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

1.0

OBJECTIVE
After going through this lesson, you will be able to-

1.1

Discuss the sales, sales management and related concepts.

Explain the structure and objectives of a sales organisation.

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 firms 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.
2

1.2

DEFINITION
Originally, the term sales management referred to the direction of

sales force personnel. But, it has gained a significant position in the

todays world. Now, the sales management meant management of all
marketing activities, including advertising, sales promotion, marketing
research, physical distribution, pricing, and product merchandising. The
American

marketers

association

(AMAs)

definition,

takes

into

consideration a number of these viewpoints. Its definitions runs like: the

planning, direction, and control of the personnel, selling activities of a
business unit including recruiting, selecting, training, assigning, rating,
supervising, paying, motivating, as all these tasks apply to the personnel
sales-force.
Further, it may be quoted: it is a socio-scientific process, involving
group-effort in the pursuit of common goals or objectives, which are predetermined. Co-ordination is its key, though, no doubt, it is a system of
authority, but the emphasis is on harmony and not conflict.
Sales-management differs from other fields of management, mainly
in different aspects: the selling operation of a business firm does not exist
in isolation. Thus, simultaneous with the changes taking place in the
business, as well as marketing-orientation, anew concept of sales
management has evolved. The business, is now society-oriented, on
human-welfare aspects. So, sales-management has to work in a broader
and newer environment, in co-existence with the traditional lines. The
present emphasis is now on total development of human resources.

1.3

BENEFITS OF SELLING ACTIVITIES

There are different benefits of selling activities, which are as

follows:
(1)

Benefits to the society: economic growth and maximum

employment are the basics for national development. The
achievement of both these goals means jobs and incomes for
a nations labour-force. The number of people, who need
jobs, continues to expand, and also some jobs are being
eliminated, because of the introduction of computers and
abolition of obsolete technology. If jobs are to be made
available for all those, who want and expect them, the
economy must continuously expand its production of goods
and services, which can only be done by adopting sound
government-policies and efficient use of people. Equally
important
individuals,

here

is

to

sell

the

fact,

what

is

that

an

produced.

economy
Through

needs
their

persistent efforts to create and stimulate demand, salespeople could be said to be the life and blood of a productive
economic-system. The large number of workers, in factories,
and offices, would not be needed, if someone were not selling
their products.
(2)

Benefits to consumers: professional people may not know

every fact of a product, but they, at least know its major
uses, limitations and benefits; so they can easily serve their
customers, quite effectively. For exan1ple, an insurance
agent can analyse the hazards and risks that confront a

clients

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 clients
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 medicalrepresentatives 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 companys
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 salesperson, 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

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 films
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

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 coordination.

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 businessoperations are to be ignored, but solved through a freeexchange 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
7

achieve the goals planned for the business. He has to take

steps to ensure that the activities of the people conform to
the plans and objectives of the organisation. The controlling
system should be such that one can study the past, note the
pitfalls and take corrective measures, so that similar
problems may not occur in the future. The controller has to
ensure that the set targets, budgets and schedules are
attained or followed in letter and spirit. There must be
procedures to bring to light the failure to attain a target. The
control-system has to (i) prepare sales and market forecasts;
(ii) determine the level of sales-budget; (iii) determine the
sales-quotas for each salesman; (iv) determine, review and
select distribution-channels; (v) organise an efficient sales
force; (vi) establish a system of sales-reporting; (vii) establish
a system of statistical sales-credit; (viii) establish stockcontrol system(s); (ix) review of performance of the salesforce; and (x) establish periodical testing programmes. In a
big organisation, each salesman is assigned a territory (not
so big that it cannot be adequately covered). Each salesman
has a target, set for specific period. From the weekly and
monthly sales-reports, the control system is established, that
will prepare records whether a particular salesman is
working efficiently or not.
(4)

Motivating: Motivation is essentially a human resource

concept. It aims to weld together distinctive personalities into
an efficient team. For this, knowledge of human psychology
is needed, as a means of understanding behaviour patterns.

This is especially important in the case of the sales-force.

Only motivated sales-persons can achieve companys goals.

1.5

OBJECTIVES OF SALES MANAGEMENT

Every business firm has certain objectives to achieve. These

objectives may be very explicit and definitive, or they may be implicit or

general. Although, firms have different mixes of objectives, and they do
place differing emphasis, on individual ones, the typical objectives
include (i) profitability, (ii) sales-volume, (iii) market share, (iv) growth,
and (v) corporate-image. While all these objectives are important to a
business firm, the objectives, relating to sales-volume, market share and
profitability, are greatly affected by the effectiveness and efficiency, with
which the sales-function is managed.
Business firms, have, in fact, found that it is the most effective
management objective of the firm; that must emanate out of its overall
business or corporate objectives. The sales-management objectives of a
business firm, generally relate to the areas of (i) achieving sufficient
sales-volume, (ii) providing sufficient profit, and (iii) experiencing
continuing growth.
Generally, objectives of sales-management have to cover various
sales-functions, in an integrated manner. These objectives are to be
expressed, as far as possible, in measurable and quantitative terms, and
should also be realistic and achievable. Since, there are more than one
objective, these should be put, on a hierarchical manner (mostimportant, down to the least important). To ensure their flawless
realisation, they must be congruent, i.e., they must fit together, and not

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

10

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)

1.7

Motivating the salesman.

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 directcontrol and supervision. But, as the business grows and expands, the

11

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.

12

(viii) To integrate the individual in the organisation.

Business organisations consist of an input, a processing-unit, an
output and a feedback-loop; with its own environment Organisation as
an open-ended social and dynamic system. Feedback-loop, provides
control mechanism. Input is drawn from the environment. It gives output
to satisfy the needs of environment, which the process itself transfers,
input to output through its operators. In this approach, the main
emphasis is on human-values. Workers are not simply cogs in the
machinery they are social beings first. They are the key players of the
production-system; and the management has to recognise this fact, that
each person is unique. This makes an organisation, in the present-day
context, quite complex.

1.7.2 Functions of Sale Organisation

A sales organisation performs the following functions:
(i)

Analysis of markets thoroughly, including products and

market research.

(ii)

Adoption of sound and defensible sales-policy.

(iii)

Accurate market or sales forecasting and planning the salescampaign, based on relevant data or information supplied by
the marketing research staff.

(iv)

Deciding about prices of the goods and services; terms of

sales and pricing policies to be implemented in the potential
and existing markets.

13

(v)

Labelling, Packaging and packing, for the consumer, who

wants a container, which will satisfy his desire for attractive
appearance; keeping qualities, utility, quantity, and correct
price and many other factors in view.

(vi)

Branding or naming the product(s) and/or services to

differentiate them from the competitors and to recognise
easily by the customer.

(vii)

Deciding the channels of distribution for easy accessibility

and timely delivery of the products and services.

(viii) Selection, training and control of salesmen, and fixing their

remuneration to run the business operations efficiently and
effectively.
(ix)

Allocation of territory, and quota setting for effective Selling

and to fix the responsibility to the concern person.

(x)

Sales-programmes and sales-promotion-activities prepared

so that every sales activity may be completed in a planned
manner

(xi)

Arranging for advertising and publicity to inform the

customer about the new products and services and their
multiple uses.

(xii)

Order-preparation

and

office-recording

to

know

the

profitability of the business and to evaluate the performance

of the employees.

14

(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 salesmans 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

15

(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 salesoperations of the company; others where the head of the sales-operations
of the company, is a functional director of the companys 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 salesmanager, 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:

16

(i)

Begin with a historical profile of the companys allegiance,

overall organisation and top-management philosophy of the
firm.

(ii)

Analyse the requirements of the company and the salesdepartment, 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,
relationship

and

especially

from

human-feelings

the

view-point

involved

in

of

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.

17

(viii) Based on the above, prepare a draft-structure of the salesdepartment, giving job-descriptions of the whole of the
department, and a whos who of the department.
(ix)

Examine the structure, from the point of view of viability and

practicality.

In the light of the complexities and vastness of the above process,

for creating a sales structure, once again, we state that various
industries, though being equally efficient, and of the same category,
organise their sales-departments, in different ways.

1.8

SUMMARY
In total, Selling is the act, sales is the result of this act, while

salesman is the person who does this act. So, salesmanship is the quality
of act of selling. Thus, selling and salesmanship cannot be used
synonymously. Salesmanship serves the dual purpose of discovering and
persuading prospective buyers. By his creative faculties, a salesman has
not only to sell but also establish a winning, regular and permanent
relationship with his customers. A satisfied customer is just the
beginning of this type of relationship, which ensures future repeat orders.
Sales-management is governed by the principle of management. The four
elements viz., (i) planning, (ii) co-ordination, (iii) controlling, and (iv)
motivation are very relevant, as per requirement of the special nature of
the business. Objectives are equally important for sound salesmanagement. Generally, these are (i) achieving sufficient sales-volume,
(ii) providing reasonable profit, and (iii) experiencing continuing growth.
SMBO (sales management by objectives) is a recent approach to

18

formulate and accomplish these objectives. Sales-management also needs

proper organisational structure. Different structures suit different
situations and requirements. These may be based on national or regional
basis or on product market basis. A sales manager/director is the key
person to plan, co-ordinate, control and motivate all the selling-activities
of a business-concern. His job is multi-purpose and he has to face, all
the odd and difficult changes. However, with his skill, urgency, and
adaptability, these can be easily faced with.

1.9

KEYWORDS
SMBO: Sales Management by objective is a selling technique or

approach which focus on result within a specified set of objectives.

Sales Volume: It is the total number of products sold. It may be
expressed in monitory terms as well.

1.10 SELF ASSESSMENT QUESTIONS

1.

Differentiate (i) selling, (ii) sales, and (iii) salesmanship.

2.

Salesmanship is both an Art as well as a Science. Comment.

3.

Write a short essay on sales-management.

4.

What do you mean by objectives of any organisation?

Explain.

5.

What do you mean by organisation for sales-management?

Explain its need, importance, functions and the essentials of
a good structure.

19

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.

20

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

2.0

Summary

2.7

Keywords

2.8

Self assessment questions

2.9

References/Suggested readings

OBJECTIVES
After going through this lesson, you should be able to

Define personal selling and salesmanship.

21

Explain personal selling objectives.

Discuss the importance and relevance of personal selling in

different situations.

2.1

Explain the diversity of selling situation.

Elaborate the personal selling process.

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 sellers 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 companys sales
representative, assistance by a sales clerk, an informal invitation from
one company executive to another. It is employed for the purpose of

22

creating product awareness, stimulating interest, developing brand

preference, negotiating price etc.
The increase in complexity of products has increased the
importance of personal selling. Manufacturers of highly technical
products such as computers, electronic typewriters, digital phones,
microwave kitchen appliances, remote control equipments etc. depend
more heavily on personal selling than do grocery or toiletry products
manufacturers.
Ever growing competition from domestic and foreign sources have
also increased the importance of sales persons in the marketing effort of
a firm. In personal selling, companys sales persons are often referred to
as sales representative, salesman or sales girl, they remain on the
companys payroll or work on commission basis or both to push the
product in the market by positively motivating the prospective customer
through oral presentation or demonstrating the product in question.
Consumers want all sorts of goods and services but inertia may
keep them from buying. Sales efforts stimulate the consumption process
by reducing peoples inherent reluctance to make purchase decision. In
fact sales person act as catalyst in the market place. When the nature of
the product is such that the buyer needs special information in order to
use it properly, sales representative acts as a consultant to consumer, to
apprise them of products technicalities and usage. Sales person also
work out the details of manner and timing of given physical possession.
In case of industrial products, the promotion mix mostly consist of
personal selling rather than advertising. Being high value and complex
product, personal contact with the customer is essential to convince him
23

of the products quality and utility. On the other hand, consumer product
companies use personal selling together with advertising, to influence
prospect to try their brand. But personal selling in this case cannot
substitute for advertising, it can only be used tactically to intensify
marketing effort, mainly because it is expensive.

2.2

PERSONAL SELLING OBJECTIVES

The qualitative personal selling objectives are long term and

concern the contribution management expects personal selling to make

in achieving long-term company objectives. These objectives generally are
carried over from one periods promotional program to the next.
Depending upon company objectives and the promotional mix, personal
selling may be assigned such qualitative objectives as1.

To do the entire selling job (as when there are no other

elements in the promotional mix).

2.

To service existing accounts (that is, to maintain contacts

with present customers, take orders, and so forth).

3.

To search out and obtain new customers.

4.

To secure and maintain customers cooperation in stocking

and promoting the product line.

5.

To keep customers informed on changes in the product line

and other aspects of marketing strategy.

6.

To assist customers in selling the product line (as through

missionary selling).

24

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 middlemens 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.

25

2.

To

obtain

sales

volume

in

ways

that

contribute

to

profitability (for example, by selling the optimum mix of

company products).

2.3

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.

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.

26

(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.

27

(c)

Consumer requires persuasion and follow-up in the

face of competitive pressure.

2.4

DIVERSITY OF SELLING SITUATIONS

All of us being consumers often come across variety of selling

situations. Differences in marketing factors cause each company to have

individualized selling styles. Each different type of selling job requires the
sales person to perform a variety of different tasks and activities under
different circumstances. The job of a soft drink driver salesperson who
calls in routine fashion on a number of retail stores is different from that
of a computer sales person who sells a system for managing information
to executive of a consultancy firm.
Before categorizing sales persons into basic selling styles, one
convenient way to classify the many different types of sales job is to array
them on the basis of the creative skill required in the job, from simple
service-or repeat order selling to the complex developmental selling. Let
us now discuss the different kinds of selling positions prevalent in Indian
companies.
Delivery sales person: The primary job of the delivery sales person
is to deliver the product e.g. soft drink, bread, milk etc. The selling
responsibilities are secondary. Good service and a pleasant personality
may lead to more sales.
Inside order taker: The retail sales person standing behind a
counter is an inside order taker. The customer comes to the sales person
with the intention to buy a product or service, the sales person only

28

serves him or her. The sales person may use suggestion selling but
ordinarily cannot do much more.
Outside order taker: The soap or spices sales person calling on
retailer is an outside order taker. They do little creative selling. In
contract with store personnel these representatives actually may be
discouraged from doing any hard selling. That task is left to executives
higher in the hierarchy.
Missionary sales people: These sales persons are not expected or
permitted to solicit an order. Their job is to build goodwill or to educate
actual or potential user or provide services for the customers, as in the
case

of

Medical

representatives,

working

for

the

pharmaceutical

company.
Consultative sales person: Consultative sales are characterized by
the product or service that is sold at the higher level of an organization
e.g. computer system or management consultancy service. The decision
to purchase such products involves higher capital outlay thus sales job
requires a low key, low pressure approach by the sales person. It would
also require a very strong knowledge about product, patience to discuss
product with several people of organization and potential benefits to the
user. Even at times when the progress of sales slows down representative
has to make creative and sensitive efforts to resume interest but without
appearing to exert pressure on the prospect.
Technical sales personnel: The most distinctive characteristic of
technical sales is the product knowledge required by its sales person,
unlike the consultative sales, where sophistication in organization
relationship and persuasive ability are sales persons most valuable
29

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 nontechnical 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
30

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

31

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 persons 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

32

over them that can help a sales person identify good prospects. Some
frequently used centers of influences are housewives, bankers, local
politicians etc.
Spotters: Some companies use spotters as a source for prospecting
potential customers. Spotters are usually sales trainees who help sales
person identifying prospects, thus saving time and qualifying sales lead.
Cold call: Cold call is also known as unsolicited sales calls. This
prospecting techniques involves knocking on doors. The sales person
makes contact with a potential customers, introduces himself or herself,
and asks if there is a use for the product or service. This technique is
utilized by the sales person when they have time available between
scheduled appointments.
Directories: A wide variety of directories are full of prospect. The
classified telephone directory is the most obvious one. A sales person
may also find that membership directories of trade associations,
professional societies, and civic and social organizations are good sources
for prospects.
Mailing lists: In India, specialized companies compile lists of
individuals and organizations for direct mail advertisers. These lists may
also be used to identify sales prospects. The major advantages of mailing
list are that they are often more current and more selective than
directories.
Trade shows and exhibitions: A cost effective way to make
personal contacts and locate prospective buyer is to participate in trade
shows and exhibitions. Now a days more and more companies are

33

increasing their participation in these shows and exhibitions to

companys booth by mailing invitations or promising a gift. Advance
announcements sent to trade publications may also help to attract
prospects. In view of the rising costs of personal selling trade shows have
become

an

increasingly

important

source

of

prospecting.

India

International Trade Fair organized by Trade Fair Authority of India every

year provides a good example of usage of trade shows for prospecting.

(b)

Qualifying prospects
Once the sales person has identified potential customers, he or she

must qualify them to determine, if they are valid prospects. Unless this is
done, time and energy is wasted in trying to sell to people who cannot or
will not purchase the product or service.
There are several factors to consider while qualifying a prospect.
One approach to qualifying often called MAN (Money, Authority and Need)
approach is given below:
Money: Does the prospect have the money or resources to
purchase a product or service? Ability to pay is very critical factor in
qualifying a prospect. The sales people must be familiar with financial
resources of a prospect.
Authority: Does the prospect have the authority to make
commitment? This is a particular concern when dealing with corporation,
government agencies or other large organizations. Even while selling to a
married couple, it may be difficult to identify who actually makes the
purchase decision. A sales person must identify the key decision maker
early to economise on selling time more effectively.

34

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.

35

(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 prospects
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

36

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).

37

Unstructured presentations: (Also referred to as problem solving)

In this approach, the buyer and seller together explore the problems that
are the real sources of the companys needs. Although unstructured
presentations are often effective and widely used, they have a number of
limitations. Such presentations tend to be not too well-focused. As a
result, points are often missed and time is wasted. Further, sales person
do not usually anticipate objections but may have to face surprise
complaint from the prospects. Because it is difficult to teach sales person
how to use the unstructured method, the problem solving presentation
seems best suited to experienced, sales person who are selling to
established customers.
Sales presentation comprises of two distinct activities, approach
and demonstration.

a)

Approach
When the sales person has the name of the prospect and adequate

pre-approach information, the next step is the actual approach. It

frequently makes or breaks the entire presentation. If the approach fails,
the sales person often does not get a chance to give a presentation or
demonstration. It gets the prospect attention, it immediately inspires
interest in hearing more about the proposition, and it makes easy
transition into the demonstration phase.
Four basic approaches are in common use:
1.

The introductory approach, the sales person introduces

himself to the prospect and states what company he
represents.

38

2.

The product consists of handling the product to prospect

with little conversation. It can be most effective when the
product is unique and creates interest on sight.

3.

The sales person starts the sale in a consumer-benefit

approach by informing the prospect of what the firm can
provide in benefits. In other words, directs the prospects
attention toward the benefits the firm has to deliver.

4.

Lastly, referral approach successful in getting an audience

with prospect who is difficult to see directly. It consists of
obtaining the permission of a past or present customer to
use his or her name as a reference in meeting a new
prospect.

(b)

Demonstration
The demonstration is the core of the selling process. The sales

person actually transmits the information and attempts to persuade the

prospect through product demonstration to make a customer.
Two factors should be taken into consideration in preparing an
effective product demonstration:
i)

The demonstration should be carefully rehearsed to reduce

the possibility of even a minor malfunction.

ii)

The demonstration should be designed to give customers

hand on experience with the product wherever possible. For
example an industrial sales representative might arrange a
demonstration before the purchasers technical personnel.

39

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 prospects 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.

40

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

41

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 buyers 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 customers 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 persons 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

42

products or services, fulfil reasonable request, and provide other forms of

assistance. The sales people should also appreciate the customer by
thanking customers for their business. Small gifts can be given after the
sale and at appropriate times during the year. Sales person should try to
make self-analysis for evaluating their own selling performance and
methods. A Sales person should analyse every call to determine what
factors influenced its eventual outcome. Self-analysis is a very useful tool
in improving overall sales effectiveness.

2.6

SUMMARY
Today personal selling has become a challenging profession. There

has been a significant change in its role from being a simple order taker
to that of an order maker or consultant to the buyers. Modern sales
persons understand that they are the major link in the total marketing
strategy for the company. If a company wants to maximize the
effectiveness of its marketing programme, the personal selling effort must
be effectively integrated with the other elements of the marketing mix.
With the growing complexity of products, importance of personal
selling

has

increased.

They

now

act

as

introducers,

intelligent

communicator as well as demand pushers and also add unique utility to

product. Their role has changed drastically from being a simple
communicator to business manager. In order to be successful a sales
person must possess a set of personal, product related and functional
qualities, as variety of analytical and administrative duties are important
component of the job. Before approaching a prospect every sales person
is advised to do bit of homework regarding companys name, size,
authority concern and general requirement. While meeting the prospect,

43

sales person should introduce himself, his company and the product
under promotion. Product presentation and overcoming of customer
objections, leads to convincing the customer and result in the closing of
mutually satisfying sale.

2.7

KEYWORDS
Personal Selling: Personal selling is finest form of promotion done

by sales force.
Salesmanship: It is the art of successfully persuading customer in
selling situations for mutual benefits.
Prospecting: It is the act of finding or identifying potential
customers.

2.8

SELF ASSESSMENT QUESTIONS

1.

Elaborate various steps involved in sales process with

suitable example.

2.

Discuss different situations where role of personal selling is

vital.

3.

Write

the

diversity

of

selling

situation

with

suitable

illustrations.

2.9

REFERENCES/SUGGESTED READINGS
1.

Still, Cundiff, and Govoni, Sales Management, PHI.

2.

Stanton and Spiro, Management of a Sales Force, McGraw

Hill.
44

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.

45

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

3.0

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

OBJECTIVE
After going through this lesson, you will be able to-

3.1

Learn the process of recruitment and various sources of it

Understand the steps involved in selection process.

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

46

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

47

they have? (c) what degree of knowledge, skill, and potential

is needed for this particular position?
2.

Determine the duties and responsibilities that are expected

from the sales-person. In so doing, information should be
obtained from (a) salespeople; (b) customers; (c) the sales
manager; and (d) other marketing executives, including the
advertising

manager,

marketing

services

manager,

distribution manager, marketing research director, and

credit manager.
3.

Spend time making calls with several salespeople, observing

and recording the various tasks of the job as they are
actually performed. This should be done for a variety of
different types of customers and over a representative period
of time.

(b)

Preparing a job description

The result of a formal job analysis is a job description. Since a job

description is used in recruiting, selecting, training, compensating and

evaluating the sales force, the description should be in writing so that it
can be referred to frequently. The written job description lets prospective
job applicants, as well as current sales personnel, know exactly what the
duties and responsibilities of the sales position are and on what basis the
new employee will be evaluated.
The job description is probably the most important single tool used
in managing the sales force. It is used not only in hiring but also in
managing and sometimes as a basis for firing salespeople. It provides the

48

sales trainer with a description of the salespeople's duties and enables

him or her to develop training programmes that will help salespeople
perform their duties better. Job descriptions are also used in developing
compensation plans. Often, the type of job determines the type of
compensation plan that will be used. Job descriptions aid managers in
supervision and motivation, and they are used as an official document
that is part of the contract between management and a salesperson's
union. Finally, a job description puts management in a position to
determine whether each salesperson has a reasonable workload.

(c)

Developing a set of job qualifications

The duties and responsibilities set forth in the job description

should be converted into a set of qualifications that a recruit should have

in order to perform the sales job satisfactorily. Determining these
qualifications is probably the most difficult aspect of the entire
recruitment process. One reason is that the manager is dealing with
human beings; therefore, a multitude of subjective and very complex
characteristics are involved. Specific qualifications such as education and
experience should be included in the job qualification, thus making good
candidates easier to identify. But most firms also try to identify
personality traits that presumably make better salespersons, such as
self-confidence, aggressiveness, etc.

(d)

Attracting a pool of applicants

The next major step in the recruitment process is attracting a pool

of applicants for the sales position to be filled. All large companies with a
sales force have a continuous need to identify, locate, and attract

49

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.

50

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

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

51

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

52

recruits.

Large

firms

usually

are

successful

in

recruiting

from

universities, but small firms tend to be more successful in recruiting

from small educational institutions or from other sources.
While most college graduates lack specific sales experience, they
have the education and perspective that most employers seek in potential
sales managers. College graduates tend to adapt more easily than
experienced personnel. They have not yet developed any loyalties to a
firm or an industry.
A major problem in recruiting from college campuses used to be
the unfavourable image of sales. Selling typically was associated with job
insecurity, low status, and lack of creativity, but this situation has been
changing in recent years. Colleges graduates are beginning to realize that
selling provides challenge and a sense of accomplishment, that it is
complex and exciting, that it allows them to be creative, that it rewards
them well and in direct proportion to their level of achievement, and that
it provides opportunity for rapid advancement. In short, many students
today know that a sales career is a good use of a college education.
Small firms are less likely to recruit on college campuses because
many graduates prefer large, well-known corporations with training
programs and company benefits. College students tend to avoid small
companies

because

these

companies

usually

employ

few

college

graduates, and students are afraid that people without college degrees
will not understand or appreciate their needs and expectations.

(e)

Advertisements

53

Classified advertisements in newspapers and trade journals are

another source of recruits. National newspapers and various trade
journals are used in recruiting for high-caliber sales and sales
management positions. However, most firms that use advertising,
especially in local newspapers, are recruiting for low-level sales positions.
Many businesses use advertising only as a last resort.
While advertisements reach a large audience, the caliber of the
average applicant is often second-rate. This places a burden on those
doing the initial screening. The quality of applicants recruited by
advertisements can be increased by carefully selecting the type of media
and describing the job qualifications specifically in the ad. To be effective,
a recruiting ad must attract attention and have credibility. The following
elements should be included to ensure an ad's effectiveness: company
name; product; territory; hiring qualifications; compensation plan,
expense plan, and fringe benefits; and the way to contact the employer.

(f)

Employment agencies
Employment agencies are among the best and the worst sources.

Most of the time it depends on the relationship between the agency and
the sales manager. The agency should be carefully selected, and a good
working relationship must be developed. Sales managers should make
sure that the agency clearly understands both the job description and the
job qualifications for the position to be filled.
In recent years agencies have steadily improved and expanded their
services. They can provide a highly useful service to sales managers by

54

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,

55

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?

56

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

57

selection tool is capable of revealing. The interview also serves as a twoway channel of communication, which means both the company and the
applicant can ask questions and learn about each other.
The questions asked during an interview should be aimed at
finding out certain things: Is the candidate qualified for the job? Does the
candidate really want the job? Will this sales job help the candidate fulfill
personal goals? Will the candidate find this sales position challenging
enough? These questions, like those on the application form, are directed
at examining the applicant's past behaviour, experiences, and motivation.
Every sales manager will use a different approach in attempting to
elicit useful information. The approach used will depend on the sales
manager's personality, training, and work experience.
Interviews differ, depending on the number of questions that are
prepared in advance and the extent to which the interviewer guides the
conversation. At one end is the totally structured, or guided, interview; at
the other end is the informal, unstructured type. In the structured
interview, the recruiter asks each candidate the same set of questions.
These are standardized questions that have been designed to help
determine the applicant's fitness for the sales position, structured
interviews can be used for initial screening but are not useful in probing
for in-depth information. A structured approach is particularly useful for
inexperienced interviewers. Since it helps and guide the interviewer and
ensures that all factors relevant to the candidate's qualifications are
covered.
At the other end of the continuum is the unstructured interview,
which is informal and non-directed. The goal of the unstructured
58

interviewing approach is to get the candidate to talk freely on a variety of

topics. Frequently, the recruiter begins the interview by saying to the
candidate. Tell me about yourself", or by asking questions such as "Why
did you decide to interview with out company?"
Several problems are associated with unstructured interviews. One
is that they do not provide answers to standard questions that can be
compared with other candidates' reponses or with the company's past
experiences. Also, considerable time may be spent on relatively
unimportant topics. However, personnel experts say this technique is the
best for probing an individual's personality and for gaining insight into
the candidate's attitudes and opinions. To administer and interpret
unstructured interviews, interviewers must be well trained.
Therefore, many firms use a combination of structured and
unstructured approaches, usually referred to as a semi-structured
interview. In semi-structured interviews the interviewer has a preplanned
list of major questions but allows time for interaction and discussion.
This approach is flexible and can be tailored to meet the needs of
different candidates as well as different interviewers.

(d)

Reference checks
A company cannot be sure it has all the information on an

applicant until references have been thoroughly checked. Reference

checks allows a company to secure information not available from other
sources. References usually are checked while the application form is
processed and before the final interview takes place.

59

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

60

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.

61

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.

62

Selection: It is termed as negative process through which pool of

talented manpower is screened and finally desired number of people are
offered employment.
Job Analysis: It is done to identify the duties, responsibilities,
requirements, and conditions involved in the job.
Reference Checks: It allows a company to secure information not
available from other sources.

3.7

SELF ASSESSMENT QUESTIONS

1.

Define recruitment and discuss in brief the process of

recruitment.

2.

Elaborate the important sources of recruitment.

3.

Write in brief the important steps involved in selection

process.

4.

"Appropriate selection policies and procedures result in

greater efficiency and reduce the training costs as well".
Comment.

3.8

REFERENCES/SUGGESTED READINGS
1.

Still, Cundiff, and Govoni, Sales Management, PHI.

2.

Stanton and Spiro, Management of a Sales Force, McGraw

Hill.

63

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.

64

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

4.0

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

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.

65

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 salespeople 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.

66

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 Salesmans 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, sellingskills 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.
67

After setting the objectives, the Manager has to think about the
following points:
(i)

What should be taught?

(ii)

Where should it be taught?

(iii)

Should who teach it?

(iv)

How should it be taught? and

(v)

What time should it be taught at?

In the reply of the first question, i.e., what (i.e., contents of the
course), have been explained already. Regarding the second question of
place, normally there are three alternatives: the companys, factory and
Office, the fields and courses run by outside organisations, e.g., NICEM,
etc. Usually, the best location for training in basics: policies procedures
and processes, knowledge is the place where this type of work is being
actually carried out, e.g. Companys Head Office. Moreover, the basics of
theoretical-training maybe discussed the staff training room is the best
location. To impart the basic knowledge, the trainees should be assigned
to a senior sales executive. It will be here that the trainee will be able to
appreciate the application of the required kills. And, training may be
integrated with demonstrations and real-life experience in in-planttraining.
In the response to the question By Whom, it simply means that
the training should be imparted by different senior sales-executives, who
are specialists in their own areas. Of course, the overall respol1sibility is
that of the sales manager/training manager. By delegating the authority,

68

the sales manager does not wash-off his hands; he just shares his
burden, but retains overall control. Some big companies have their own
training department and human resource development departments. It
pre-supposes enough number of trainees, to justify specialised staff.
Sometimes, companies also have consultants. But this approach has the
disadvantage of total lack of their knowledge of companys objectives and
needs. External courses are also mostly general in nature. However, a
judicial mix of all the three alternatives, so as to serve best the companys
needs is advised.
The reply of fourth question depends upon, who is teaching? Every
individual has his own and unique way of teaching/explaining. However,
some basic guidelines may be laid down to serve as instructions of the
training-personnel. Similarly, the last question is at What Time? It is
difficult to precisely lay down the specific duration of training. Usually, it
may be between 6-8 weeks in medium to large companies. In between
sessions, there should be adequate breaks. If required, the programme
can go well into the evenings. However, every instructor should avoid too
much of lectures and rather should concentrate on participative-activity,
so that interest in the course is maintained. Another teaching-approach,
suitable to all companies of any size is meet the man behind you. Here,
each head of the department talks with the trainees. In doing so, he
makes direct contact and he befriends them. He tries to self his
department to the trainees. During this type of a lecture, the following
points are may be covered: (i) His job-what he does? (ii) Goals-what his
department does presently? (iii) Innovations- what is scheduled for
future? (iv) Needs-what is needed for his more effective working? (v) Helphow salesmen can help in effective working? To sum-up, the initial

69

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 TrainingProgramme 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

70

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-goingbasis. For this, the sales-executive in-charge has to follow the points:
(i)

Compares

his

charges

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

71

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 sellings

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 ones 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 promisingprospects, 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

72

suit its unique aims/objectives and needs. However, some type of

selectivity is essential to run the sales- force, as a tight and effective
force. No two bases need be the same. But bear in mind not to target
those customers, whom youre competitors are in a far better position of
penetrating. As a guide/salesperson, for this basis of categories, the
following points must be considered:
(i)

Size of the firm and/or its consumption-level (sales-volume).

(ii)

Segments that serve potential-customers.

(iii)

The nature of firms products, techniques and productionprocesses.

(iv)

The personality of buying-decision-makers and/or their

motivational stimuli (e.g., willing to purchase from .large
firms or from small firms only).

(v)

2.

The geographical location of the customers.

Understanding the Customers Decision-Making Unit

(DMU)
Generally, sales-person deals with a number of customers. In this

process

of

selling;

the

main

participants

are

deciders,

buyers,

influencers, users, and gatekeepers etc. Each one of these has a role to
play, sometimes supportive and sometimes become barrier. A good salesperson must understand the way this unit, as a whole, functions, and
the respective roles of each member, thereof. The situation gets further
complicated in the case of large firms, where there are many members in
this

decision-making

unit

(DMU).

73

Each

one

of

them

is

to

be

communicated, in one form or the other. However, it is impractical,

inefficient and often positively imprudent, for the sales-persons to contact
them all. It is suggested that he may contact, the less important or less
accessible members of this unit, through companys literature, directmailing, exhibitions etc. However, it must be ensured that:
(i)

Every member of the DMU receives the right amount of

information neither too much, nor too little.

(ii)

He has to concentrate on the most important and decisive

members of this DMU of the buyer (customer).

(iii)

The sales manager may prepare a record about ever] one of

more promising customers, which should include: annual reports and

published accounts; a scrap-book of published material about the firm;
companys literature and product-specifications; organisational details; a
who-is-who of the personnel in the company; and ideally, a comparison
of the firms performance, with that of its competitors. If this database is
complete and up-to-date, the sales-person would be addressing a
customer about whom his or her knowledge-level is so high, that a true
relationship can easily be forged.
(iv)

The sales manager may also prepare a comprehensive list of

DMUs members, together with the other sub-departments of marketing,

designing and integrated communication programme etc. Whatever
selling-technique the sales-person adopts, the aim should be, to target
each member of the DMU, in the most productive and cost-beneficial
way, especially those upon whom they can have maximum impact. In
case the sales-department has a fairly small number of large potential
(key) accounts, we can also prepare an integrated communication
74

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.

75

(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 feedbackinformation; (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. Companys 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

76

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 days 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-persons 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,

salesmans

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

77

parting, the appraiser says a few words of encouragement and concludes

on a note of optimism.
Such kerb-side meetings are very useful for the purpose of
increasing the productivity of employees, but heavily depend on the
ability and skills of the appraiser, to pinpoint deficiencies and offer
remedial measures. However, generalities should be avoided, as the
process is very expensive.

(6)

Refresher Courses
Generally, the refresher courses are held at the companys

headquarters, usually once a year. The course-content is usually based

on the feedback-information from (i) companys activities; (ii) salesexecutives; (iii) market-intelligence; (iv) sales-meetings/conferences etc.,
(v) product-development, (vi) technical areas affecting the company etc.
(since the last conference/meeting). Such courses make the sales-force
adequately prepared, periodically, to face the challenges of competition,
with confidence.

(7)

Sales Bulletins
Lastly but not least, training and development is also continued

through sales bulletins. It is a good medium to keep the salesman

educated about day-to-day matters of changes/interests. The information
reaches him through the bulletins, while the salespeople are at work, and
also when it is urgently required. No time is lost in waiting for the next
sales-meeting/conference. However, the language used in he bulletins
should be crisp and to the point, so as to arouse the salesmans interest
and is easily understood by the recipient.

78

4.5

SUMMARY
The Selling activity is the most important instrument for attaining

a Business-concerns objectives and good results. So, the whole set-up of

the personnel, which carries it out, is equally important and crucial, for
the success of any undertaking. This set-up is termed as the Sales-Force
of an Enterprise-the most precious resource, and the envy of competitive
firms. It takes many years to build-up and to develop it to do the work
efficiently and effectively. But it can be most effective only when the other
components of the marketing-mix are equally sound and intact. It is the
infantry that visits customers and/or channels of distribution, and
provides the information and knowledge to the potential customers to
obtain orders and ensure that the existing customers are happy and
satisfied with the company and its services provided to them. Every wellmanaged, productive and effective sales-force organisation has its
challenging objectives for the overall sales-efforts, for the region and for
each individual of the company. Naturally to achieve the objectives and
good results, a new entrant needs training (theoretical and practical).
Before this selection of the new recruits must be done with the
consideration of job-analysis, description and specification respectively.
Because, these steps relates to is the quality and quantity of the salesforce. The work of training new entrants does not end when the
theoretical training is over. Next is the in-job training, when new entrants
are assigned to experienced sales-executives, for practical training? This
is essential for his all-round development. Finally, there is the most
difficult, but most vital aspect, of the whole training-programmes. It is to
improve the overall productivity of the total sales-force. To improve the
productivity of the employees it is very important to identifying the

79

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:

80

(i)

Recruitment

and

selection

of

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-forces 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.

81

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.

82

To know the types of compensation and factors influencing

it.

Discuss the need for motivating sales personnel and

motivational tools.

5.1

INTRODUCTION
Successful sales managers have three primary concerns in

managing the sales force- attracting outstanding salespeople, motivating

them to work both effectively and efficiently, and holding on to good sales
people. Among the most important tools for accomplishing these three
objectives is the organisations compensation plan. The sales force of any
company needs to be compensated adequately to keep its morale high
and to enable it to contribute to its maximum. A sales force is the
representative of the companys philosophy and business principles. The
building and maintenance of sales force is possible through proper
compensation plan.
Motivation is derived from the Latin term movere meaning to
move. Motivation stimulates the movement of an individual. It can be
defined as a dynamic process set in motion by creating or arousing
internal needs that activate goal-directed efforts and determine their
intensity and persistence. In simple words motivation is goal-directed
behaviour, underlying which are certain needs or desires. It is generally
regarded as the process of getting people to work towards the
achievement

of

an

objective.

Sales

force

cannot

be

controlled,

administered in the way factory workers can be monitored. The salesforce

is required to be self starters, highly ambitions, result oriented and go-

83

getters. Thus, the salesforce has to be kept highly motivated and

committed.

5.2

REQUIREMENTS OF A GOOD SALES COMPENSATION

PLAN
A good sales compensation plan meets seven requirements. First, it

provides a living wage, preferably in the form of a secure income.

Individuals worried about money matters do not concentrate on doing
their jobs well. Second, the plan fits with the rest of the motivational
program-it does not conflict with other motivational factors, such as the
intangible feeling of belonging to the sales team. Third, the plan is fair-it
does not penalize sales personnel because of factors beyond their controlwithin the limits of seniority and other special circumstances, sales
personnel receive equal pay for equal performance. Fourth, it is easy for
sales personnel to understand- they are able to calculate their own
earnings. Fifth, the plan adjusts pay to changes in performance. Sixth,
the plan is economical to administer. Seventh, the plan helps in attaining
the objectives of the sales organization.

5.3

DEVISING A SALES COMPENSATION PLAN

Whether contemplating major or minor changes or drafting a

completely new sales compensation plan, the sales executive approaches

the project systematically. Good compensation plans are built on solid
foundations. A systematic approach assures that no essential step is
overlooked.
The first step is to re-examine the nature of the sales job. Up-todate written job descriptions are the logical place to start. Other aspects
84

of company operations are considered in relation to their impact upon

the sales job. Sales department objectives are analyzed for their effect on
the salespersons job. The impact of sales-related marketing policies is
determined. Distribution policies, credit policies, price policies, and other
policies affect the salespersons job. Current and proposed advertising
and sales promotional programs assist in clarifying the nature of the
salespersons 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?

85

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

86

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 plans 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

87

selling, say, industrial or electronic products may offer a high basic

salary. Sometimes, when the product is in the introductory stage the
function of the salesman is to create new markets and make customers
understand how to use the product as in the case of a new consumer
durable product like vacuum cleaners of a new electronics products used
by certain industries; the basic salary of the salesman may be on the
higher side. The direct compensation package of a salesperson thus
consists of the basic pay plus allowances covering all travel and
entertainment expenses etc. In case, the salesman has to stay overnight
his boarding and lodging allowances are also provided for. The basic
salary and other allowances are revised from time to time. They also
increase with promotion of the salesman.
Indirect: It consists of financial as well as non-financial incentives.

Financial incentives
(i)

Salary plus commission on sales above a certain amountHerein,

the

salesman

receives

direct

salary

and

commission in addition to it. Every salesman is assigned a

fixed quota. The commission is awarded on achievement of
the targeted quota. A fixed percentage of sales achieved over
and above the target is also set. This type of compensation
scheme ensures a direct salary as well as an in-built
motivation system through incentives.
(ii)

Salary plus share in profits- This is not a very prevalent

method. It is generally suggested for a company selling high
value items with high profit margins. The incentive here is

88

based on profits earned. The selling expenses to sell a

product may also be large and this is incorporated in the
profit sharing scheme as it acts as a control mechanism. Also
salespeople working to obtain contracts are generally given a
share in profits rather than awarded on direct sales.

Non-financial incentives
(a)

Training

programme-

Most

companies

offer

training

programmes for their salesmen. On an average a salesman

has to undergo a training course every one or two years.
These programmes enable interaction between salesmen of
different territories as well as provide them with latest
developments in the field. These training programmes are
viewed as an indirect benefit by the salesmen.
(b)

Awards, recognitions and prizes- In addition to training

programmes

the

award

ceremonies

for

outstanding

achievements in sales are held in exotic locations like hill

stations or five-star hotels. The awards are presented
through foreign dignitaries or important people in the field,
thus

providing

the

salesman

with

the

much

needed

recognition.

5.5

FACTORS INFLUENCING COMPENSATION

Although the basic structure of a compensation plan may be

similar across the companies, some factors do predominantly shape the

structure of the companys compensation plan.

89

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

90

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
competitors

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 salespersons 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 persons efforts be
channeled in a direction consistent with the companys strategic plan.
Therefore, the direction of the salespersons effort is as important as the
intensity and persistence of that effort.

91

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

92

whole group but also has the flexibility to appeal to the varying individual
needs.
A related point is that the sales people themselves may not know
why they react as they do to a given motivator, or they may be unwilling
to admit what these reasons are. For example, a salesperson may engage
in a certain selling task because it satisfies his ego, rather than admit
this, however, he will say that he is motivated by a desire to serve his
customers.
Diversity in company goals- A company usually has many diverse
sales goals, and these goals may even conflict with each other. One goal
may be to correct an imbalanced inventory and another may be to have
the sales force to missionary selling to strengthen long-term customer
relations. These two goals conflict somewhat and require different
motivating forces. With diverse goals such as these, developing an
effective combination of motivators is difficult.
Changes in market environment- Changes in the market
environment can make it difficult for management to develop the right
mix of sales force motivational methods. What motivates sales people
today may not work next month because of changes in market
conditions. Conversely, sales executives can face motivational problems
when market conditions remain stable for an extended period of time. In
this situation, the same motivators may lose their effectiveness.

5.8

MOTIVATION THEORIES
Researchers in the behavioural sciences have shown that all

human activity is directed toward satisfying certain needs and reaching

93

certain goals. How sales-people behave on the job is directly related to

their individual needs and goals. Thus, some individuals will behave
differently and will be more successful because of different motivational
patterns. Many people feel that individual motivation is dependent upon
whether or not salespersons find something in the job that is personally
motivating for them. Therefore, the job of the sales manager must be
redefined, with greater emphasis placed upon understanding and
accepting the idea of how motivation works. The sales manager is
responsible not only for motivating the sales force per se but also for
counseling each salesperson individually to find the source of that
persons self-motivation.

Maslows Need Theory

Maslows well-known theory contends that people are motivated by
a hierarchy of psychological growth needs. Relative gratification of the
needs at one level activates the next-higher order of needs. The
hierarchy-of-needs theory implies that salespeople come to their jobs
already motivated and that they only need the opportunity to respond to
the challenges of higher-order needs. The following Exhibit presents the
order of priority of the needs individuals seek to fulfill and the needs
sales managers must consider.

EXHIBIT: HIERARCHY OF HUMAN NEEDS AND THEIR IMPLICATIONS

FOR SALES MANAGERS
Maslows Hierarchy

Salespersons Needs

Sales Managers Task

Self-development
Creativity
Self-fulfillment

Provide greater freedom,

self-development workshop

Self-actualization needs

94

Esteem needs
Recognition Status

Provide greater job

responsibilities, promotion
opportunities, public
recognition for
achievements

Social interaction
Friendship
Acceptance among peers
and superiors

Maintain close
relationships with sales
force
Sales meetings
Newsletters, memoranda,
etc.

Freedom from worry about

security of jobs, incomes,
medical expenses, etc.

Provide a balanced package

of fringe benefits

Food, shelter, overall

health, etc.

Be aware of general health

and living conditions of
sales force

Social needs

Safety needs

Physiological needs

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.

95

Motivator-Hygiene Theory: Herzbergs 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 Herzbergs 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

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).

96

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. Achievementoriented 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

97

is also essential so that these sales-people can know whether they are
successful or not. Managers may have to temper negative feedback
because achievement-motivated people may resign if they feel that they
are

going

to

be

unsuccessful.

Finally,

competition

among

such

salespeople can become cut-throat and damaging to the organization

unless carefully monitored and controlled.
Contrasted with these achievement-oriented individuals, affiliative
people are not as competitive nor are they as anxious about uncompleted
tasks; they require only general feedback regarding goal achievement.
Affiliative types like to work in groups and want to be accepted by others.
They are less self-centered, usually help bind the group together, and are
less able to tolerate traveling jobs involving long periods of solitude.
Although

salespeople

generally

exhibit

traits

of

both

task

achievement and group affiliation, it is up to the sales manager to learn

the dominant needs of individual salespeople in order to devise specific
strategies for motivating them.
Inequity theory: According to the inequity theory of motivation,
people compare their relative work contributions and rewards with those
of other individuals in similar situations. As positive-thinking minister
and author Robert Schuller says: Many people hear through their peers,
not their ears. Inequity is experienced when a person feels either
underrewarded or overrewarded for his or her contribution relative to
that of others. The stronger the feeling of inequity, the stronger the drive
to reduce tension. Although individuals may respond in unique ways to
inequity, most people who feel underpaid or underrewarded, relative to
others making similar contributions, tend to decrease their work efforts:

98

people who feel overpaid tend to increase their efforts. People may also
reduce their inequity tensions by distorting their perceptions of their
rewards and contributions versus those of others. Finally, individuals
may leave a perceived inequitable situation by quitting the job or
changing the comparison group.
According to inequity theory, it is important that sales managers
learn how individual sales representatives feel about the equity of their
contributions and rewards compared with those of others. If inequity is
perceived by some of the salespeople, the sales manager needs to correct
the situation if inequity really does exist or help the salespeople reduce
tensions by altering their perceptions of the comparison groups relative
contributions and rewards.
Role clarity: Donnelly and Ivancevich contend that one of the
most important needs of salespeople is role clarity, or a concept of exactly
what their job entails. Because salespeople often lack sufficient job
knowledge,

must

deal

across

departmental

boundaries,

and

are

challenged by complex problems requiring innovative solutions, precisely

defined goals and clear role expectations can be motivational. Empirical
research with salespeople correlates increased role clarity with greater
job interest, more opportunity for job innovation, less work tension, more
job satisfaction, and a lower propensity to leave. Salespeople usually
want and need more information about what is expected of them and how
they will be evaluated.
Clearly written job descriptions and management-by-objectives
(MBO) conferences that set precise goals (mutually agreed upon by the
salesperson and sales manager) can have important motivational effects

99

and stimulate job satisfaction. Clarifying the role expectations for

salespeople by individualizing achievement plants and providing a
continuous flow of helpful information will consume significant amounts
of sales management time. But this seems to be one of the least
complicated, least expensive, and surest ways of obtaining higher sales
force productivity.

5.9

MOTIVATIONAL TOOLS
The simple motivational tools of early years such as only financial

benefits prove to be a poor method of motivation beyond physiological

and safety needs satisfaction on account of the unique aspects of a
salespersons job. The non-financial incentives, become an important
component of motivation. Some of the factors that make a special mark
on salesforce motivation are discussed below.
1.

Meeting between manager and salesforce- These are highly

regarded by sales managers in the motivation of their sales
teams. This provides opportunity to managers to meet their
salesforce in the field, at head office and at the sales
meetings/conventions.

This

provides

number

of

opportunities for improving motivation. These meetings allow

the sales manager to understand the personality, needs and
problems of each salesperson.
2.

Clarity of job- Clarity of job and what is expected from the

salesperson is a great motivator. The objectives when duly
quantified and well defined, properly connected and linked

100

with

the

reward

and

recognition

serve

as

source

of

motivation to the salesperson.

3.

Sales targets or quotas- If a sales target or quota is to be

effective in motivating a salesperson, it must be regarded as
fair and attainable and yet offer a challenge to him. Because
the salesperson should regard the quota as fair, it is usually
sensible to allow him to participate in the setting of the
quota.

4.

Sales contest- The sales contest is an important tool to

motivate salesperson. The purpose of the sales contest varies
widely. It may encourage a higher level of sales in general, to
increase the sales of a slow-moving product or to reward the
generation of new customers. It provides an incentive to
show better performance and secure more satisfactory
results.

5.

Sales conventions and conferences- These are the devices

of

group

motivation.

They

provide

opportunities

for

salesperson to participate, gain social satisfaction and

express their views on matters directly affecting their work.
They promote team work, dissolve social barriers, inspire and
raise salespersons morale. Most of the companies in India
are now-a-days adopting this method to motivate their
salesforce.
6.

Positive affect- The positive affect method is also an

important techniques for motivating the salesforce to their
best. The proper application of praise, positive feedback, and
101

human warmth and understanding can impel others to

perform up to their capabilities. This must be done in a
genuine way and not be perceived as overtly-self serving.
7.

Leadership style of the manager- Leadership style of the

manager

plays

salesperson.
influence

an

important

Inspirational

through

role

in

leadership,

referent

power.

motivating

which

refers

Identification

the
to
or

charismatic charm is an important tool in the motivational

strategy of the management.
8.

Freedom to work- In order to perform the onerous duties

and responsibilities, the salesperson must be given a
reasonable amount of freedom and discretion in performing
their job. Discretion and freedom may be accomplished by
allowing salesperson to develop their own call patterns, more
control over the types of promotional packages that are
offered to their customers etc. Freedom or autonomy satisfies
the psychological needs and is like power pay (which is a
reward), making the job of salesperson more important in the
organization.

9.

Reward and recognition- Although sales quotas, sales

contests, conventions and conferences have positive carry
over effects, these are short lived techniques of motivating
salesmen. On the other hand reward and recognition on
salesperson

accomplishments

are

more

enduring

and

relatively economic methods of motivation. Some of the ways

to extend recognition and honour to salesperson include

102

conferment upon the title of salesman of the month/year.

Congratulation telegrams from members of top management,
sales trophies, offering membership of social clubs, mention
in company newsletter, certificate etc.
10.

Persuasion- One of the more common and recommended

forms of inducing high levels of motivation is through
persuasion.

In

this

situation,

managers

use

rational

arguments to convince salesperson that it is in their own

best interests to act in preferred way. Persuasion has the
advantage of getting people to conclude that their actions
were performed out of their own free will. This leads to higher
levels of self direction than reward or coercive modes of
influence where one perceives he or she acts more as a
function or external compulsion than internal volition.

5.10 SUMMARY
The sales compensation plan is an essential part of the total
program for motivating sales personnel. The basic sales compensation
elements (salary, commissions or combination of both) should be in
amount large enough to provide the living wage and sufficiently flexible to
adjust for changes in job performance. Motivating sales people is an
important aspect of sales force management. Sales personnel require
additional motivation because of inherent nature of the sales job, role
conflicts, the natural tendency towards apathy, and difficulties in
building group identity. Implementing motivational efforts requires that
sales executives be skilled leaders, rather than drivers, of sales
personnel.

Satisfactory

job

performance

103

develop

out

of

deep

understanding of motivational forces and processes, effective leadership,

two way communications, and effective handling of relationships.

5.11 KEYWORDS
Compensation: It is sum total of financial and non-financial
benefits provided to sales force in lieu of their services provided to
organisation.
Motivation: It is goal directed behaviour of sales force in any
organisation. It stimulates the movement and work of an individual.
PLC: Product Life Cycle is the journey of any product from the
stage of its introduction to decline. It depicts the life span of a product.

5.12 SELF ASSESSMENT QUESTIONS

1.

Discuss the importance of compensation plan for sales

personnel and write the components of a compensation plan.

2.

Elaborate the importance of motivation for sales force and

discuss in brief the important tools of motivation.

3.

Discuss the factors influencing compensation plan for sales

force.

5.13 REFERENCES/SUGGESTED READINGS

1.

Still, Cundiff, and Govoni, Sales Management, PHI.

104

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.

105

Subject: Sales Management

Course Code: MM-308

Author: Dr. Surinder Singh Kundu

Lesson No.: 06

Vetter: Dr. B.S. Bodla

SALES MEETING AND CONTESTS

STRUCTURE
6.0

Objective

6.1

Introduction

6.2

Sales meetings

6.3

Sales meetings: planning and staging

6.3.1 Aims
6.3.2 Content
6.3.3 Method
6.3.4 Execution
6.3.5 Evaluation

6.4

Types of sales meetings

6.4.1 National sales meetings
6.4.2 Regional sales meetings
6.4.3 National

and

regional

sales

meetings:

resistance
6.4.4 Local sales meetings
6.4.5 Travelling and remote-control sales meetings
6.5

Sales contests

6.6

Objectives of sales contests

6.7

Formats of contest
6.7.1 Contest prizes

106

executive

6.7.2 Awarding the prizes for sales contests

6.7.3 Evaluation of contests
6.7.4 Objections of sales contests
6.8

Summary

6.9

Keywords

6.10 Self assessment questions

6.11 References/Suggested readings

6.0

OBJECTIVE
After going through this lesson, you will be able to

Discuss the meaning, nature, types and features of sales

meeting and sales contests.

It also presents the process of conducting these meetings

and contests.

6.1

INTRODUCTION
The sales personnel/salespeople strive for the better performance

in the sales organisation beyond routine fair work. Some of them are the
real self-starters, whose achievement is self-motivated and no extra push
other than the challenge of the job itself is required. On the other hand,
most of the sales personnel do not strive for performance beyond routine
fair work without additional motivation. For the purpose of motivation
among the salespeople; sales management uses two main mechanisms
for stimulating them: sales meetings and sales contests.

107

6.2

SALES MEETINGS
Meeting is the session of sharing ideas, notion, facts and

experiences from one to another colleagues. In the sale organisation, the

meeting on sales and related matters are to be held. The sales meetings
are important both for communication and motivational purposes among
the sales people at the top or lower level in the management. When sales
personnel are on the road without the day-to-day opportunity for
employer communication and supervision, periodic group meetings are
valuable for exchanging information and idea. They also provide
occasions for motivating individual sales personnel through group
pressures. Most important, they provide occasions for management to
stimulate the group to raise its standards as to reasonable and
acceptable performance.

6.3

SALES MEETINGS: PLANNING AND STAGING

For the purpose of planning for a sales meeting; the five major

decisions: (i) defining the specific training aims; (ii) deciding meeting
content; (iii) determining methods of conducting the meeting; (iv) deciding
how to execute (hold) the meeting; and (v) deciding how to evaluate the
results; are taken. Thus, once again, the A-C-M-E-E approach also
assures that sales meetings, like sales training programs, are fully
planned and effectively staged.

6.3.1 Aims
In planning any sales meeting it is important to have clearly
defined

objectives.

The

underlying

purposes,

of

course,

are

to

communicate and to motivate the sales personnels. But more specific

108

aims, light heartedly called excuses for holding a meeting, are required. A
new product may be about ready for introduction or research may have
uncovered new insights on customer attitudes and behavior, and either
of these could lead to meetings of the sales training type to communicate
these matters to sales personnel. It is hoped, to motivate them; or
supervisory reports might have indicated that many sales personnel are
no efficient in applying sales techniques. This could lead to a sales
meeting, also of the training type, aimed to improve these skills; or there
may be new company policies or sales goals requiring explanation, and
the meeting may aim not only to communicate but also to use this
important information to motivate the group. Running throughout all
meeting purposes, of course, is the common aim of altering the attitudes
of sales personnel so as to modify their behavioral patterns in ways
leading to improved job performances addition, aims of meetings include
(i) improving the quality of sales force reports; (ii) orienting sales
personnel on the advertising program and showing how they can tie in
their efforts with it; (iii) increasing the effectiveness with which sales
personnel use their time and (iv) introducing new services (such as
inventory control assistance) for customers.

6.3.2 Content
The contents of a meeting mean to plan the agenda of meeting. All
agenda, by definition, is a list or an outline of things to be considered or
dis. cussed during the meeting. The content derives directly from the
meetings specific aims. For example, there is an industry rumor that a
strong competitor is about to introduce a far-fetched new product and
company sales personnel have high levels of apprehension. Thus, a

109

meeting may be planned with the specific aim of reducing apprehension

through informing sales personnel on what the company knows about
the competitors forthcoming new product and the companys plans for
neutralize it. In this situation, content might include (i) what we know
about the far-fetched new product; (ii) what we think the trades reactions
will be and why; (iii) what your company is doing; and (iv) what you
should do and how?

6.3.3 Method
The methods used in conducting a sales meeting depend upon the
aim, content, time availability and meeting place. Most local sales
meetings, held rather frequently, are short and participative in nature.
Regional and national sales meetings, held less often, run for two or more
days, have more ambitious aims and wider content, so they utilize a mix
of methods.

6.3.4 Execution
The execution phase is of key importance to meeting success.
Decisions are reached on speakers, seminar leaders, meeting site,
and time. Still other execution decisions, outwardly trivial, contribute
significantly to a meetings success or failure. Among these seemingly
trivial decisions is room arrangement. Most sales meetings, because of
their underlying purposes of communicating and motivating, require
active participation by attendees. The conventional classroom, as found
in most educational institutions, is setup for the lecture method; seats in
rows and columns.

110

The workshop is appropriate when smaller groups are to hold buzz

sessions on particular topics and report round tables are preferred, but
rectangular ones are also used. The inverted V-shape and the seminar or
British square are used where considerable participation by the
attendees is important. Among other seemingly trivial execution decisions
are those on audio visual equipment and supplies, provision of materials
to attendees (including pads and pencils), timing of breaks and
refreshments, and starting time and closing time. Inappropriate decisions
on any of these detract from a meetings effectiveness.

6.3.5 Evaluation
The meeting planners often neglect the evaluation phase. If
management desires to improve meeting effectiveness then it is very
much important aspect. The basis for evaluation should be whether the
meeting accomplished its aims. To determine this, participant feedback is
necessary. For this purpose the meeting planners may develop a sales
meeting evaluation form. The best practice is to design a new form to
evaluate each sales meeting held.

6.4

TYPES OF SALES MEETINGS

The following are the types of sales meeting:

6.4.1 National sales meetings

To elaborate the burning issues in competitive market, the national
sales meetings are to be held by the sales organisations. The costs of
bringing the entire sales force to a central site are substantial, but
national sales meetings are sometimes appropriate. If, for example,

111

comprehensive changes in marketing or sales policies are being made, a

national meeting can introduce these changes rapidly and uniformly,
providing standardized explanations and answers to questions. Moreover,
major executives attend a national meeting but not a series of
decentralized meetings-and their attendance provides more stimulation
than written or recorded messages at decentralized meetings. There are
other advantages in holding national sales meetings. Sales personnel
meet informally with their counterparts from elsewhere and learn from
the interchange of experience. On finding that others face and solve
similar problems, sales personnel are encouraged to find their own
solutions. Meeting home office personnel should result in better
coordination between the office and the field. The size of the national
meeting generates contagious enthusiasm. If the meeting is held at or
near a factory, there is opportunity for product training and to acquaint
sales personnel with technical manufacturing details. The national sales
meeting has drawbacks, in addition to the expense. It is difficult to find a
convenient time for all sales personnel to attend, unless the product line
is seasonal. Company routine is disrupted and competitors may cut into
market share while sales personnel are away. However, more aggressive
selling resulting from the national meeting should more than compensate
for any temporary lapse in sales coverage.

6.4.2 Regional sales meetings

In the present scenario, the sales organisations are not giving
stress to hold the national and regional sales meetings. There are so
many reasons: the conversion of sales force from field to centralised
office; attending the decentralised meetings by headquarters sales

112

executives and personnel; reducing the total travel cost and lowering the
lost selling time. Headquarters sales executives and personnel; brought
into direct contact with field personnel; learn about the current problems
at the firsthand. Each regional meeting may have a program designed to
emphasize unique problems of that region. The smaller attendance
should increase participation time per person attending. Regional sales
meetings have some disadvantages. Demands on executive time may be
excessive; consequently, top sales executives often rotate attendance
among regional meetings. The smaller percentage of the top mal1agemerit
in attendance depreciates the meetings importance in the eyes of the
sales staff and, because total attendance is smaller, developing a spirit of
contagious enthusiasm is more difficult. The pressure to economize
reduces the stimulating effect of the regional meeting further. The costs
of conducting a series of meetings preclude using the top-flight speakers
and entertainers featured at national meetings. Furthermore, the total
costs of holding several meetings may equal or exceed those of one large
national meeting, because much planning and organizational expense is
not fixed but is incurred separately for each meeting.

6.4.3 National and regional sales meetings: executive resistance

In many cases, sales executives oppose both national and regional
sales meetings. Some results do not justify expected costs, but they
admit that many benefits, such as the effect on sales force morale cannot
be measured in monetary terms. Other executives, especially those in
industries without slack selling seasons, contend that they can ill afford
to have sales personnel away from the field, even for a week. Still others
object to the demands on their own time. Ina few cases, sales executives

113

oppose national or regional meetings because of low sales force morale.

They fear that sales personnel will use the meeting to compare
complaints and to strengthen their convictions that the company is a bad
place to work.

6.4.4 Local sales meetings

District sales managers conducted local sales meetings weekly or
biweekly and from fifteen minutes to several hours. The strength of the
local sales meeting is its informality, each salesperson having an
opportunity to pose questions and to state personal views. Local sales
meetings are occasions for sales personnel to get together, become better
acquainted, and strengthen group identity.

6.4.5 Travelling and remote-control sales meetings

To reduce cost and time expenditure certain forms of sales
meetings are conducted by c1osed-circuit television, sales meetings by
telephone, sales meetings at home, and as the travelling sales meeting.
1.

Closed-circuit television: Closed-circuit television enables a

company to hold. several sales meetings. The program is live
at one meeting site and is telecast to others, thus retaining
much of the inspirational value of the live show without
incurring costs and inordinate losses of selling time.
Televised sales meetings are appropriate for companies with
large sales forces or large dealer organizations. Many
companies use televised sales meetings to introduce new
products or to launch national sales campaigns.

114

2.

Sales meetings by telephone: Telephone conference calls

are used for small group meetings and discussions. Users
say the group should be no larger than twenty. The meeting
is conducted like other small-group meetings: the sales
manager welcomes the group and opens the discussion,
which is guided by two rules-only one individual talks at a
time, and spea.1cers identify themselves and their cities. At
the end of t.1.e call, the sales executive gives a brief
summary. The telephone sales meeting save time and money,
and of course, sales personnel lose little, if any, time away
from their jobs.

3.

Sales meetings at home: Seeking to reduce the time and

costs of sales meetings, some companies mail recordings or
printed materials, to sales personnel at their homes. One
format is to record an executive conference or meeting and to
provide sales personnel with cassette copies. Another is to
print an illustrated script of a home office meeting for
distribution to sales personnel. Executives using these
formats point to three advantages: (i) sales personnel receive
the information at home, free from distractions; (ii) they can
review the information many times; and (iii) there are savings
in time and money.

4.

Travelling

sales

meetings:

Certain

meetings

require

numerous physical props. For instance, a manufacturer introducing a

new product line may want to display and demonstrate each new
product. It is difficult in this situation to stage regional meetings because
the displays must be transported to, moved in, and set up at each of
115

several sites. Some companies overcome this by outfitting motorized vans

and trailers with product displays and conference rooms. Thus, the sales
meeting moves from city to city, and at each stop sales personnel and/or
dealers come aboard.

6.5

SALES CONTESTS
A special selling campaign offering incentives in the form of prizes

or awards beyond the compensation plan called sales contest. The

purpose of sales contests is to provide extra incentives to increase sales
volume, to bring in more profitable sales volume, or to do both.
Corresponding to Herzbergs motivation-hygiene theory; sales contests
aim to fulfil individual needs for achievement and recognition-both
motivational factors. In terms of Maslows hierarchy of needs, sales
contests aim to fulfil individual needs for esteem and self-actualizationboth higher-order needs. In addition, sales contests develop team spirit,
boost morale by making jobs more interesting, and make personal selling
efforts more productive.

6.6

OBJECTIVES OF SALES CONTESTS

Sales contests are aimed to accomplish the following objectives:
I.

To obtain new customers.

II.

To secure larger orders per sales call.

III.

To push slow moving items, high-margin goods, or new

products.
IV.

To overcome a seasonal sales slump.

V.

To sell a more profitable mix of products.

VI.

To improve the performance of distributors sales personnel.

116

VII.

T o promote seasonal merchandise.

VIII. To obtain more product displays by dealers.

6.7

IX.

To get reorders.

To promote special deals to distributors, dealers, or both.

FORMATS OF CONTEST
Basically, the contest formats are classified into two groups: direct

and novelty. A direct format has a contest theme describing the specific
objective, such as obtaining new accounts, for example; Let s go after
new customers. A novelty format uses a theme, which focuses upon a
current event, sport, or the like, as in Lets hoot for hidden treasure (find
new customers) or Lets start panning gold (sell more profitable orders).
Some executives say a novelty format makes a sales contest more
interesting and more fun for the participants. Others say that novelty
formats are insults to mature people. A format should be timely, and its
effectiveness is enhanced if it coincides with an activity in the news. The
theme should bear an analogous relationship to the specific contest
objective-for example, climbing successive steps on a ladder can be made
analogous to different degrees of success, experienced at different timesin persuading dealers to permit the erection of product displays. Finally,
the theme should lend itself to contest promotion.

6.7.1 Contest prizes

There are four kinds of contest prizes: cash, merchandise, travel,
and special honors or privileges. Cash and merchandise are the most
common prizes. Many sales contests feature more than one kind of prize,
for example, travel for large awards and merchandise for lesser awards.

117

Some contests give participants the option of accepting one prize rather
than another.
1.

Cash: The cash as an incentive weakens as an individuals

unfulfilled needs; which are pushed farther up in the need of hierarchy.

Once basic physiological needs and safety and security needs are
satisfied whatever potency money retains as an incentive relates to
unfulfilled esteem and achievement needs. Non-cash prizes fill these
needs better than cash. If the compensation plan provides sales
personnel with sufficient income to meet basic physiological needs and
safety and security needs, a cash prize is a weak incentive unless it is a
substantial sum-say, 10 to 25 percent of an individuals regular annual
income. A cash prize of Rs. 100 means little to most sales personnel, and
they exert token efforts to win it. .Another objection to cash prizes is that
winners mix them with other income, and thus have no permanent
evidence of their achievements.
2.
Winners

Merchandise: Merchandise is superior to cash in respects.

have

permanent

evidence

of

their

.achievement.

The

merchandise prize is obtained at wholesale, so it represents a value

larger than the equivalent cash. For the same total outlay, too, more
merchandise prizes than cash awards can be offered; hence, the contest
can have more winners. Merchandise prizes should be those items; which
salespersons and their families desire. One way to sidestep this problem
is to let winners select from a variety of offerings. From the psychological
standpoint, people feel good when they are permitted to assert their
individuality and take their choice. A number of merchandise incentive
agencies, some of them providing a. complete sales contest planning

118

service, specialize in finishing prizes. Agencies issue catalogs with prices

stated in points rather than in money.
3.

Travel: Travel awards are popular. Few things can be

glamorized more effectively than a trip to a luxury resort or an exotic

land. The lure of a trip of a lifetime is a strong incentive, especially for the
person to escape the jobs routine. Travel awards generally provide trips
for winners and their spouses, this being advisable both to obtain the
spouses motivational support and to avoid the spouses opposition to
solo vacation trips by the salesperson.
4.

Special honours or privileges: This award has many forms:

a letter from a top executive recognizing the winners superior

performance, a loving cup, a special trip to a home office meeting, or
membership in a special group or dub has certain privileges. Winners, in
addition, receive publicity through house organs and in home town
newspapers. These awards provide strong incentives, as, for example,
they do with life insurance salespersons that push to gain membership in
the million-dollar club. Mainly firms employing sales personnel who are
almost independent entrepreneurs use the special honor or privilege
award. Such awards, however, are appropriate wherever management
desires to strengthen group identity and build team spirit. This type of
award appeals to the salespersons belongingness and social relations
needs, which, according to Maslow, an individual strives to satisfy after
fulfilling basic physiological needs and safety and security needs. It also
appeals to esteem and self-actualization needs.

119

6.7.2 Awarding the prizes for sales contests

It is a good idea to make it possible for everyone to win to stimulate
widespread interest in the contest. This means that the basis for awards
should be chosen with care. Contest planners recommend that present
performance levels be taken into account-to motivate the average or
inexperienced salesperson along with the star performer-and the basis of
award be for improvement rather than total performance. Hence, total
sales volume is less effective as an award basis than, for example,
percent of quota achieved or percent of improvement in quota
achievement. Many contests offer awards to all showing improvement,
but the value of individual awards varies with the amount of
improvement. The danger in offering only a few large prizes is that the
motivational force will be restricted to the few who have a real chance of
winning-the rest, knowing they have no chance to win, give up before
they start.
1.

Contest

Duration:

Contest

duration

is

important

in

maintaining the interest of sales personnel. Contests run for periods as

short as a week and as long as a year: but most run from one to four
months. One executive claims that thirteen weeks (a calendar quarter) is
ideal; another states that no contest should last longer than a month;
still another points to a successful contest lasting six months. There are
no set guides. Contest duration should be decided after considering the
length of time interest and enthusiasm can be maintained, the period
over which the theme can be kept timely, and the interval needed to
accomplish the contest objective.

120

2.

Contest

Promotion:

Effective

contest

promotion

is

important. To most sales personnel a contest is nothing new. A clever

theme and attractive prizes may arouse interest, but a planned barrage of
promotional material develops enthusiasm. A teaser campaign sometimes
precedes the formal contest announcement; at other times, the
announcement comes as a dramatic surprise. As the contest progresses,
other techniques hold and intensify interest. Results and standings are
reported at sales meetings or by daily or weekly bulletins. The sales
manager dispatches telegrams carrying news of important developments
or changes in relative standings. At intervals, new or special prizes are
announced. Management encourages individuals or groups to compete
against each other. Reports of standings are addressed to spouses. If the
prizes selected arouse the spouses interest, continuing enthusiasm is
generated in the home, the contest administrator should from time to
time inject new life into the contest. From the start regular news flashes
on comparative standings should be sent out, and, if initial contest
incentives are not producing the desired results, the administrator adds
the stimuli needed.

6.7.3 Evaluation of contests

There are two times when management should evaluate a sales
contest-before and after. Revaluation aims to detect and correct
weaknesses, Post-evaluation seeks insights helpful in improving future
contests. Both pre- and post evaluations cover alternatives, short- and
long-term effects, design, fairness, and impact upon sales force morale.
1.

The contest versus alternatives: If serious defects exist in

key aspects of sales force management, a sales contest is not likely to

121

provide more than a temporary improvement. Deficiencies caused by bad

recruiting,

ineffective

inappropriate

training,

compensation

incompetent
plans

are

supervision,
not

or

an

counterbalanced,

extemporarily let alone permanently, by a sales contest. The underlying

purpose of all sales contests is to provide extra incentives to increase
sales volume, to bring in more profitable volume, or to do both-this
purpose is not accomplished if sales force management has basic
weaknesses. Other avenues to improvement of selling efficiency need
exploring and evaluating at the time that a sales contest is being
considered. Probable results of pursuing these other avenues are taken
into account in contest planning and in the post mortem evaluation.
2.

Short and long term effects: A sales contest accomplishes

its pose if it increases sales volume, brings in more profitable volume, or

does both in the short and the long nm. No contest is a real success if it
borrows sales from preceding months, succeeding months, or both.
Successful contests increase both contest period sales and long-run sales
(although there may be a temporary sales decline after the contest is
over) because they inculcate desirable selling patterns those personnel
retain. Furthermore, successful contests so boost the spirits of sales
personnel that there is a beneficial carryover effect.
3.

Design: A well-designed contest provides motivation to

achieve the underlying purpose, while increasing the gross margin

earned on sales volume by at least enough to pay contest costs. The
contest format, whether direct or novel, should tie in directly with the
specific objectives, include easy-to-understand and fail contest rules,
and lend itself readily to promotion.

122

4.

Fairness: All sales persolli1el should feel that the contest

format and roles give everyone a fair chance of winning the more
attractive awards. While the contest is on, all sales personnel should
continue to feel that they have real chances of winning something. A
sales contest is unfair if its format causes some to give up before it starts
and others to stop trying before it is over.
5.

Impact upon sales force morale: Successful sales contests

result in permanently higher levels of sales force morale. If the contest

format causes personal rivalries, it may have the counterproductive effect
of creating jealousy and antagonism among the sales force. Even if sales
personnel compete for individual awards, it is often advisable to organize
teams and place the emphasis on competition among teams for
recognition rather than among individuals for personal gain.

6.7.4 Objections of sales contests

Only one- fourth departments use sales contests. The remaining
give the standard objections:
1.

Salespeople are paid for their services under provisions of the

basic compensation plan, and there is no reason to reward
them further for performing regular duties.

2.

High-caliber and more experienced sales personnel consider

sales contests infantile and silly.

3.

Contests lead to unanticipated and undesirable results, such

as increased returns and adjustments, higher credit loss,
and overstocking of dealers.

123

4.

Contests cause salespeople to bunch sales during the

competition, sales slumps occur both before and after the
contest.

5.

The disappointment suffered by contest losers cause a

general decline in and safes force morale.

6.

Contests ate temporary motivating devices and, if used too

frequently, have a narcotic effect. No greater results in the
aggregate are obtained with contests than without them.

7.

The competitive atmosphere generated by a sales contest

weakens team spirit.

The

foremost

objection

indicates

misunderstanding

ofbothpersonne1 motivation and contest design, and the second mayor

may not be true in individual situations. All the other objections are
overcome through good contest design, intelligent contest administration,
and proper handling of other aspects of sales forces management.
Assuming that sales management is competent, thorough planning and
effective administration of a contest can produce lasting benefit for both
sales personnel and company. If a contest is used as a substitute for
management, it is likely to have bad results. Under some circumstances,
nevertheless, sales contests are ill advised. When a firms products are in
short supply, for instance, it is ridiculous to use a contest to stimulate
orders, but the same firm might find a contest appropriate to lower
selling expense or improve sales reports. Companies distributing
industrial goods (that is, raw materials, fabricating materials and parts,
installations, accessory equipment, and operating supplies) do not find
sales contests effective for stimulating sales except, of course, where it is
possible to take sales away from competitors. But, again, industrial

124

goods-companies

use

contests

to

reduce

selling

costs,

improve

salespeoples reports, and improve customer service. Similarly, where the

product is highly technical and is sold only after long negotiation, as with
many industrial goods, sales contests for stimulating sales volume are
inappropriate.

6.8

SUMMARY
To stimulate sales personnel sales meetings and sales contests are

two main means in the sales organisations. Sales meetings provide

opportunities for motivating and communicating with individual sales
personnel and for strengthening group identification. Sales contests
provide incentives to increase profitable sales volume and achieve more
specific objectives. Sales meetings and sales contests require thorough
planning and effective implementation. The judicious use of meetings and
contests builds individual and sales force morale and helps to accomplish
company goals.

6.9

KEYWORDS
Sales Contests: It is an important tool to motivate sale force by

comparing their performance.

Sales Meeting: Sales meeting is the session of sharing ideas,
notions, facts, and experience from one to another colleagues to improve
performance of sales force.
ACMEE: It is a tool for planning sales meeting, based on Aim,
Contents, Methods, Execution, and Evaluation.

125

6.10 SELF ASSESSMENT QUESTIONS

1.

What do you mean by Sales-meeting? What steps may be

followed to conduct a meeting.

2.

Why the sales meetings have become so important in success

of firm?

3.

What are the objectives of a sales meeting and sales

contests?

4.

Explain the types of sales meeting and sales contests.

5.

Explain the role of sales meeting and sales contests to

improve Sales-Forces Productivity and performance?

6.11 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.

126

Subject: Sales Management

Course Code: MM-308

Author: Dr. Atul Dhingra

Lesson No.: 07

Vetter: Dr. B.S. Bodla

SALES TERRITORIES
STRUCTURE
7.0

Objective

7.1

Introduction

7.2

Reasons for establishing territories

7.3

Bases for territory development

7.4

Approaches of Designing Territories

7.5

Procedure for Setting up sales territories

7.6

Revising Sales Territories

7.7

Why sales territories may not be developed

7.8

Summary

7.9

Keywords

7.10 Self Assessment Questions

7.11 References/Suggested readings

7.0

OBJECTIVE
After going through this lesson, you will be able to

Understand the concept of sales territories

Know the basic reasons for establishing sales territories

Know the benefits of sales territories

Understand the procedure of setting up sales territories

Know the types of sales territories

127

7.1

Examine the reasons of revising sales territories

Find out the reasons of not establishing sales territories

INTRODUCTION
No sales manager can afford to ignore the planning and

organisation of the territorial coverage. Although much has been done to

improve the efficiency of individual salesman, there is still much room
left for the improvement in territorial management. There are still some
sales organisations that believe that planning and organisation of sales
territories would be too difficult to attempt, and there is nothing wrong if
salesmen just go out and make calls. However, the sensible thing to do
is to guide the salesmans field activities properly, control them, and plan
them so as to achieve the sales objectives. No doubt, the establishment
and

maintenance

of

the

sales

territories

involves

substantial

expenditure of time and effort; but wherever sales manager have paid
attention to its organisation and planning, they have reaped substantial
rewards by way of decreased selling cost and increased sales. In this way,
they have also helped individual salesman to achieve greater earnings for
himself and greater profits for the company.
A sales territory comprises a group of customers or a geographical
area assigned to a salesperson. The territory may or may not have
geographical boundaries. Typically, however, a salesperson is assigned to
a geographical area containing present and potential customers.
Assigning sales territories helps the sales manager achieve a match
between sales efforts and sales opportunities. The total market of most
companies is usually too large to manage efficiently, so territories are

128

established to facilitate the sales managers task of directing, evaluating,

and controlling the sales force.
The emphasis in sales territory concept is upon customers and
prospects rather than only upon the area in which an individual
salesperson works. Customers and prospects are grouped in such a way
that the salesperson serving these accounts can call on them as
conveniently and economically as possible.
Operationally defined, a sales territory is a grouping of customers
and prospects assigned to an individual salesperson. Many sales
executives refer to sales territories as geographical areas. But, in
contrast, in some companies particularly in which technical selling style
is predominant, geographical considerations are ignored and sales
personnel are assigned entire classes of customers, regardless of their
locations. When sales personnel sell mainly to personal acquaintances,
as in selling property, insurance, and investment securities; little logical
base exists for dividing the market geographically.
Small companies, and companies introducing new products
requiring the use of different marketing channels, often do not use
geographically defined territories at all, or if they do, use rough divisions
such as entire states or census regions: In these instances, there is no
reason to assign territories, since existing sales coverage capabilities are
inadequate relative to sales potentials.

7.2

REASONS FOR ESTABLISHING TERRITORIES

The primary reason for establishing sales territories is to facilitate

the planning and controlling of the selling function. Well-designed sales

129

territories, however, may result in increased motivation, morale, and

interest of the sales force, improving the total sales performance. But
sales managers typically have more specific reasons for establishing
territories.
(i)

To obtain thorough coverage of the market: Sales territories

help in proper market coverage. A salespersons calling time is planned

as efficiently as possible in order to ensure proper coverage of present as
well as potential customers. Coverage is likely to be more thorough when
each sales person is assigned to a properly designed sales territory rather
than when all sales personnel are allowed to sell anywhere. With proper
coverage of the territories, the company can more closely reach the sales
potential of its markets.
(ii)

To Establish Salespersons Job and Responsibilities: Sales

territories help in setting the tasks and responsibilities for the sales force.
Salespeople have to act as business managers for their territories. They
have the responsibility of maintaining and generating sales volume in
their territories. Once all call frequencies are calculated and assigned, it
is easier to determine the total wor1doad and then to break it down into
equal assignments among salesmen. When an equitable workload is
assigned on the basis of call frequencies, better results are obtained. An
equitable workload assignment creates greater interest and enthusiasm
among the salesmen.
(iii)

To evaluate sales performance: Sales territories help in the

evaluation of sales performance of a company. Actual performance data

can be collected, analyzed, and compared with expected performance
goals. Even present sales figures can be compared with past figures to

130

judge the performance over the years. Individual territory performance

can also be compared to district performance, district performance
compared to regional performance; and regional performance compared
to the performance of the entire sales force.
(iv)

To Improve Customer Relations: Properly designed sales

territories allow sales people to spend more time with present and
potential customers and less time on the road. Customer goodwill and
increased sales can be expected when customers receive regular calls.
Since the salesmans visits are decided under a call frequency schedule
programme, he comes in contract with his customers on the basis of a
regular schedule. Such regular contacts enable both the salesman and
the customer to understand each other well and get their difficulties
solved in respect of the supply of, and demand for, goods, and also raises
the general reputation of the company which the salesman represent.
(v)

To Reduce Sales Expenses: Sales territories are designed to

avoid duplication of effort so that two or more salespersons are not

travelling in the same geographical area. This lowers selling cost and
increases company profits. Sales territories also result in such benefits as
fewer travel miles and fewer overnight trips.
(vi)

To Improve control of the sales forces: When customer calls

frequencies, routes and schedules are determined, the performance of

salesmen can be measured. It, then, becomes difficult for a salesman to
neglect a hard territory and only go ahead with the easiest-to- sell
accounts. Over and above this, no salesman can devote more time and
get himself lost in one territory when he is supposed to follow a preestablished schedules and route. When all frequencies, routes and

131

schedules are predetermined, the work habits of salesmen, in general,

are improved, resulting in better control of the sales force.
(vii)

To co-ordinate selling with other marketing, functions: A well-

designed sales territory can aid management in performing other

marketing functions. Sales and cost analyses can be done more easily on
a territory basis than for the entire market. Marketing research on a
territory basis can be used more effectively for setting quotas and
establishing sales and expense budgets. If salespeople are to aid
customers in launching advertising campaigns, distributing point of
purchase displays, or performing work related to sales promotions, the
results are usually more satisfactory when the work is assigned and
managed on a territory-by-territory basis rather than for the market as a
whole.

7.3

BASES FOR TERRITORY DEVELOPMENT

The objectives & criteria for sales territory formation are directly

related to the bases used in creating the territories. The actual division of
a firms customer base into individual territory can be achieved by means
of several methods, depending on which of the three alternative types of
bases used. The three important bases are- geography, potential and
servicing requirements, & work load.
(a)

Geography: For the establishment of territories, geographical

considerations are the most frequently used base. This base is simple, as
it tends to adopt existing geopolitical boundaries such as states,
countries, or cities. The major advantage of the geographic approach is
the ready availability of secondary data from different sources.

132

(b)

Potential and servicing requirements: The potential approach

refers to splitting up a firms customer base according to sales potential.

It would seem to provide equality of opportunity and thus bring out the
best

in

sales

people.

The

procedure

is

relatively

simple.

First

management has to estimate the sales potential for the entire company
and then try to divide this potential equally among salespersons. Assume
that a firm has estimated its total sales potential at Rs. 10 million for a
given year. Sales manager has further determined that each sales person
can handle a personal sales potential of Rs. 500,000. This would mean
that twenty territories would be formed, all of which would have identical
sales potential of Rs. 500,000 each.
(c)

Workload: The third sales territory base, workload, goes one

step further. It not only considers individual account potential &

servicing requirements in creating territories, but also reflects differences
in

coverage

difficulty

caused

by

topographical

features,

account

locations, competitive activity & so forth. Some companies try to attain

equity by assigning finite number of accounts and establishing average
call frequencies. For instance, a firm may give every territory manager
two hundred accounts to service and prescribe an average frequency
often calls per day; This would mean that all accounts visited once
during a months twenty working days.

7.4

APPROACHES OF DESIGNING TERRITORIES

Three approaches may be used to design the sales territories.
The

building

up

approach

of

designing

territories

involves

combining enough pieces of a companys overall market to create units

133

presenting sufficient sales challenges. To use this approach, actual &

potential customers have to be identified and their individual sales
volumes assessed. After classifying them according to desirable call
frequencies & determining how many calls a salesperson can reasonably
be expected to make, account mixes can be created to satisfy the dual
goals of adequate consumer coverage. This method is favored by many
consumer goods manufacturers looking for intensive distribution.
The breakdown approach proceeds in the opposite direction. It
starts with the overall sales forecast for the entire company, which is in
turn derived from a projection of the total market potential and an
estimate of the companys likely share of it. The method then sets an
average sales figure per salesperson to reach at the number of territories
to be formed using this as divisor to total market potential. Such an
approach may prove satisfactory for industrial goods producer that desire
selective distribution. The method, however, suffers from a severe
conceptual paradox: Instead of viewing sales as a result of sales force
effort and then forecasting sales accordingly, the number of members in
the sales organization is determined by the expected overall sales. This
can lead to a self-fulfilling prophecy.
The incremental approach is conceptually the most appealing. With
this approach, additional territories are created as long as the marginal
profit generated exceeds the cost of servicing them. Administrative
difficulties, however, hamper the methods applicability since it requires a
cost accounting system capable of determining sales, costs, and profits
associated with various levels of input. If a company can determine this
kind of information, profits can be maximized by increasing the number
of territories up to the point of negative returns.
134

7.5

PROCEDURE FOR SETTING UP SALES TERRITORIES

A sales territory should not be so large that the sales person either

spends an extreme amount of time travelling or has time to call on only a

few of the scattered customers. On the other hand, a sales territory
should not be so small that a sales person is calling on customers too
often. The sales territory should be big enough to represent a reasonable
workload for the ales force but small enough to ensure that all potential
customers can be visited as often as needed.
Whether a company is setting up sales territories for the first time
or revising ones that are already in existence, the same general procedure
applies: (1) select a geographic control unit, (2) make an account
analysis, (3) develop a salesperson workload analysis, (4) combine
geographic control units in to territories, and (5) assign sales personnel
to territories.

1.

Selecting a basic geographical control unit

The starting point in territorial planning is the selection of a basic

geographical control unit. The most commonly used control units are
districts, pin code numbers, trading areas, cities, and states. Sales
territories are put together as consolidations of basic geographical control
units.
Management should strive for as small a control unit as possible.
There are two reasons for selecting a small control unit. One reason is to
realize an important benefit of using territories, precise geographical
identification of sales potential. If the control unit is too large, areas with
low sales potential are hidden by inclusion with areas having high sales

135

potentials, and areas with high sales potentials are obscured by inclusion
with those having low sales potentials. The second reason is that these
units remain relatively stable and unchanging, making it possible to
redraw territorial boundaries easily by redistributing control units among
territories. If, for example, a company wants to add to Ram s territory
and reduce Shams territory, it is easier to transfer city-sized rather than
state- sized control units.
Political units (state, district, or city) are presently used quite often
as geographic control units. These are commonly used because they are
the basis of a great deal of government census data and other market
information.
Counties: In the United States and U.K., the county is the most
widely used geographical control unit. County, in these countries,
typically is the smallest unit for which government sources report
statistical data. Districts may be used on: similar lines in India.
Zip code areas: It is also used in USA. Typical Zip code area is
smaller than the typical county. In India Pin code areas may be used on
similar lines.
Cities: When a companys sales potential is located entirely or
almost entirely, in urbanized areas, the city is used as the control unit.
The city rarely is fully satisfactory as a control unit, suburbs adjacent to
cities possess sales potentials at least as great as those in the cities
them-selves and, in addition, they can often be covered by the same sales
personnel at little additional cost.

136

Trading areas: Another control unit used for establishing sales

territories is the trading area. The trading area is perhaps the most logic
al control unit, since it is based mainly on the natural flow of goods and
services rather thin on political or economic boundaries. Firms that sell
through Wholesalers or retailers often use the trading area as a control
unit. The trading area is a geographical region that consists of a city and
the surrounding areas that serve as the dominant retail or wholesale
center for the region. Usually, customers in one trading area will not go
outside its boundaries to buy merchandise; nor Will a customer from
outside enter the trading area to purchase a product. The trading area as
a geographic control unit has several advantages. Since trading areas are
based on economic considerations, they are representative of customer
buying habits and patterns of trade. Also, the use of trading areas aids
management in planning and control.
States:

Many

companies

have

used

state

boundaries

in

establishing territory boundaries. A state may be an adequate control

unit if used by a company with a small sales force that is covering the
market selectively rather than intensively. The use of states as territory
boundaries may also work well for a company that is seeking nationwide
distribution for the first time. In fact, in these situations salespeople may
be assigned to territories that consist of more than one state. This may be
done on a temporary basis until the market develops, at which time a
change can be made to a smaller control unit. State sales territories are
simple, convenient, and fairly inexpensive.

2.

Making an Account Analysis

137

After a company selects the geographic control unit, the next step
is to conduct an audit of each geographic unit. The purpose of this audit
is to identify customers and prospects and determine how much sales
potential exists for each account.
First, accounts must be identified by name. Many sources
containing this information are available. For example, the yellow Pages
have become computerized, and they represent one of the most effective
sources for identifying customers quickly. Other sources include
company records of past sales; trade directories; professional association
membership lists; directories of corporations; publishers of mailing lists;
trade books and periodicals; chambers of commerce; central, state, and
local governments; and personal observation by the salesperson.
After potential accounts are identified, the next step is to estimate
the total sales potential for all accounts in each geographic control unit.
The sales manager estimates the total market potential and then
determine how much of this total the company can expect to get. The
estimated sales potential for a company in a particular territory is often a
judgmental decision. It is based on the companys existing sales in that
territory, the level of competition, any differential advantages enjoyed by
the company and the relationships with the existing accounts. The
Personal Computer has become a tremendous management aid in
analyzing the sales potential in a territory. The PC can also calculate the
estimated sales potential based on the pre-determined criteria much
faster than the sales manager can.
Once the sales potential estimates have been made, the PC can
classify each account according to it s annual buying potential. One

138

commonly used approach is to employ an ABC classification. The

computer identifies all those accounts whose sales potential is greater
than a predetermined amount, and classifies them as an account. Next,
the accounts that are considered to be of average potential are classify as
C accounts. Finally, accounts whose potential is less than a certain
amounts are classified as C accounts.

3.

Developing a Salesperson Workload Analysis

A salesperson workload analysis is an estimate of the time and

effort required to cover each geographic control unit. This estimate is

based on an analysis of the number of accounts to be called on, the
frequency of the calls, the length of each call, the travel time required,
and the non-setting time. The result of the workload analysis estimate is
the establishment of a sales call pattern for each geographic control unit.
Several factors affect the number of accounts that can be called on
in each geographic control unit. The most basic factor is the length of
time required to call on each account. This is influenced by the number
of people to he seen during each call, the amount of account servicing
needed, and the length of the waiting time. Information about these
factors can be determined by examining company records or by talking
with sales people.
One factor that affects the number of accounts that can be called
on is the travel time between accounts. Travel time will vary considerably
from one region to another, depending on factors such as available
transportation, conditions of highways, and the weather. The sales

139

manager seeks ways to minimize travel time and thereby to increase the
number of accounts that can be called on.
The frequency of sales calls is influenced by a number of factors.
Accounts are generally grouped into several categories according to sales
potential. Group A accounts are called on most frequently, group B
accounts less frequently, and group C accounts the least of all. Other
factors that influence the call frequency are the nature of the product
and the level of competition. The level of non-selling activities influences
the time and effort required to cover a geographic control unit.

4.

Combining Geographical Control Units into Sales

Territories
Up to this point the sales manager has been working with the

geographic control unit selected in the first phase of the procedure for
setting up sales territories. The unit may be a state, county, city or some
other geographical area. The sales manager is now ready to group
adjacent control units into territories of roughly equal sales potential.
In the past the sales manager used to develop a list of tentative
territories by manually combining adjacent control units. However, this
was a long procedure that, in most cases, resulted in split control units
and territories with uneven sales potential. Today, computers are
handling this task in a much shorter time period.
Territories with unequal sales potential are not necessarily bad.
Salespeople vary in ability and experience as well as initiative, and some
can be assigned heavier workloads than others. The sales manager
should assigns the best salespeople to territories with a high sales

140

potential and newer less effective salespeople to the second and third-rate
territories, Of course, some adjustment in sales quotas and commission
levels may be necessary; depending on the relative sales potential of a
specific area and the types of selling or non-selling tasks assigned to the
sales representatives.

Territory Shape
The planner now considers territory shape. The shape of a territory
affects both selling expenses and ease of sales coverage. In addition, if
the shape of a territory permits the salesperson to minimize time on the
road, shape contributes to sales force morale. Three shapes are in wide
use; the wedge, the circle, hopscotch, and the cloverleaf.
The wedge is appropriate for territories containing both urban and
non-urban areas. It radiates out from densely populated urban centre.
Wedges, of course, can be in many sizes. Travel time among adjoining
wedges can be equalized by balancing urban and non-urban calls.
The circle is appropriate when accounts and prospects are evenly
distributed throughout the area. Circular territory involves starting at the
office and moving in a circle of stops until the salesperson ends up back
at the office. The salesperson assigned to the circular M shaped territory
is based at some point near the center, making for greater uniformity in
frequency of calls on customers and prospects. This also makes the
salesperson nearer to more of the customers than is possible with a
wedge- shaped territory.
The cloverleaf is desirable when accounts are located randomly
through a territory. Careful planning of call schedules results in each

141

cloverleaf being a weeks work, making it possible for the salesperson to

be home weekends. Home base for the salesperson assigned to the
territory is near the centre. Cloverleaf territories are more common
among industrial marketers than they are among consumer marketers
and among companies cultivating the market extensively rather than
intensively.
In the case of hopscotch territory, the salesperson starts at the
farthest point from the office and makes calls on the way back to the
0ffice. The salesperson would typically go non-stop to the farthest point
in one direction and on the way back stops at many places. On the next
trip the salesperson will go in the next direction.

5.

Assigning Sales Personnel to Territories

When an optimal territory alignment has been devised the sales

manager is ready to assign salespeople to territories. Salespeople vary in

physical condition, as well as ability, initiative and effectiveness. A
reasonable and desirable workload for one salesperson may overload
another and cause frustration.
In assigning sales personnel to territories, the sales manager must
first rank the salespeople according to relative ability. When assessing a
salesperson relative ability, the sales manager should look at such
factors as product and industry knowledge, persuasiveness and verbal
ability. In order to judge a salespersons effectiveness within a territory,
the sales manager must look at the salespersons physical, social and
cultural characteristics and compare them to those of the territory. For
instance, the salesperson born and brought up in a village is likely to be

142

more effective with rural clients than with urban customers because he
or she speaks the same language and shares the same value as the rural
clients. The goal of the sales manager in matching salespeople to
territories in this manner is to maximize the territorys sales potential by
making the salesperson comfortable with the territory and the customer
comfortable with the salesperson.

7.6

REVISING SALES TERRITORIES

Two major factors may cause a firm to consider revising

established territories. First, a firm just starting in business usually does

not design territories very carefully. Often, it is unaware of the problems
inherent in covering a certain territory, and sometimes it overestimates or
under-estimates the territorys sales potential and required workload. But
as the company grows and gains in experience, the sales manager
recognizes that some territory revision is needed. In other situations, a
well- designed territory structure may become outdated because of
changing market conditions or other factors beyond the control of
management.
With the aid of a PC, the sales manager can produce several
revised territory alignments in minutes. Without a computer this task
would consume days. Before embarking on the revision, the sales
manager should determine whether the problems with the original
alignment are due to poor territory design, market changes, or faulty
management in other areas. For example, it would be a serious mistake
for management to revise sales territories if the problems are really due
to a poor compensation plan.

143

Signs that justify territory revision

As a company grows, it usually needs a larger sales force to cover
the market adequately. If the company does not hire additional sales
personnel, the sales force will probably only skim the territory instead of
covering it intensely. If sales potential have been estimated in an
inadequate manner, the performance of the sales force may be very
misleading.
Territories may also need revision because of an overestimation of
sales potential. For instance, a territory may be too small for a good
salesperson to earn an adequate income. Certain environment changes
could also warrant the revision of a sales territory.
Overlapping territories are another reason for revision. This
problem usually occurs when territories are split, and it can cause a
tremendous amount of friction in the salesforce. Sales people are very
reluctant to have their territories divided because that means handing
over accounts they have built up and nurtured. The mere thought that
another salesperson is reaping the benefits of their hard work can lead to
much bitterness. The organization should immediately correct this
problem in a way that will benefit the existing representatives, the new
representatives, and the company.
Territory revisions may be necessary when one salesperson jump
into another salespersons territory in search of business. This is an
unethical practice, and it will cause problems with in the sales force. If
territories have been designed properly, there should be no need for
jumping. Territory jumping is usually a sign that a salesperson is not

144

developing his or her territory satisfactorily. However, it can also indicate

that the sales potential due territory is greater than that in another. If a
salesperson is doing a good job covering his or her market but the
contiguous market has more potential, the representative may be forced
to enter the adjacent market.

The effects of territory revision

Salespersons, .like most others, dislike change. Management,
therefore, must make, a decision either to avoid territory revisions for
fear of damaging sales force morale or to revise the territories in order to
eliminate problems. When a territory is reduced, a salesperson might face
a reduction in potential income and the loss of key accounts that he or
she has developed over years. Both of these can result in low morale.
Therefore, before revisions are made, sales manager should ask the sales
force for ideas and suggestions that might alleviate such problems.
Compensation adjustments sometimes must be made to avoid low
morale. The salesperson whose territory is being reduced should be taken
into confidence and told that a smaller territory can be covered more
intensively, thereby Offering a higher volume for the same travel time.
One approach to compensating the salesperson is to guarantee the
previous level of income.

7.7

WHY SALES TERRITORIES MAY NOT BE DEVELOPED

In spite of the stated advantages, there are disadvantages to

developing sales territories:

Sales people may be more motivated if they are not restricted

by a particular territory and can develop customers wherever

145

and whenever they find them. For example, in the case of

industrial products, organisations/customers are scattered
geographically and not concentrated at one place, sales
people, therefore, may be allowed to sell to any potential
customer.

The company may be too small to be concerned with

segmenting the market into sales areas.

Management may not want to take the time, or may not have
the know-how for territory development.

Personal

friendship

may

be

the

basis

for

attracting

customers. For Example, Life insurance salespeople may first

sell policies to their family and friends and then use their
contacts.

Territory Management problems & Remedies

The table given below summarises some of the problems of territory
management and also the remedial actions that may be taken to
overcome these problems:
Problems

Remedies

Inadequate coverage

Split territories

Inadequate size

Enlarge territories

Revision

Prepare salespeople

Shifting accounts

Revise territories

Inadequate support

Assist sales persons

Territory jumping

Eliminate practice

Overlapping territories

Minimize crossovers

Selling cost variations

Review cost figures

146

Problems

Remedies

High turnover

Rectify casual factor

7.8

SUMMARY
The establishing cost of making a personal sales visit has caused

sales managers to seek more efficient and less expensive means of

reaching customers. This is done through effective time and territory
management with the aid of innovative ideas and new technology.
Setting up sales territories facilitates the planning and control of
sales operations. Well-designed territory assist in attempts to improve
market coverage and customer service, reduce selling expense ratio,
secure coordination of personal- selling and advertising efforts, and
improve the evaluation of personnel performance.
Territory management implies responsibility. Sales representatives
in charge of there own territories are responsible for making things
happen. A territory can be thought of as a scaled-down version of a firms
total market, and so a sales representative in charge of a territory has
many sales management duties.
Managing sales territories includes establishing the territories,
analyzing accounts, analyzing each salespersons workload, assigning
personnel to territories and, if necessary, revising territories. Effective
territory management is needed to provide salespeople with evenly
divided sales territories, estimate a territorys potential correctly,
formulate a strategy for achieving that potential, and properly consider
each individual salespersons strengths and weaknesses.

147

7.9

KEYWORDS
Sales Territory: It comprises a group of customers or a

geographical area assigned to a sales person.

Building up approach: To use this approach of designing territory,
actual and potential customers have to be identified and their sales
volumes assessed.
Break Down Approach: This approach sits an average sales figure
per salesperson to reach at the number of territories to be formed.
Incremental approach: In this approach additional territories are
created as long as the marginal profit generated exceeds the cost of
servicing them.

7.10 SELF ASSESSMENT QUESTIONS

1.

What do you understand by sales territory? Discuss the

procedure of setting sales territories.

2.

Clarify the concept of sales territory and discuss its

advantages and significance.

3.

Discuss the types of sales territories highlighting their utility

and importance.

4.

Why is it necessary to establish sales territories that are

equal?

7.11 REFERENCES/SUGGESTED READINGS

1.

Still, Cundiff, and Govoni, Sales Management, PHI.

148

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.

149

Subject: Sales Management

Course Code: MM-308

Author: Dr. M.R.P. Singh

Lesson No.: 08

Vetter: Sh. Sanjeev Kumar

SALES QUOTA
STRUCTURE
8.0

Objectives

8.1

8.0

Introduction

8.2

Purpose of the Sales Quota

8.3

Types of quotas

8.4

Procedure for setting sales volume quota

8.5

Characteristics of a good quota system

8.6

Summary

8.7

Keywords

8.8

Self assessment questions

8.9

References/Suggested readings

OBJECTIVES
After going through this lesson, you will be able to-

8.1

Describe purpose and importance of sales quota.

Explain the types of sales quota and procedure for setting it.

Discuss the characteristics of good quota system.

INTRODUCTION
A sales quota is a quantitative goal assigned to a sales unit for a

specific period of time. A sales unit may be a sales person, territory,

150

branch office, region or distributor. Sales quotas are used to plan, control
and evaluate selling activities of a firm. As standards for appraising
selling effectiveness, quotas specify desired performance levels for sales
volume, expenses, gross margin, net profit, selling and non-selling
activities, or some combination of these items. Sales quotas provide a
source of motivation, a basis for incentive, compensation, standards for
performance evaluation of sales person and uncover the strengths and
weaknesses in the selling structure of the firm.
Quotas are devices for directing and controlling sales operations.
Their effectiveness depends upon the kind, amount, and accuracy of
marketing information used in setting them, and upon managements
skills in administering the quota system. For effective results, quotas are
designed on the basis of information derived from sales forecasts, studies
of market and sales potentials, and cost estimates. Accurate data are
important to the effectiveness of a quota system, but, they are not
sufficient; judgement and administrative skills are required of those with
quota setting responsibilities. Soundly administered quotas based on
thorough market knowledge are effective devices for directing and
controlling sales operations.

8.2

PURPOSE OF THE SALES QUOTA

(i)

To

provide

standards

for

evaluating

performance:

Quotas provide a means for determining which sales

personnel, territory, other units of sales organisation, or
distributive outlets are doing average, below average, or
above average job. They are yardsticks for measuring sales
performance. Comparisons of quotas with sales performance

151

identify weak and strong points, but management must dig

deeper to uncover reasons for variations.
(ii)

To furnish goals and incentives for the sales force:

Quotas provide salespersons, distributive outlets and others
engaged in selling activities, goals and incentives to achieve
certain performance level. Many companies use quotas to
provide their salesforce the incentives of increasing their
compensation through commissions or bonus if the quota is
surpassed and/or recognised for superior performance.
Needless to say, to be true motivators, sales quota should be
perceived as being realistic and attainable and to an extent
surpassable.

(iii)

To control salespeoples activities: Quotas provide an

opportunity to direct and control the selling activities of sales
persons. Sales persons are responsible for certain activities
e.g. customer calls per day, calling on new accounts, giving a
minimum number of demonstrations and realisation of firms
account. If the sales people fail to attain these quotas, the
company can take corrective action to rectify the mistake.

(iv)

To evaluate the productivity of sales people: Quotas

provide a yard-stick for measuring the general effectiveness
of sales representatives. By comparing salespersons actual
results with set quotas the areas of activities are determined
where the salesforce need help for improving productivity.

(v)

To control selling expenses: Quotas are also designed to

keep

selling

expenses

within

152

limits.

Some

companies

reimburse sales expenses only upto a certain percentage of

sales quota. Others tie expenses to the salespersons
compensation

in

order

to

curb

wasteful

expenditure.

Expense quota helps companies to set profit quotas.

(vi)

To make effective compensation plan: Quotas play an

important role in the companys sales compensation plan.
Some Indian companies follow the practice that their
salespersons will get commission only when they exceed their
assigned quotas. Companies may also use attainment of the
quotas in full or in part as the basis for calculating the
bonus. If the salesperson does not reach the minimum
desired quota, he will not be entitled for any bonus.

(vii)

To evaluate sales contests results: Sales quotas are used

frequently in conjunction with sales contests. Companies
mostly use performance against quota as the main basis for
giving away awards in sales contests. Sales contests are
more powerful incentives if all participants feel they have a
more or less equal chance of winning by basing awards on
percentage

of

quota

fulfilment

which

is

common

denominator. Hence, it causes average salesperson to turn

into above average performers.

8.3

TYPES OF QUOTAS
Differences in forecasting and budgeting procedures, management

philosophy, selling problems, and executive judgment, as well as

variations in quota-setting procedures, cause each firm to have

153

somewhat unique quota. Ignoring small differences, however quotas fall

into four categories:
(i)

Sales volume quota: The most commonly used quotas are

those based on sales volume. This type of quotas are set for
an individual sales person, geographical areas, product lines
or distributive outlet or for only one or more of these in
combination. Sales volume quotas are also set to balance the
sales of slow moving products and fast moving products or
between various categories of customers per sales unit. The
sales volume quota may be set in terms of units of product
sales, or rupee sales or both on overall as well as productwise basis.
Some companies combine these two and set quota on the
point basis. Points are awarded on the attainment of a
certain specific level of sales in units and rupee terms for
each product/customer. For example: A company might
consider Rs. 1000 equal to 1 point, Rs. 2000 equal to 2
points and so on. At the same time company may award 3
points for unit sales of product A and 5 points-for unit sales
product B. Companies use this type of approach generally
because of problems faced in implementing either rupee
sales volume or unit sales volume quota. Unit sales volume
quotas are found useful in market situations where the
prices of the products fluctuate considerably or when the
unit price of the product is rather high. Rupee sales volume
quotas are found suitable in the case of sales force selling
multiple products to one or different types of customers.
154

(ii)

Financial or budget quotas: Financial or budget quotas are

determined to attain desired net profit as well as to control
the sales expenses incurred. In other words, it is set for
various units in the sales organisation to control expenses,
gross margin, or net profit. The intention in setting financial
quota is to make it clear to sales personnel that this jobs
consist something more than obtaining sales volume. It
makes personnel more conscious that the company is in
business to make a profit. Expense quotas emphasize
keeping expenses in alignment with sales volume, thus
indirectly

controlling

gross

margin

and

net

profit

contribution. Gross margin or net profit quotas emphasize

margin and profit contributions, thus indirectly controlling
sales expenses.
Expense quotas: In order to make the salesforce conscious
of the need to keep selling costs within reasonable limits,
some companies set quota for expenses linked to different
levels of sales attained by their salesforce. And to ensure its
conformity they even link compensation incentives to keep
expenses within prescribed limits. Since sales are the result
of the selling tasks performed which vary across sales
territories, it is not easy to determine expense quotas as
percentage of sales in a uniform manner. Also very strict
conformity to expense quota norms result in demotivation of
salesforce. As such expense quota is generally used as a
supplement to other types of quotas.

155

Net profit quotas: Net profit quotas are particularly useful

in

multiproduct

companies

where

different

products

contribute varying level of profits. Its emphasis is on the

salesforce to make right use of their time. It is important for
the management to ensure that its sales force donot spend
more

time

on

less

profitable

products,

because

the

salespersons are costing the company the opportunity of

earning higher profits from their high margin products. In
other words, it should ensure that its salespersons spend
their maximum time on more profitable customers. The
objective can be achieved by setting a quota on net profit for
its salesforce, and thus, encouraging them to sell more of
high margin products and less the low margin products.
(iii)

Activity quotas: Good performance in competitive markets

requires the salesforce to perform the sales as well as market
development related activities. The latter activities have long
term implications on the goodwill of the firm.
To ensure that such important activities get performed, some
companies set quotas for the salesforce in terms of various
selling activities to be performed by them within a given
period. Finally the company must set a target level of
performance for the sales persons. Some of the common type
of activity quotas prevalent in Indian firms are as under:

Number of prospects called on

Number of new accounts opened

Number of calls made for realising companys account

156

Number of dealers called on

Number of service calls made

Number of demonstrations made

The chief merit of activity quota lies in its ability to direct the
sales force to perform the urgent selling activities and
important

non-selling

but

market

development

related

activities in a balanced and regular manner.

(iv)

Combination Quotas: Depending upon the nature of

product and market, selling tasks required to be performed
as well as selling challenges facing the company, some
companies find it useful to set quotas in combination of the
two or three types discussed above. Rupee sales volume and
net profit quotas or unit sales volume and activity quota in a
combined manner are found in common use in a large
number of consumer and industrial products companies in
India.

8.4

PROCEDURE FOR SETTING SALES VOLUME QUOTA

(i)

Quotas based on sales potential: One common practice in

quota setting is to relate quotas directly to the territorial
sales potentials. These potentials are the share of the
estimated total industry sales that the company expects to
realise in a given territory. A sales volume quota sums up the
effort that a particular selling unit should expend. Sales
potential represents the maximum sales opportunities open
to the same selling unit. Many companies derive sales

157

volume quota from sales potentials, and this approach is

appropriate when - territorial sales potentials are determined
in conjunction with territorial design or bottom-up planning
and forecasting procedures are used in obtaining the sales
estimate in the sales forecast.
Thus, if the territorial sales potentials or forecasts have
already been determined and the quotas are to be related to
these measures, the job of quota setting is largely completed.
For instance, let us assume that the sales potential in
territory A is Rs. 300000 or 4 per cent of the total company
potential. Then management may assign this amount as a
quota for the salesperson who covers that territory. The total
of all territorial quotas then would be equal the company
sales potential.
In some cases, management chooses to use the estimate of
potential as starting point in determining the quota. These
potentials are then adjusted for one or more of the factors
discussed below:
Human

factors:

quota

may

have

to

be

adjusted

downwards because an older salesperson is covering the

district. The salesperson may have done a fine job for the
company for years but is now approaching retirement age
and slowing down because of physical limitations. It would
not be good on human relations - or ethical - to discharge or
force the person into early retirement. Sometimes such
persons are given smaller territories with corresponding

158

lower quotas. Likewise sometimes new sales people are given

lower quotas for the first few years until they learn a greater
level of competence.
Psychological factors: Management understands that it is
human nature to relax after a goal has been reached.
Therefore, sometimes sales managers set their quotas a little
higher than the expected potential. On the other hand
management must not set the goals unrealistically high. A
quota too far above the sales potential can discourage the
salesforce. The ideal psychological quota is one that is bit
above the potential but can still be met and even exceeded by
working efficiently.
Compensation factors: Sometimes companies relate their
quotas basically to the sales potential, but adjust them to
allow for the compensation plan. In such a case, the
company is really using both the quota and compensation
systems to stimulate the salesforce. For example, one
company may set its quota at 90 percent of potential. It pays
for one bonus if the quota is met and an additional bonus if
the sales reach 100 per cent of the potential.
(ii)

Quotas based on past sales alone: In some organisations,

sales volume quotas are based strictly on the preceding
years sales or on an average of sales over a period of several
years. Management sets each salespersons quota at an
arbitrary percentage increases over sales in some past
period. The only merits in this method of quota setting are

159

computational simplicity and low-cost administration. If a

firm follows this procedure, it should at least use an average
figure for the past several years as a base, not just the
previous years sales. Random or irregular events would
greatly affect a sales index based on only one year.
However,

quota

setting

method

based

on

past

performances alone is subject to severe limitations. This

method ignores possible changes in a territorys sales
potential. Generally business conditions this year may be
depressed in a district, thus cutting the sales potential or
promising new customers may have moved into the district,
thus boosting the potential volume. Basing quotas on
previous years sales may not uncover poor performance in a
given territory. A person may have had sales of Rs. 100000
last year, and the quota is increased by 5 per cent for this
year. The salesperson may even reach the goal of Rs.
105000. However, the potential in the district may be Rs.
200000. This salesperson may perform poorly for years
without letting the management realize that a problem exists.
Quotas set on past sales also ignore the percentage of sales
potential already achieved. Moreover, chase your tail
quotas- in which the more the salespeople sell, the more they
are supposed to sell-destroy morale and ultimately cause top
achievers to leave the company.
(iii)

Quotas based on executive judgement: Sometimes sales

volume quotas are based solely on the executive judgment,
which

is

more

precisely
160

called

guesswork.

Executive

judgment is usually an indispensable ingredient in a sound

procedure for quota setting, but to use it alone is certainly
not recommended. Even though the manager may be very
experienced, too many risks are involved in relying solely on
this

factor

without

referring

to

quantitative

market

measures. This method is justified when there is little

information to use in setting quotas. There may be no sales
forecast, no practical way to determine territorial sales
potential. The product may be new and its probable rate of
market acceptance is unknown, the territory may not yet
have been opened, or a newly recruited salesperson may
have been assigned to a new territory. In such situations,
management may set sales volume quotas solely on a
judgement basis.
(iv)

Quotas based on total market estimates: In some

companies management has neither statistics nor salesforce
estimates of territorial sales potentials. These companies use
top-down planning and forecasting to obtain the sales
estimate for the whole company; hence, if management sets
volume quotas, it uses similar procedures. Management may
either (i) breakdown the total company sales estimate, using
various indexes of relative sales opportunities in each
territory and then make adjustments or (ii) convert the
company sales estimate into a companywide sales quota and
then breakdown the company volume quota, by using an
index of relative sales opportunities in each territory. In the
second procedure, another set of adjustment is made for

161

differences in territories and sales personnel before finally

arriving at territorial quotas. Note that these choices are
similar, the only difference being whether adjustments are
made only at the territorial level, or also at the company
level. The second alternative is a better choice.
(v)

Quotas related only to compensation plan: Companies

sometimes base sales volume quotas solely upon the
projected

amounts

of

compensation

that

management

believes sales personnel should receive. No consideration is

given to territorial sales potentials, total market estimates,
and

past

sales

experiences,

and

quotas

are

tailored

exclusively to fit the sales compensation plan. If for example,

salesperson A is to receive Rs. 5000 monthly salary and a 5
per cent commission on all monthly sales over Rs. 50,000.
As monthly sales volume quota is set at Rs. 50,000. As long
as As monthly sales exceed Rs. 50,000, management holds
As compensation-to-sales ratio to 5 per cent. Note that A is
really paid on a straight-commission plan, even though it is
labelled Salary and commission.
Such sales volume quotas are poor standards for appraising
sales performance, they relate only indirectly, if at all, to
territorial sales potentials. It is appropriate to tie in
salesforce quota performance with the sales compensation
plan, that is, as financial incentive to performers, but no
sales volume quota should be based on the compensation
plan alone.

162

(vi)

Salesperson set their own quota: Some companies turn

the setting of sales volume quotas over to the sales staff, who
are placed in the position of determining their own
performance standards. The reason for this is that sales
personnel, being closest to the territories, know them best
and therefore, should set the most realistic sales volume
quotas. The real reason, however, is that management is
transferring the quota setting responsibilities and turns the
whole problem over to the sales staff, thinking, they will
complain less if they set their own standards. There is,
indeed, a certain ring of truth in the argument that having
sales personnel set their own objectives may cause them to
work harder to attain them and complain less. But sales
personnel are seldom dispassionate in setting their own
quotas. Some are reluctant to obligate themselves to achieve
what they regard as too much; and others far this is just as
common-overestimate

their

capabilities

and

set

unrealistically high quotas. Quotas set unrealistically high or

low-by

management

dissatisfaction

and

or

by

results

the
in

low

sales

force

salesforce

cause
morale.

Management should have better information, therefore, it

should make final quota decisions. How, for instance, can
sales personnel adjust for changes management makes in
price, product, promotion, and other policies?

163

8.5

CHARACTERISTICS OF A GOOD QUOTA SYSTEM

(i)

Realistic attainability: If a quota is to spur the salesforce

to maximum effort, the goal must be realistically attainable.
If it is too far out of reach, the salespeople will lose their
incentives.

(ii)

Objective Accuracy:

Regardless of what type of quota

management uses, it should be related to potentials.

Executive judgement is also required, but it should not be
the sole factor in the decision.
(iii)

Ease of understanding and administering: A quota must

be easy for both management and the salesforce to
understand. Also, the system should be economical to
administer.

(iv)

Flexibility: All quota systems need adequate flexibility.

Particularly, if the quota period is as long as a year,
management may have to make adjustments because of
changes in market conditions.

(v)

Fairness: A good quota system is perceived as fair to the

people involved. The workload imposed by quotas should be
the same for all sales people. However, this does not mean
that quotas must be equal. Differences in potentials,
competition, and ability of the salesforce do exist.

164

8.6

SUMMARY
Quotas are quantitative objectives assigned to sales personnel and

other units of the selling organisation. They are intended both to

stimulate performance and to evaluate it, through communicating
managements expectations and serving as performance measures. In
successful quota systems, special pains are taken to tie in quota setting
procedures with sales potentials and planning data from the sales
forecast and sales budget. Sound judgement is required for adjusting
tentative quotas both for contemplated policy changes and for factors
unique to each territorial environment. Continuous managerial review
and appraisal and balanced flexibility in making changes in quotas and
improvements in quota setting procedures characterise successful quota
system. When based on relevant and accurate market information, and
when intelligently administered, quotas are effective devices for directing
and controlling sales operations.

8.7

KEYWORDS
Sales Quota: It is quantitative goal assigned to a sales person.
Sales Volume Quota: It is the number of products to be sold by an

individual sales person.

Activity Quota: It is the various activities assigned to sales force to
be performed regarding sales.
Budget/Financial Quota: It is determined to attain designed net
profit as well as to control the sales expenses incurred.

165

8.8

SELF ASSESSMENT QUESTIONS

1.

Define Sales Quota and discuss in brief the different types

of sales quota.

2.

Discuss

the

purpose

of

sales

quota.

Also

write

the

characteristics of a good quota system.

8.9

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.

166

Subject: Sales Management

Course Code: MM-308

Author: Dr. Atul Dhingra

Lesson No.: 09

Vetter: Dr. B.S. Bodla

SUPERVISION AND EVALUATION OF

SALES-FORCE
STRUCTURE
9.0

Objective

9.1

Introduction

9.2

Supervision of sales force

9.3

Evaluation of sales force

9.4

Time horizon for evaluation

9.5

Standards of performance
9.5.1 Quantitative Performance Standards
9.5.2 Qualitative performance criteria

9.6

Measuring actual performance

9.6

Comparing actual performances with standards

9.7

The dynamic phase of evaluation

9.8

Summary

9.9

Keywords

9.10 Self Assessment Questions

9.11 References/Suggested Readings

9.0

OBJECTIVE
After going through this lesson, you will be able to-

167

Understand the concept of sales force supervision and

evaluation.

Understand the quantitative as well as qualitative standards

of performance.

9.1

Understand the method of supervision as well as evaluation.

Know the types of sales reports

INTRODUCTION
Every member of an organization, either directly or indirectly,

affects sales. The ultimate success, however, depends largely on the

performance of individual salesperson. Primary job of every sales
manager is to help every sales person achieve his or her full potential.
Sales force supervision and evaluation, therefore, become very important.
Adoption

and

successful

operation

of

appropriate

control

procedures results in greater effectiveness which ultimately shows up in

greater sales volume at more profit and less cost. Supervision and
evaluation of sales force are instruments of achieving sales control. They
are concerned with monitoring the performance and striking balance
between the standards and actual performance. Effective supervision and
evaluation assure the attainment of objectives with minimum efforts.

9.2

SUPERVISION OF SALES FORCE

Management

controls

sales

personnel

through

supervision.

Regardless of who does the supervising, the objective is to improve the

job performances of sales personnel. Executives supervise the sales
personnel under them. The executive with supervisory responsibilities
establishes working relations with sales personnel for purposes of
168

observing,

evaluating,

and

reporting

on

performance;

correcting

deficiencies; clarifying duties and responsibilities; providing motivation;

informing sales personnel of changes in company policies; and helping to
solve business and personal problems. Clearly, sales supervision is
concerned mainly with the action phase of control- action aimed at
enhancing personnel contributions to the achievement of objectives.

How much supervision?

It is difficult to prescribe how much supervision is enough as too
much is as bad as too little. However, there are some conditions under
which supervision is needed:

Excessive sales turnover rate.

High turnover of clients/accounts.

Increased complaints from customers.

Increase in mail orders or orders over phone without any

particular reason.

Low ratio of orders to sales calls.

Total number of calls very low or very high.

Increasing ratio of selling expenses to total sales.

These conditions may point towards wrong kind of supervision as

well as to too much or too little supervision. When management brings in
highly trained and self reliant people to meet the new selling challenge,
traditional supervision, and the attitude that underlines it, stifles those
whom management seeks to encourage. The type of supervision,
therefore, should be adjusted to the type of person in the selling job.
When the type of person changes, the type of supervision must also
change.
169

Who should supervise?

Depending upon the company and its organization, sales force may
be supervised by branch or district managers, field sales executives, or
field sales supervisors. Put another way, sales supervision may be either
through executives as one of their job responsibilities, or through
specialists whose jobs are mainly supervising. If the sales force is small
and experienced, sales supervision is generally through the top sales
executive. Companies having decentralised sales structure normally
assign supervision responsibility to branch or district managers.
Sales supervisors generally are selected from among the sales
force, but besides having the qualifications required for selling success,
they need other qualifications. They must be good teachers. They must
recognise training needs, know how to train, be patient with those who
have less skill, and be tactful in pointing out better ways of doing things.
Supervisors must be skilled in handling people and be equipped to deal
with many complex situations. Beyond these supervisory duties, some
companies expect sales supervisors to sell certain accounts personally,
this being one way to motivate them to keep up to date on field selling
techniques.

9.3

EVALUATION OF SALES FORCE

In general sense, the evaluation process consists of comparing

actual performance with planned performance. Evaluation implies a

process of systematically uncovering deviations between goals and
accomplishments. When weaknesses are identified, the firm will devise
and implement corrective methods through supervision and other control

170

devices. When strengths are indicated, by the discovery of deviations in a

favourable direction, management will use this information as a valuable
aid in the anticipating and dealing with problems in future periods. This
may take the form of revising performance standards and generally
reappraising present policies, procedures, marketing communication
methods, and potential opportunities for the firm. Thus, the evaluation
process aims at both prognosis and diagnosis and is considered to be a
preventive and curative marketing device.
Evaluation system should do three essential things for the sale
manager and sales-people:

Provide feedback to each salesperson on individual job

performance.

Help salespeople modify or change their behavior toward

effective work habits.

Provide information to sales managers on which to base

decisions on promotion, transfer and salespeople.

9.4

TIME HORIZON FOR EVALUATION

Sales evaluation normally is of three types:
1.

Short run evaluation- In this, performance is evaluated over

one year and the focus is on the achievement of targets in
terms of sales.

2.

Intermediate run evaluation- The performance is judged

over 2 to 4 years time period and focus is on evaluation in
terms of creating and identifying new opportunities while
adapting to competitive and environmental threats.

171

3.

Long run evaluation- This is on long-term basis and focus

on evaluation in terms of surviving in an uncertain and
increasingly competitive world.

9.5

STANDARDS OF PERFORMANCE
Performance standards are designed to measure the performance

of activities that the company considers most important. Setting

standards of performance requires consideration of the nature of the
selling job. In other words, sales job analysis is necessary to determine
job objectives, duties and responsibilities, and the like. These, in turn,
depend upon selling strategy. Setting performance standards for newbusiness sales personnel requires different measures from those for
trade-selling sales personnel.
Setting sales performance standards requires considerable market
knowledge. It is important to know the total sales potential and the
portion that each sales territory is capable of producing. Management
needs evaluations of customers and prospects from the standpoint of
potential profitability for each class and size of account. Marketing
intelligence

must

provide

evaluations

of

competitions

strengths,

weaknesses, practices and policies. These items all bear on the setting of
performance standards, especially quantitative standards.

9.5.1 Quantitative Performance Standards

Most companies use quantitative performance standards. The
particular combination of standards chosen varies with the company and
its marketing situation. Quantitative standards, in effect, define both the
nature and desired levels of performance. Quantitative standards provide

172

descriptions of what management expects. Each person on the sales force

should have definitions of the performance aspects being measured and
the measurement units. These definitions help sales personnel make
their activities more purposeful. Sales personnel with well-defined
objectives waste little time or effort in pursuing activities that was not
contribute to reaching those objectives.
A single quantitative standard, such as one for sales volume
attainment, provides an inadequate basis for appraising an individuals
total performance. In the past the performances of individual sales
personnel were measured solely in terms of sales volume. Todays sales
managers realize that it is possible to make unprofitable sales, and to
make sales at the expense of future sales. In some fields, for example,
industrial goods of high unit price, sales result only after extended
periods of preliminary work, and it is not only unfair but misleading to
appraise performance over short intervals solely on the basis of sales
volume.
Sales personnel have little control over many factors affecting sales
volume. They should not be held accountable for uncontrollable such
as differences in the strength of competition, the amount of promotional
support given to the sales force, the potential territorial sales volume, the
relative importance of sales to national or home accounts.
Each company selects the combination of quantitative performance
standards that fits its marketing situation and selling objectives. If
necessary, it develops its own unique standards designed best to serve its
objectives. The standards discussed here are representative of the many
types in use.

173

(i)

Sales Quotas
A quota is a quantitative objective expressed in absolute terms and

assigned to a specific marketing unit. The terms may be rupees or units

of product; the marketing unit may be a salesperson or a territory. As the
most widely used quantitative standards, quotas specify desired levels of
accomplishment for sales volume, gross margin, net profit, expenses,
performance of non-selling activities, or a combination of these and
similar items. When sales personnel are assigned quotas, management
is answering the important question: How much and for what period?
The assumption is that management knows which objectives, both
general and specific, are realistic and attainable. The validity of this
assumption depends upon the market knowledge management has and
utilizes in setting quotas. When sales volume quotas are based upon
sound sales forecasts, in which the probable strength of demand has
been fully considered, they are valuable performance standards. But
when sales volume quotas represent little more than guesses, or when
they have been chosen chiefly for inspirational effect, their value as
control device is dissipated.

(ii)

Selling expense ratio

Sales manager uses this standard to control the relation of selling

expenses to sales volume. Many factors, some controllable by sales

personnel and some not, cause selling expenses to vary with the territory,
so target selling expense ratios should be set individually for each person

174

on the sales force. Selling expense ratios are determined after analysis of
expense conditions and sales volume potentials in each territory. An
attractive feature of the selling expense ratio is that the salesperson can
affect it both by controlling expenses and by making sales.
The selling expense ration has several shortcomings. It does not
take into account variations in the profitability of different products, so a
salesperson who has a favorable selling expenses ration may be
responsible for disproportionately low profits. Then, too, this performance
standard may cause the salesperson to over-economize on selling
expenses to the point where sales volume suffers. Finally, in times of
declining

general

business,

selling

expense

rations

inhibit

sales

personnel from exerting efforts to bolster sales volume.

Selling expense ratio standards are used more by industrial
product

companies

than

by

consumer

product

companies.

The

explanation traces to differences in the selling job. Industrial product

firms place the greater emphasis on personal selling and entertainment
of customers; consequently their sales personnel incur higher costs for
travel and subsistence.

(iii) Territorial net profit or gross margin ratio

Target ratios of net profit or gross margin to sales for each territory
focus sales personnels attention on the needs for selling a balanced line
and for considering relative profitability. Managements using either ratio
as a quantitative performance standard, in effect, regard each sales
territory as a separate organizational unit that should make a profit
contribution. Sales personnel influence the net profit rations by selling

175

more volume and by reducing selling expenses. They may emphasize

more profitable products and devote more time and effort to the accounts
and prospects that are potentially the most profitable. The net profit ratio
controls sales volume and expenses as well as net profit. The gross
margin ratio controls sales volume and the relative profitability of the
sales mixture, but it does not control the expenses of obtaining and filling
orders.
Net profit and gross margin ratios have shortcomings. When either
is performance standard, sales personnel maYJ1eglect new accounts,
and over-emphasize sales of high profit or high margin products while
under-emphasizing new products that may be more profitable in the long
run.

(iv)

Territorial market share

This standard controls market share on a territory by territory

basis. Management sets target market share percentages for each

territory. Management later compares company sales to industry sales in
each territory and measures the effectiveness of sales personnel in
obtaining market share. Closer control over the individual salesperoJ1 s
sales mixture is obtained by setting target market share percentages for
each product and each class if customer or even for individual
customers.

(v)

Sales coverage effectiveness index

This standard controls the thoroughness with which a sales person

works in the assigned territory. The index consists of the ratio of the
number of customers to the total prospects in a territory. To apportion

176

the sales persons efforts more among different classifications of

prospects, individual standards for sales coverage effectiveness are set up
for each class and size of customer.

(vi)

Call frequency ratio

A call frequency ratio is calculated by dividing the number of sales

calls on a particular class of customers by the number of customers in

that class. By establishing different call frequency ratios for different
classes of customers, management directs selling effort to those accounts
most likely to produce profitable orders. Management should assure that
the interval between calls is proper, neither so short that unprofitably
small orders are secured, nor so long that sales are lost to competitors.
Sales personnel who plan their own route and call schedules find target
call frequencies helpful, in as much as these standards provide
information essential to this type of planning.

(vii) Calls per day

In consumer product fields, where sales personnel contact large
numbers of customers, it is desirable to set a standard for the number of
calls per day. Otherwise, some sales personnel make too few calls per day
and need help in planning their routes, in setting up appointments before
making calls or simply in starting their calls early enough in the morning
and staying on the job late enough in the day. Other sales personnel
make too many calls per day and need training in how to service
accounts. Standards for calls per day are set individually for different
territories taking into account territorial difference as to customer
density, road and traffic conditions and competitors practices.

177

(viii) Order call ratio

This ratio measures the effectiveness of sales personnel in securing
orders. Sometimes called a batting average, it is calculated by dividing
the number of orders secured by the number of calls made. Order call
ratio standards are set for each class of account. When a salespersons
order-call-ratio for particular class of account varies from the standard
then the salespersons need helping in working with that class of
accounts.

(ix)

Average cost per call

To emphasize the importance of making profitable calls, a target for

average cost per call is set. When considerable variation exists in cost of
calling on different sizes or classes of accounts, standards are set for
each category of account.

(x)

Average order size

Average order size standards control the frequency of calls on

different accounts. The usual practice is to set different standards for

different sizes and classes of customers. Using average order size
standards along with average cost per call standards, management
controls the salespersons allocation of effort among different accounts
and increases order size obtained.

(xi)

Non-selling activities
Some companies establish quantitative performances standards for

such non-selling activities as obtaining dealer displays and cooperative

advertising contracts, training distributors personnel, and goodwill calls
178

on distributors customers. Whenever, non-selling activities are critical

features of sales job, appropriate standards should be set. Since
quantitative standards for non-selling activities are expressed in absolute
terms, they are, in reality, quotas.

9.5.2 Qualitative performance criteria

Qualitative

criteria

are

used

for

appraising

performance

characteristics that affect sales results, especially over the long run, but
whose degree of excellence can be evaluated only subjectively. Qualitative
criteria defy exact definition. Many sales executives do not define the
desired qualitative characteristics with any exactitude; instead they
arrive at informal conclusion regarding the extend to which each sales
person possesses them. Other executives consider the qualitative factors
fom1al1y, one method being to rate sales persoIl.l1el against a detailed
checklist of subjective factors such as given below:

Job Factors

Product knowledge

Customers knowledge

Competitors knowledge

Handling sales presentations

Customer satisfaction

Time management

Personal Factors

Punctuality

General Attitude

Dress and Appearance

179

Co-operation

Adaptability

Reliability

Communication skills

Decision-making ability

Initiative

Executive judgement plays the major role in the qualitative

performance appraisal. Written job description, up to date and accurate,
are the logical points of departure. Each firm develops its own set
qualitative criteria, based upon the job description, but the manner in
which these criteria are applied depends upon the needs of management.

9.6

MEASURING ACTUAL PERFORMANCE

Sales managements next task is to measure actual performance.

There are two basic sources of performance information: sales and

expense records and reports of various sorts. Almost every company has
a wealth of data in its internal sales and expense records, but this
purpose.

Field sales reports

The fundamental purpose of field sales reports is to provide control
information. They provide a basis for discussion with sales personnel.
They also indicate the matters on which sales personnel need assistance.
The sales executive uses field sales reports to determine whether sales
personnel are calling on and selling to the right people, and whether they
are making the proper number of calls. Similarly, field sales reports
assist in determining how to secure more and larger orders. Field sales
180

reports provide the raw materials that sales management processes to

gain insights on giving needed direction to field sales personnel.
A good field sales reporting system assists sales personnel in their
self-improvement programs. Recording accomplishments in written form
forces individuals to check their own work. They become their own critics
and self-criticism often is more valuable and more effective than that
from headquarters.

Purposes of field sales reports

The general purpose of all field sales reports is to provide
information for measuring performance; many reports, however, provide
additional information. Consider the following list of purposes served by
field sales reports:
1.

To provide data for evaluating performance- for example,

details concerning accounts and prospects called upon,
number of calls made, orders obtained, days worked, miles
travelled, selling expenses, displays erected, cooperative
advertising arrangements made, training of distributors
personnel, missionary work, and calls made with distributors
sales personnel.

2.

To help the sales person plan the work- for example,

planning itineraries, sales approaches to use with specific
accounts and prospects.

3.

To record customers suggestions and complaints and their

reactions to new products, service policies, price changes,
advertising campaigns, and so forth.

181

4.

To gather information on competitors activities- for example,

new products, market tests, changes in promotion, and
changes in pricing and credit policy.

5.

To provide information requested by marketing research- for

example, data on dealers sales and inventories of company
and competitive products.

6.

To report changes in local business and economic conditions.

7.

To keep the mailing list updated for promotional and

catalogue materials.

Types of sales force reports

Reports from sales personnel fall into six principle groups.
1.

Progress or call report: Most companies have a progress or

call report. It is prepared individually for each call or cumulatively,

covering

all

calls

made

daily

or

weekly.

Progress

reports

keep

management informed of the salespersons activities, provide source data

on the companys relative standing with individual accounts and in
different territories, and record information that assists the sales person
on revisits. Usually the call report form records not only calls and sales,
but more detailed data, such as the class of customer or prospect,
competitive brands handled, the strength and activities of competitors,
best time to call, and future promises.
2.

Expense report: The purpose is to control the nature and

amount of salesperson expenses. This report also helps the salesperson

exercise

self-control

over

expenses.

The

expense

report

reminds

salesperson that they are under moral obligation to keep expenses in line

182

with reported sales-some expense report forms require sales persons to

correlate expenses with sales. The details of the report form vary with the
plan for reimbursing expenses.
3.

Sales work plan: The salesperson submits a work plan

(giving such details as accounts and prospects to be called upon,

products and other matters to be discussed, routes to be travelled, and
hotels or motels) for a future period, usually a week or a month. The
purposes are to assist the salesperson in planning and scheduling
activities and to inform management of the salespersons whereabouts.
The work plan provides a basis for evaluating the salespersons ability to
plan the work and to work the plan.
4.

New-business or potential new-business report: This

report informs management of accounts recently obtained and prospects

who may become sources of new business. It provides data for evaluating
the extent and effectiveness of development work by sales personnel. A
subsidiary purpose is to remind sales personnel that management
expects them to get sales reports point the way to needed sales training,
changes in customer service policies, and product improvements. The
salesperson reports the reasons for the loss of the business; but receipt
of a lost-sales report also causes management to consider further
investigation.
5.
provides

Report of complaint and/or adjustment: This report

information

for

analysing

complaints

arising

from

salespersons work, complaints by class of customer, and cost of

complaint adjustment. This assists management in detecting needed
product improvements and changes in merchandising and service

183

practices and policies. These data also are helpful for decisions on sales
training programs, selective selling, and product changes.
The optimum number of reports is the minimum necessary to
produce the desired information. Holding down the number of reports is
important, since they are generally made out after the selling day. Report
preparation places demands on free time, and, unfortunately, the best
people often have the least time. All reports are reviewed from time to
time to determine whether the information is worthwhile. When a new
report is proposed, the burden of proof of its need is upon its advocates.
Information obtainable through other means at no higher cost should not
be gathered through field sales reports.
The amount of detail required in sales reports varies from firm to
firm. A company with many sales personnel covering a wide geographical
area needs more detailed reports than does a company with a few
salespeople covering a compact area. The more freedom that sales
personnel have to plan and schedule their activities, the greater should
be the detail required in their reports.

9.6

COMPARING ACTUAL PERFORMANCES

WITH STANDARDS
The most difficult step in sales force control is the evaluation step-

the comparing of actual performances with standards. This is more than

a mechanical comparison; this step is difficult because evaluation
requires judgement. The same standards cannot be applied to all sales
personnel-there are differences in individual territories, their sales
potentials, the impact of competition and the personalities of sales

184

personnel and their costumers. It is possible to take territorial differences

into account by setting individual performance standards for each
territory, but it is not possible to adjust fully for differences in the
personalities

of

the

salesperson

and

the

clientele.

Furthermore,

complications often develop in relating individual performances to

standards, for example, when two or more sales persons work on the
same account or when an account deals both with the salesperson and
the home office.
Evaluating

sales

personnel

requires

both

comparison

of

performance with quantitative standards and an appraisal against

qualitative performance criteria. Sales personnel with poor performances,
as gauged by quantitative standards, may be making offsetting
qualitative contributions. Individual who do not reach sales quotas or
keep to prescribed call schedules, for instance, may be building for the
future by cementing relations with distributors and dealers. Evaluating
performance

of

sales

personnel

requires

judgement

and

deep

understanding of market factors and conditions.

Judgement enters into the evaluation of sales personnel in still
other ways. Performance trends, as well as the current record, are
relevant- an individual showing improvement but with still substandard
performance needs encouragement. There is always the chance, too, that
something is wrong with a standard-when an individual continually fails
to reach a standard, management should investigate whether the
standard has been set too high.
In comparing actual results with projected results, the general
procedure in scientific work is to set up tests that measure the variable

185

under observations while taking account of the effects of other variables.

In the evaluation of sales personnel it is not possible to set up such tests.
Each salespersons performance results from complex interactions of
many variables, some beyond the control of either the salesperson or of
management. The time element changes and so do the sales personnel,
the customers, general business conditions, competitors activities and
other variables. However, some companies measure the impact of
particular variable on personnel performance through careful design of
experimental and control groups.

9.7

THE DYNAMIC PHASE OF EVALUATION

The evaluations, or comparisons of actual performances with

standards, and adjusted by executive judgement, point the way to needed

action. If performance and standards are in alignment may no action
needed. Otherwise the three alternatives are:
1.

Adjust performance to the standards, thus increasing the

degree of attainment of objectives;

2.

Revise the policy and/or plan, or the strategies used for their
implementation to better for the achievement of objects;

3.

Lower or raise the objectives or the standards and/criteria

used in measuring degree of attainment to make them more
realistic.

Similarly actions to be taken depend on the performance in terms

of quantitative as well as quantitative evaluation. Four such situations,
as discussed below, may be anticipated:

186

1.

Good

performance

in

both

qualitative

and

quantitative

evaluation- The appropriate response would be praise,

monetary rewards and may be promotion.
2.

Good performance in quantitative but poor in qualitative

evaluation- The good quantitative result suggest performance
in terms of sales/profits and in front of customers is good.
However, poor performance on qualitative criteria warrant
advice and training on qualitative aspects.

3.

Poor performance in quantitative but good in qualitative

evaluation- Good qualitative input is failing to be reflected in
quantitative success. The specific causes need to be
identified and training and guidance should be provided.

4.

Poor

performance

in

both

quantitative

and

qualitative

evaluation- Critical and thorough discussion is required on problem

areas. Training may be provided to improve the performance. In some
situations, punishment including dismissal is required.

9.8

SUMMARY
Sales force supervision and evaluation help every salesperson

achieve his or her full potential. Supervision and evaluation of sales force
are instruments of achieving sales control. Its objective is to improve the
job performance of sales personnel. There are two important facets of
supervision i.e., how much supervision and who should supervise. The
evaluation process consists of comparing actual performance with
planned performance. Its a process of uncovering deviations between
goals and accomplishments. The quantitative performance standards

187

include sales quota, selling expense ratio, call frequency ratio, order call
ratio etc. the qualitative performance criterion are used for appraising
performance characteristics that affect sales result, especially over the
long run, but whose degree of excellence can be evaluated only
subjectively. It includes product knowledge, handling sales presentations,
customer satisfaction, communication skills, decision making ability etc.
The sales reports are used for measuring performance and they also
provide additional information. If performance and standards are in
alignment the decision may be no action needed, but corrective actions
are taken in case of deviation between the two.

9.9

KEYWORDS
Supervision:

Management

controls

sales

personnel

through

supervision in order to improve this job performances.

Evaluation: It consists of comparing actual performance with
planned performance in a systematic manner.
Selling Expense Ratio: It is used to control the relation of selling
expenses to sales volume.
Call frequency ratio: It is calculated by dividing the number of
sales calls by the number of customers.

9.10 SELF ASSESSMENT QUESTIONS

1.

How will you evaluate the performance of sales personnel?

What standards will you use for this purpose?

2.

What is the need and significance of sales force supervision?

188

3.

Quantitative

measures

of

the

performance

of

sales

representatives are more likely to mislead than guide

evaluation. Do you agree with this statement? Give reasons
in support of your viewpoint.
4.

5.

Write short notes on the following:

(a)

Quantitative standards of sales force evaluation

(b)

Qualitative standards for sales force evaluation

Do you think the increasing use of computers in sales

management

will

change

the

sales

force

performance

measurement and evaluation process? If so, how?

9.11 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.

189

Subject: Sales Management

Course Code: MM-308

Author: Dr. Surinder Singh Kundu

Lesson No.: 10

Vetter: Dr. M.R.P. Singh

SALES CONTROL AND COST ANALYSIS

STRUCTURE
10.0 Objective
10.1

Introduction

10.2 Sales audit

10.3 Sales analysis
10.3.1 Allocation of Sales Efforts
10.3.2 Data for Sales Analysis
10.3.3 Purposes of Sales Analysis
10.4

Marketing cost analysis

10.4.1 Purpose of marketing cost analysis
10.4.2 Marketing cost analysis techniques

10.5

Summary

10.6 Keywords
10.7 Self assessment questions
10.8 References/Suggested readings

10.0 OBJECTIVE
After going through this lesson, you will be able to

Discuss the sales control and analysis.

Explain the techniques of sales analysis and methods of

improving the productivity of sales force.

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10.1 INTRODUCTION
The sales executives/sales people play a crucial role in the sales
organizations. They are responsible for many activities: they participate
in

setting

selling

and

profit

objectives;

formulating

sales-related

marketing policies; and designing personal-selling strategies. Further,

they build and develop a sales organization to carry the sales program
into effect. They integrate the sales organization with the distributive
network and other company marketing units; e.g. advertising, sales
promotion, and physical distribution. Sometimes, for discharging these
responsibilities, salespeople pay inadequate attention to selling and profit
objectives. Resultantly, they neglect longer-term matters due to the
overburden of every days activities related to individual sales personnel
and customer problems. This is exactly the type of setting in which the
installation and operation of control techniques pays off substantially.
Aptly designed and efficiently implemented control mechanism; increases
the chances for the growth and expansion of the sales organisation. For
the control mechanism; the sales budget is a very much fabulous
medium. And quotas in terms of sales volume, profit, activity, properly
set and administered, stimulate sales personnel to achieve sales and
profit objectives. In setting up sales territories, management makes the
control of sales operations more effective. In addition, other control
mechanisms: sales audit, sales analysis, and cost analysis contribute to
the effectiveness of the personal-selling effort.

10.2 SALES AUDIT

In sale organisations; the sales audit is a systematic and
comprehensive appraisal of the total selling operations. It appraises

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integration of the individual inputs to the personal selling effort and

identifies and evaluates assumptions underlying the sales operation.
Specifically, a sales audit is a systematic, critical, and unbiased reviewfield appraisal of the basic objectives and policies of the selling function
and of the organization, methods, procedures, and personnel employed to
implement those policies and achieve those objectives; which are
predetermined by the sales organisation. Proponents of the sales audit
stress the importance of focusing on overall selling strategy and methods
for implementing it rather than examining individual components piecemeal. Sales executives, for example, may become so involved in programs
to reduce sales personnel turnover or some new technique for motivating
sales personnel that they lose sight of some key objective, which might
be, for instance, to increase the profitability of small accounts. Existing
sales personnel may do a poor job in working with small accounts, yet
management focuses more on retaining these sales personnel than on
making them more effective with small customers. In contrary, the new
motivational technique maybe counterproductive; it may be encouraging
sales personnel to concentrate upon getting the cream of the business
from the largest customers. Sales audits detect situations of this type. A
sales audit uncovers opportunities for improving the effectiveness of the
sales organization. An audit identifies strengths and weaknesses:
strengths have potential for exploitation; weaknesses have potential for
improvements. While audit implies an after the fact evaluation or a
backward approach (a carry-over from financial usage), a sales audit
provides information useful for planning sales strategy.
Basically, sales audits have no standardized formats. Each
company designs a sales audit to fit its needs. Generally, six main

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aspects of selling operations come under the purview of sales audit

examination:
1.

Objectives: Each selling input should have clearly defined

objectives, related to desired outputs. For example, a firm
might have the objective of raising its market share from 10
to 15 percent without reducing per unit profit in the
organisation.

2.

Policies: In case of policies; both explicit and implicit are

appraised for their consistency in achieving the selling
objectives.

3.

Organization: In this aspect, it is seen that does the

organization possess the capabilities for achieving the
objectives? Are the planning and the control systems
appropriate for achieving the targets? If an organization is
understaffed, or staffed with incompetent persons, there is a
least probability of achieving predetermined objectives or
ensuring proper control.

4.

Methods: In this step; it is felt that the individual strategies

for carrying out policies are appropriate or not. Because, it is
vain to attempt upgrading quality and price if the company
has already established a strong consumer image for low
quality and price.

5.

Procedures: The steps in implementing individual strategies

should be logical, well designed, and chosen to fit the
situation. The procedures should allocate responsibility for

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implementation to particular individuals and explain how the

goals are to be achieved.
6.

Personnel: All executives playing key roles in planning sales

operations and strategy, as well as those responsible for
implementation of sales programmes are evaluated as to
their effectiveness relative to stated objectives, policies, and
other aspects of sales operations. Too often an executive is
evaluated in terms of ability to increase sales or profit rather
than success in reaching pre-determined objectives, such as
increased market share.

In total, it can be observed that a company examines both its

markets and its products in sales audit.

10.3 SALES ANALYSIS

Always, it is treated that the sales analysis is a detailed study of
sales volume performance to detect strengths and weaknesses. If sales
management-depends solely on summary sales data it has no way to
evaluate its own activities and those of the sales force. The fact that sales
increased by two percent over last year but profit decreased by one
percent would be a cause for concern but of no help in determining how
to

reverse

the

profit

decline.

Sales

analysis

provides

additional

information, for example, that the increased sales volume came from
products carrying a lower-than-average gross margin. Trough sales
analyses, management seeks insights on strong and weak territories,
high-volume and low-volume products, and the types of customers
providing satisfactory and unsatisfactory sales volume. Sales analysis

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uncovers details that otherwise lie hidden in the sales records. It provides
information that management needs to allocate sales efforts effectively.
These aspects are discussed below considerably:

10.3.1 Allocation of Sales Efforts

A small percentage of the territories, customers, products, or
orders bring in a high percentage of the sales in many businesses and
vice-versa. For example, a sales executive for a carpet manufacturing
firm found that eighty percent of the customers accounted for only fifteen
percent of the sales. Comparable situations exist in most companies.
These are examples of the iceberg principle; only a small part of the total
situation is above the surface and known while the submerged part is
less than the surface and unknown. Sales analysis detects such
situations, alerting management to opportunities for improving the
operations in the organisation. Iceberg-type sales patterns do not always
mean unprofitable operations; but they frequently result in profits lower
than necessary. Because, sales efforts and selling expenses ordinarily are
divided on the basis of customers, territories, orders, and so forth, rather
than on the basis of sales potentials or actual sales. It usually costs as
much to maintain sales personnel in poor territories as in good ones,
almost as much to promote a slow-selling product as one that sells like
hotcakes. It costs as much to have sales personnel call on customers who
give small orders as on those who place large orders. Normally, a large
proportion of the total spending for personal-selling efforts brings in a
small proportion of the total sales and profits. Sales analysis detects
these situations.

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10.3.2 Data for Sales Analysis

Data availability for sales analysis varies in all companies. Atone
extreme, some have no data other than the accounting system records as
sales are made, and, of course, copies of sales invoices. On the other
hand, some maintain detailed sales records and have data readily
available for use in making all types of analyses. The original sources of
data for sales analysis are the sales invoices. In a company with a good
information system, detailed data from sales invoices are transferred to
computer tapes or data-processing cards. The information on each
transaction identifies the customer in terms of name, geographical
location, and so on; the salesperson in terms of name, territory, etc.; and
includes such sales data as order date, products sold and quantities,
price per unit, total dollar sales per product, and total order amount.
With information stored by the sales organisation, sales analyses are
performed quickly and at low cost.

10.3.3 Purposes of Sales Analysis

The sales analyses portray strengths and weaknesses of a sales
organization in terms of sales, and each type of sales analysis glimpses
different aspect. The sales territories analysis depicts about that the
particular product where it can be sold. Analysis of sales by products
answers how much of what is being sold. Analysis of sales by customers
answers who is buying how much: All sales analyses relate to how much
is being sold, but each answers the question in a different way. Sales
analyses identify different aspects of sales strengths and weaknesses, but
they cannot explain why strengths and weaknesses exist.

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In addition to above, sales analysis answered four questions of

sales manager: (i) it revealed the sales territories with good and poor
performances; (ii) it showed that whomsoever salespersons are above; at
par and below the quota given to them; (iii) it indicated that Edwards
performance improved as accounts got smaller, but was unsatisfactory
with all sizes of accounts; and (iv) where sales were weak and strong,
which salespersons were performing above or below quota, which classes
of accounts were buying, and which products were being sold.

10.4 MARKETING COST ANALYSIS

In the Marketing cost analysis; we analyze the sales volume and
the selling expenses to determine the relative profitability of particular
aspects of sales operations within a specified period of time. The first step
in marketing cost analysis is sales analysis by territories, sales
personnel, products, class of account, size of order, marketing channels,
and other categories. For example, having broken down sales volume by
sales territories, the next step is to break down and assign selling
expenses by sales territories accordingly. The outcome indicates relative
profitability of the sales territories. Marketing cost analysis searches for
ways to improve profit performance through exposing relative strengths
and weakness of the sales organization and its salespeople.

10.4.1 Purpose of marketing cost analysis

The analysis in terms marketing cost determines the relative
profitability of particular aspects of sales operations. By this analysis, we
became in position to reply the questions like: (i) which sales territories
are profitable and which are unprofitable; (ii) what are the profit

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contributions of individual sales personnel; (iii) what is the profitability of

the different products; (iv) what is the minimum size of a profitable
account; (v) how small can an order be and still be profitable; and (vi)
which marketing channels provide the most profit for a given sales
volume? Further, the marketing cost analyses indicate aspects possibly
requiring managerial action, but not the nature of the action. Answers to
more complex questions requiring cross-analysis of expense allocations,
are also suggested. If the expenses of selling different products, for
instance, are cross analyzed with the expenses incurred by individual
sales personnel, insights are gained on how sales time should be
allocated among products. But, the point related to improvement in sales
time allocation among products requires consideration of other factors
among them, sales potentials for each product in each sales territory. The
marketing cost analysis also discusses about the price discrimination
among the products. Especially, a marketing cost analysis performed for
this purpose would aim to show that the difference in prices was no
greater than the difference in selling expenses incurred in servicing the
two customers.

10.4.2 MARKETING COST ANALYSIS TECHNIQUES

In the marketing cost analysis, the following techniques may be
used:
1.

Selling expenses classification: Marketing cost analysis

requires the classification of selling expenses as either
separable (direct) or common (indirect). A separable expense
is

one

traceable

to

individual

sales

personnel,

sales

territories, customers, marketing channels, products, or the

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like. A common expense is one that is not traceable to

specific

sales

personnel,

sales

territories,

customers,

marketing channels, products, or the like. Whether a given

expense is a separable or common expense may depend on
company policies or aspects of the operation under study. If
sales personnel are paid salaries, for example, the outlay for
salaries is a common expense as far as selling individual
products is concerned. But if sales personnel are paid
commissions, sales commissions are a separable expense of
selling

individual

products

and

of

selling

particular

categories of account or individual customers.

2.

Alteration of accounting expense data and activity

expense groups: Conventional accounting systems record
expenses

according

to

their

immediate

purpose.

For

instance, typical account titles include salespeople salaries,

commissions, travel expense, branch sales office rent,
advertising expense, general selling expense, general and
administrative

expenses,

and

bad-debt

expense.

In

marketing cost analysis, accounting expense data are

converted into activity expense groups all the expenses
related to field sales operations are grouped together i.e.
sales salaries, sales commissions, sales travel expense, and
branch sales office rent to determine total expense for this
activity.
3.

Allocation bases for common expenses: Selection of bases

for allocating common expenses is troublesome. In contrast
to the analysis of production costs, where a single allocation
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basis, such as number of machine hours, is used for

allocating all manufacturing expenses, some forms of
marketing cost analysis require the allocation of selling and
marketing expenses on several bases. Allocation bases are
factors that measure variability in the activities for which
specific expenses are incurred. Allocation bases permit
logical assignment of portions of common expense items to
particular aspects of sales operations. Some expenses, such
as credit and collection expenses, can be allocated according
to a logical basis in any type of marketing cost analysis. But
other expenses, such as sales salaries, can be allocated to
sales territories or to customers but not usually to products,
unless available data show the allocation of sales time among
different products. For most marketing cost analyses, no
attempt is made to allocate all common expenses, only those
that can be allocated on logical bases. Marketing cost
analyses determine relative profitability, not net profitability,
of particular aspects of sales operations. Therefore, there is
no

need

to

allocate

all

common

costs

in

the

sales

organization.
4.

Contribution: As already discussed that marketing cost

analyses focus upon separable expenses and those common
expenses available for allocation on logical bases, relative
profitability is measured as a contribution margin. As we
know, Contribution = Net Sales - Cost of Goods Sold (separable expenses + common expenses allocatable on
logical bases).

200

10.5 SUMMARY
A control technique contributes to the effectiveness of sales
management if it implemented properly. The periodic sales audits provide
a widespread appraisal of the total personal selling operations, identifying
areas of strength with a potential of further utilization and areas of
weakness with potential for improvement. Marketing cost analysis goes
beyond analysis of sales volume and look into selling expenses to
determine relative profitability of particular aspects of sales operations in
the specified period of time. In total, sales audits, sales analyses, and
marketing cost analyses are not final ends in themselves-the results of
each are enriched by combining them with other techniques, such as
ratios and percentage calculations. Efficient and effective sales executives
continually examine the personal-selling operation for opportunities to
exploit strengths and overcome weaknesses through different control
techniques to enhance their productivity or performance in their unit.

10.6 KEYWORDS
Sales Audit: It is systematic and comprehensive appraisal of the
total selling operations.
Sales Analysis: It is a detailed study of sales volume performance
to detect strength and weaknesses.
Cost Analysis: It is technique to analyse the sales volume and the
selling expenses to determine the relative profitability of particular
aspects of sales operations within a specified time period.

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10.7 SELF ASSESSMENT QUESTIONS

1.

What do you mean by Sales-analysis? Explain with suitable

example.

2.

How the sales analysis techniques have become so important

in success of firm?

3.

What are the objectives of a sales audit and sales analysis?

4.

Explain the Marketing Cost Analysis in a sales organization.

5.

How to improve Sales-Forces Productivity and performance?

Explain.

10.8 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.

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