persons a particularly difficult and important task. Unique nature of the sales job- Salespeople experience a wonderful sense of exhilaration when they make a sale. But they must also frequently deal with the frustration and rejection of not making the sale. Even very good sales person does not make every sale. Also, while many customers are gracious, courteous, and thoughtful in their dealings with salespeople, some are rude, demanding, and even threatening. Salespeople spend a large amount of time by themselves calling on customers and travelling between accounts. This means that most of the time they are away from any kind of support from their peers or leaders, and they often feel isolated and detached from their companies. Consequently, they usually require more motivation than is needed for other jobs to reach the performance level management desires. Individuality of salespeople- Sales people have their own personal goals, problems, strengths, and weaknesses. Each sales person may respond differently to a given motivating force. Ideally, the company should develop a separate motivational package for each sales person; but a totally tailor-made approach poses major practical problems. In reality, management must develop a motivational mix that appeals to a 95 Esteem needs Recognition Status Provide greater job responsibilities, promotion opportunities, public recognition for achievements Social needs Social interaction Friendship Acceptance among peers and superiors Maintain close relationships with sales force Sales meetings Newsletters, memoranda, etc. Safety needs Freedom from worry about security of jobs, incomes, medical expenses, etc. Provide a balanced package of fringe benefits Physiological needs Food, shelter, overall health, etc. Be aware of general health and living conditions of sales force Sales managers applying need theory should keep in mind its two major premises: • The greater the deprivation of a given need, the greater its importance and strength. • Gratification of needs at one level in the hierarchy activates needs at the next-higher level. Sales managers must keep track of the level of needs most important to each salesperson, from the beginning trainee to the senior sales representative. Before salespeople become stagnated at one level, they must be given opportunities to activate and satisfy higher-level needs if they are to be successfully motivated toward superior performances. Since various salespeople are at different need levels at any one time, sales managers have to retain their sensitivity to the evolving needs of individual sales person through close personal contact with each member of the sales force. 96 Motivator-Hygiene Theory: Herzberg’s classic research studies found two types of factors associated with the satisfaction or dissatisfaction of employees. Sources of satisfaction are called motivators because they are necessary to stimulate individuals to superior efforts. They relate to the nature or content of the job itself and include responsibility, achievement, recognition, and opportunities for growth and advancement. Sources of dissatisfaction are called hygiene factors because they are necessary to keep employee performance from dropping or becoming unhealthy. They comprise the environment, include salary, company policies and administration, supervision, and working conditions. According to Herzberg’s theories, to improve productivity, sales managers must maintain hygiene factors (pleasant work environment) while providing motivators (job enrichment) for the sales force. Here are some examples of job enrichment: Give salespeople a complete natural unit of work responsibility and accountability (e.g. specific customer category assignments in a designated area). Grant greater authority and job freedom to the salespeople in accomplishing assignments (e.g., let salespeople schedule their time in their own unique way as long as organizational goals are met). Introduce salespeople to new and more difficult tasks and to challenges not previously handled (e.g., opening new accounts, selling a new product category, or being assigned a large national account). 97 Assign salespeople specific or specialized tasks enabling them to become experts (e.g., training new salespeople on “how to close a sale”). Send periodic reports and communications directly to the salesperson instead of forwarding everything via the sales supervisor. (Of course, the supervisor must be informed about what information the salespeople are receiving). Achievement Theory: Research by McClelland and his associates confirmed that some people have higher achievement needs than others; they labeled such persons “achievement oriented”. Children who are given greater responsibilities and trusted from youth to do things on their own are more likely to have achievement-oriented profiles. Achievement- oriented people readily accept individual responsibility, seek challenging tasks, and are willing to take risks doing asks that may serve as stepping stones to future rewards. These individuals receive more satisfaction from accomplishing goals and more frustration from failure or unfinished tasks than the average person. Any achievement-related step on the “success path” may include rewards (positive incentives) or threats (negative incentives). A path is contingent if the individual feels that immediate success is required in order to have the opportunity to continue toward further successes and that immediate failure causes loss of the opportunity to continue on the path. If immediate success or failure has no effect on the opportunity to continue on the path toward future success or failure, the path is noncontingent. Sales managers need to identify the achievement-motivated salespeople and then give them personal responsibility for solving definable problems or achieving certain goals. Frequent, specific feedback