Professor Chip BesioProfessor Chip BesioSales ManagementSales ManagementMarketing 3345Marketing 3345

Evaluating Sales Force Performance

Set goals and objectives forsales force, including:

RevenuesContribution profitsMarket shareExpense ratios

Design sales plan

Set product performance standards for:Organization SalespeopleRegions AccountsDistricts

Measure results against standard Take Corrective Action

A Sales Force Evaluation Model

Performance Measure

Percent Using

Performance Measure

Percent Using

Sales Sales volume dollars Sales volume previous year’s sales Sales to quota Sales growth Sales volume by product Sales volume by customer New account sales Sales volume in units Sales volume to potential Accounts Number of new accounts Number of accounts lost Number of accounts buying full line

79% 76 65 55 48 44 42 35 27 69 33 27

Profit Net profit Gross margin percentage Return on investment Net profit as a percentage of sales Margin by product category Gross margin dollars Orders Number of orders Average size of order

69% 34 33 32 28 25 47 22

Output Measures Used in Sales Force EvaluationOutput Measures Used in Sales Force EvaluationOutput Measures Used in Sales Force EvaluationOutput Measures Used in Sales Force Evaluation

Source: Donald W.Jackson, John L. Schlacter, and William G. Wolfe, “Examining the Bases Utilized for Evaluating Salespeoples’ performance,” Journal of Personal Selling & Sales Management, Vol. 15, No. 4 (Fall 2005), p. 62.

Base

Percent Using

Base

Percent Using

Selling expenses to budget

Total expenses

Selling expenses as a % of sales

Number of calls

55%

53

49

48

Number of calls per day

Number of reports turned in

Number of days worked

Selling time vs. nonselling time

42%

38

33

27

Source: Donald W.Jackson, John L. Schlacter, and William G. Wolfe, “Examining the Bases Utilized for Evaluating Salespeoples’ performance,” Journal of Personal Selling & Sales Management, Vol. 15, No. 4 (Fall 2005), p. 62.

Input or Behavior Bases Used in Sales Force EvaluationInput or Behavior Bases Used in Sales Force Evaluation

Base

Percent Using

Performance Measure

Percent Using

Communication skills

Product knowledge

Attitude

Selling skills

Initiative and aggressiveness

Appearance and manner

Knowledge of competition

Team player

Enthusiasm

88%

85

82

79

76

75

71

67

66

Time management

Cooperation

Judgment

Motivation

Ethical/Moral behavior

Planning ability

Pricing knowledge

Report preparation and submission

Creativity

63%

62

62

61

59

58

55

54

54

Source: Donald W.Jackson, John L. Schlacter, and William G. Wolfe, “Examining the Bases Utilized for Evaluating Salespeoples’ performance,” Journal of Personal Selling & Sales Management, Vol. 15, No. 4 (Fall 2005), p. 63.

Qualitative Bases Used in Sales Force EvaluationQualitative Bases Used in Sales Force Evaluation

Input-based System

BehaviorCallsReportsComplaintsDemonstrationsDealer meetingsDisplay set upTravel/entertainment

expenses

ResultsSales revenuesSales growthSales/quotaSales/potentialNew accountsContribution marginsContribution

percentage

Output-based System

SalespersonSalespersonEvaluationEvaluation

A Model of Salesperson EvaluationA Model of Salesperson Evaluation

1 2 3 4 Company Percentage Industry Company

Volume Change from Volume Market ShareYear ($ millions) Previous Year ($ millions) (percent)

2008 26 + 8.3 300 8.62007 24 +14.3 219 10.92006 21 +23.5 165 15.72005 17 --- 125 13.6

Sales Data for Bear ComputerSales Data for Bear Computer

Products

Thousands of Dollars

Units

Avg Price Per Unit

Thousands Of Dollars

Units

Avg Price Per Unit

Computers

Accessories

Software

$16,800

4,800

2,400

560

4,000

1,200

$30,000

1,200

2,000

$18,200

5,200

2,600

520

4,727

1,280

$35,000

1,100

2,031

Total $24,000 5,760 $26,000 6,527

2007 Sales 2008 Sales

Comparing Dollar and Unit Sales at the Bear Computer Company

Comparing Dollar and Unit Sales at the Bear Computer Company

1 2 3 4 5 6 7 8Market

Sales ‘07 Sales ‘08 Potential Sales Percentage SalesJan-Sept Jan-Sept Dollar Sales index Quota of Quota Variance

Territory (000) (000) Change Growth (percent) (000) Achieved (000)

Jones $ 750 $ 825 + $75 10.0% 26.0% $ 943 87% – $118

Smith 500 570 + 70 14.0 15 543 105% + 27

Brown 1025 1110 + 85 8.3 32 1160 96% – 50

West 960 1000 + 40 4.2 27 977 102% + 23

$3235 $3505 +$270 8.3% 100.0% $3623

Measuring Sales Force Output for Bear Computer Company

Measuring Sales Force Output for Bear Computer Company

Territory Performance (thousands)a

Jones Smith Brown West

Net Sales $825 $570 $1100 $1000

Less CGS and Commissions 495 428 744 660

Contribution margin 330 142 356 340

CM as a percentage of sales 40% 25% 32% 34%

Less direct selling costs

Sales force salaries 55.0 35.0 55.0 65.0

Travel 15.5 4.1 3.5 5.0

Food and lodging 12.5 4.0 3.2 4.5

Entertainment 11.4 0.3 0.5 1.0

Home sales office expense 4.5 2.3 2.0 4.5

Profit contribution $231.1 $ 96.3 $291.8 $260.0

PC as a percentage of sales 28% 17% 26% 26%

aSales figures are from previous slide.

Measuring Territory Profit Output for Bear Computer Company

Measuring Territory Profit Output for Bear Computer Company

Calls per day = Calls per day = # Calls____ # Calls____ # Days worked# Days worked

Calls per account = Calls per account = #Calls__ #Calls__ # of Accounts # of Accounts

Planned Call = Planned Call = # Planned calls# Planned calls Total # CallsTotal # Calls

Batting Average = Batting Average = # Orders__ # Orders__ Total # CallsTotal # Calls

Call Productivity RatiosCall Productivity Ratios

Expense to Sales = Expense to Sales = ExpensesExpenses

SalesSales

Cost per Call =Cost per Call = Total CostsTotal Costs # of Calls# of Calls

Expense RatiosExpense Ratios

Sales to Account = Sales to Account = Dollar Sales _Dollar Sales _ # Accounts# Accounts

Average Order Size = Average Order Size = Dollar Sales Dollar Sales # Orders# Orders

Growth Ratio = Growth Ratio = # New Accounts# New Accounts Total # Total #

AccountsAccounts

Account Success = Account Success = Accounts sold_ Accounts sold_ Total # AccountsTotal # Accounts

Account Related RatiosAccount Related Ratios

Inputs

• Attitude

• Motivation

• Skills

• Abilities

• Job Perception

InputsBehavior• # Calls• Days worked• Expenses• Selling vs. non- selling time• Quotas

Outputs

• # Orders• Order Size• # New, lost,

or active

accounts

Models Combining Input & Output ControlsModels Combining Input & Output Controls