Chapter 6
Introduction to Sales
Management
and Its Evolving Roles
PowerPoint presentation prepared by
Dr. Rajiv Mehta
New Jersey Institute of Technology
Chapter Outline
• Purpose and Levels of
Organizational Planning
• Sales Management
Planning Process
• Causes of Unsuccessful
Planning
Source: Flying Colours Ltd.
• Organizing the Sales Force
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Learning Objectives
After reading this chapter, you should be able to do
the following:
1. Understand the purpose and levels of organizational
planning.
2. Apply the sales planning process, including strategic
and tactical sales planning.
3. Avoid unsuccessful sales planning.
4. Describe different ways to organize the sales force,
including calculating its optimal size.
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The Purpose and Benefits of Planning
• improving morale when the entire sales
organization actively participates in the planning
process
• providing direction and focus for organizational
efforts
• improving cooperation and coordination of sales
force efforts
• developing standards by which sales force
performance can be measured and deviations
can be identified to take corrective actions
• increasing the sales organization’s flexibility in
dealing with unexpected developments
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Planning at Different Levels of Management
Type
Strategic
planning
Participants
CEO, boards, president,
senior VPs
Focus
company mission,
vision, goals, primary
strategies, overall
budgeting
Tactical planning general sales manager,
director of marketing
departmental, yearly,
and quarterly plans,
policies, procedures,
budgets
Monthly and
weekly planning
regional sales managers
branch plans and
budgets
Daily planning
sales supervisors and sales unit plans and budget
reps
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Sales and Operational
Planning Process
Develop performance
standard controls so
they can compare
actual performance to
predetermined
standards.
Predetermined
approaches for
handling routine
matters or reoccurring
situations are called
policies.
Objectives are specific results desired within a
designated time frame, for example, become best
service-oriented sales force.
1.
Define goals
and objectives
6.
Develop and
enforce controls
2.
Set policies
Sales &
operational
planning process
3.
Establish procedures
5.
Direct tactics
4.
Devise strategies
Tactics are day-to-day
actions that make up the
strategic plan, for
example, using special
sales contests to spur
sales of products.
A strategy is an overall program of action for
using resources to achieve a goal or objective.
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Detailed descriptions of
specific steps for
carrying out actions are
called procedures.
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Sales and Operational
Planning Process
Define
goals
and
objectives.
Set
policies.
Establish
procedures.
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Devise
strategies.
Direct
tactics.
Develop
and
enforce
controls.
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Planning Components for Managers
1. Diagnosis: Where are we now?
2. Prognosis: Where are we
headed if no changes are made?
3. Objectives: Where should we
be headed?
4. Strategy: What is the best way
to get there?
5. Tactics: What actions need to
be taken by whom, and when?
6. Control: What measures must
be monitored so we know how
we’re doing?
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Source: Digital Vision
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Stages in the Sales Management
Planning Process
Analyze the situation.
Set goals and objectives.
Determine market potential
and forecast sales.
Develop strategies.
Allocate resources and
develop budgets.
Evaluate and control.
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competitor:
• numbers
channels of
distribution,
channel partners,
storage and
transportation
facilities, and
intensity of
distribution
Analyze the Situation
• strengths,
weaknesses
the number and types of potential
buyers, their demographic and
behavioral profiles, their attitudes
and buying patterns, and their
servicing needs
• products
• prices
• market shares
• sales trends for each
brand
1.
Market
characteristics
6.
Distribution systems
2.
Competition
Analyze the
situation
3.
Sales, cost, and
profit data
5.
Promotional mix
4.
Benefits offered
personal selling,
advertising, sales
promotion, and
emerging Internet
strategies
brand names,
prices, packages,
and service
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financial data by
product, market,
territory, and time
period
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Set Goals and Objectives
1.
Sales goals
Set goals
and objectives
• implement a sales
management training
program for new sales
managers within two years
• reduce sales force turnover
to below the industry
average over the next five
years
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2.
Sales objectives
• increase sales by 15% next
year
• reduce customer
complaints by 10% next
year
• increase the number of new
customer accounts by 20%
in the next six months
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Determine Market Potential
and Forecast Sales
1.
Market potential
the maximum possible
sales for an entire
industry
Determine
market potential
and forecast sales
3.
Market capacity
2.
Sales potential
the maximum
possible sales for a
company
the units the market will
absorb if the product or
service is free
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Develop Strategies:
Four Types Of Growth Strategies
New
market
Current market
Current product
A. Market penetration
Market penetration focuses on
increasing sales of current
products in current markets by
more intensive marketing efforts.
New product
B. Product development
Product development creates new
or improved products for current
markets by adding new sizes,
models with new features,
alternative quality versions, or
creative new alternatives to satisfy
the same basic needs.
C. Market development
D. Product diversification
Market development seeks to open
up new markets for current
products.
Diversification refers to expansion
into new product lines or by
purchasing new businesses.
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Four Types of Growth Strategies
Current market
Current product
A. Market penetration
B. Product development
Modifying an existing product in an existing
market (also new uses)
Introducing a new product into an
established market
for example, Honda Accord
for example, Toyota Camry
for example, Nissan Maxima
for example,
for example,
for example,
for example,
C. Market development
New
market
New product
Finding a new market for an existing product
(also new users)
for example, Harley Davidson
for example, Gatorade
for example, Power Bars
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BMW X5, Volvo SUV
Toyota Prius, Scion (Gen Y)
LandRover’s RangeRover
Honda Element (Gen Y)
D. Product diversification
Creating a new product for a new market
for example, Sony electronics to VAIO
for example, Hooters Restaurants, Airlines
for example, Ford (Jaguar), Honda (Acura)
for example, Virgin Airlines, Megastores,
soft drinks, and cell phones
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Business Portfolio Approach:
Strategic Business Units (SBU)
• SBUs are divisions of major firms within multiple product
•
•
•
•
companies.
A division, product line, or single product may be classed
as an SBU.
Each SBU has its own management.
SBUs are evaluated on their profit and growth potential as
standalone firms.
SBUs have several characteristics:
–
–
–
–
–
distinct mission
separate management
unique customer segments
their own competitors
planning independent of other company units
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Three Levels of Strategy: Strategic
Business Units
Corporate level
strategy:
Corporation
What business are we
in?
Business level strategy:
How do we compete?
Marketing
Finance and
accounting
Strategic
business
unit A
Production
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Strategic
business
unit B
Human
resources
Strategic
business
unit C
Strategic
business
unit D
Research
and
development
Functional
level
strategy:
How do we
support
business
level
strategy?
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General Motors Corporation:
Organized by Strategic Business Units
GMC
Chevrolet
Marketing
Finance and
accounting
Production
Cadillac
Human
resources
Buick
Research
and
development
GMC
Truck
Saturn
Hummer
Saab
Pontiac
Oldsmobile
Electronic
Data
Systems
GMC
Finance
Firms are treated as products
in a portfolio (like stocks in an
individual’s portfolio), for
example, keep and expand
those that do well; sell those
that don’t.
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Ford Motor Corporation:
Organized by Strategic Business Units
Firms are treated as products in a
portfolio (like stocks in an individual’s
portfolio), for example, keep and
expand those that do well; sell those
that don’t.
Ford
Lincoln
Mercury
FMC
Volvo
Jaguar
Aston
Martin
Why did Ford buy Jaguar and Volvo?
Why was Aston Martin was sold?
Marketing
Finance and
accounting
Production
Human
resources
R&D
Why might Ford sell Jaguar?
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United Technologies Corporation:
Organized by Strategic Business Units
UTC
Carrier
Chubb
Hamilton
Sunstrand
Pratt
&
Whitney
OTIS
Sikorsky
UTC
Power
Blackhawk Helicopters
Marketing
Finance and
accounting
Production
Human
resources
R&D
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Boston Consulting Group’s
Market Share/Market Growth Matrix
High
High
Stars
Low
Problem children
(aka question marks)
Low
Relative Market Growth
Relative Market Share
generate considerable income
have potential to become stars
or cash cows
Cash cows
Dogs
generate strong cash flow
generate little profits or make
losses
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BCG Matrix: What
Strategy Would You Employ?
High
High
Stars
Low
Problem children
(aka question marks)
Strategy?
Low
Relative Market Growth
Relative Market Share
Strategy?
generate considerable income
can become stars or cash
cows
Cash cows
Dogs
generate strong cash flow
generate little profits or make
losses
Strategy?
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BCG Matrix: What
Strategy Would You Employ?
High
High
Stars
Low
Problem children
(aka question marks)
generate considerable income
Strategy: invest funds for
future growth
Low
Relative Market Growth
Relative Market Share
can become stars or cash
cows
Strategy: invest more funds
for growth or divest
Cash cows
Dogs
generate strong cash flow
generate little profits or make
losses
Strategy: milk profits to help
stars and question marks
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Strategy: consider divesting
SBU or product
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Stakeholders
1.
Government:
federal, state,
local
6.
Investigative
reporters
2.
Company
employees
Stakeholders
5.
Suppliers
3.
Stockholders
4.
Financial
community
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Allocate Resources
and Develop Budgets
• Given detailed sub-plans and tactics, managers
must allocate resources—money, people, materials,
equipment, and time—to carry out the plans.
• The sales budget is the expected expenditures
required to achieve projected sales revenues.
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Implement the Plan
• Sales managers often use
management by objectives
(MBO) to involve subordinates
in planning and budgeting.
• A program evaluation and
review technique (PERT)
diagram specifies a project’s
critical path—the sequence
of tasks to be completed, the
time to complete each activity,
and the responsible
individuals.
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Performance Standards and Measures
Customer
Service
Internal
Components
External
measures
measures
1. Industry
Reliability
averages
1. Customer
satisfaction
2. Past
Tangibility
performance
Performance
standards and
measures
2. Societal
satisfaction
3. Managerial
Responsiveness
expectations
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Planning Tools
• Unsuccessful planning may result from making erroneous
assumptions.
• Thus, management must make assumptions about the future
by using these two tools:
1.
Dialectic
planning
Planning tools
• Dialectic planning examines
the validity of assumptions
in a forecast.
• Calls for making a new set of
assumptions to revaluate
previous plans.
• Plans are rigorously
challenged; a second plan is
prepared.
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2.
Contingency
planning
A contingency plan is a
backup plan to the one
adopted, and it will be
executed only if events
occur beyond the control
of the major plan.
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Organizing the Sales Force
• The purpose of organizing the sales force is
to accomplish marketing and sales objectives
by taking these steps:
– shortening the time a sales manager needs to
evaluate and respond to changing market needs
– arranging activities efficiently
– establishing and maintaining open channels of
communication with customers, salespeople,
support staff, and concerned stakeholders
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Types of Organizations
•
•
Matrix organizations
revolve around projects.
3.
Functional
4.
Matrix
organization
Line organizations have few
managers who have
authority over specific
functional areas of the
business, such as
production, finance, or sales
Types of
organizations
1.
Line
•
•
Staff specialists have line
authority, for example, a
sales manager directs
salespeople, but the sales
training director also has
authority over the sales
force for training.
2.
Line and staff
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•
Line and staff organizations
have more functional areas
and staff assistants to
complete specialized
support activities, such as
marketing research or sales
forecasting.
Staff managers only make
recommendations or assist
line managers.
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Matrix Organizations
• Matrix organizations encourage teamwork to
maximize individual contributions.
• Team leaders are viewed as coordinators rather
than as bosses.
• Matrix organizations are most effective in these
circumstances:
– projects or products are unique
– team members are professionals in terms of expertise
and skills
– project is of a short duration
– speed and creativity are as important as cost
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Line Organization for
Marketing and Sales
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Line-and-Staff Organization
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Functional Organization
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Matrix Organizations
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Types of Sales Department
Organizations
5.
Combination of the
preceding four
1.
Geographic
4.
Market
Types of sales
department
organizations
3.
Function
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2.
Product
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Geographic Sales Organization
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Product Sales Organization
Honda has product lines that include the following:
• automobiles
• lawn mowers
• generators
• motorcycles
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Functional Sales Organization
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Customer/Market Sales Organization
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•
Aircraft manufacturers have
different marketing efforts for
the following :
•
government
•
military
•
commercial markets
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Combination Sales
Organization—Organized by
Geography, Products, and Customers
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Team Selling
• Selling teams frequently include
individuals from diverse functional areas
such as operations, finance, research and
development, marketing, and sometimes
even the CEO.
• Here are some reasons for adopting a
team selling approach:
– Information needs of customers are large.
– Several people are involved in the
decision to buy.
– The potential sale is large for the selling or
buying company or both.
Source: Flying Colours Ltd.
– Complexity of the products or services is
high and therefore beyond a single
individual’s capabilities.
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Guidelines for Developing
Sales Organizations
6.
Coordination and
balance
1.
A market-oriented
approach
5.
Flexibility
4.
A reasonable
span of control
Sales
organizations
development
guidelines
3.
Defined areas of
authority and
responsibility
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2.
Approach
designed around
sales activities
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Size of the Sales Force
1.
Equalized
workload
assumes that the total
workload in covering the
market consists of three
factors:
a) customer size
b) sales volume potential
c) travel time
Size of the
sales force
3.
Sales potential
based on assumption of what
the average sales
representative will achieve in
annual sales volume, then
divide by year sales forecasted
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2.
Incremental
productivity
assumes the sales force
should be increased until
profits added by the last
salesperson hired equal
the costs of employing
that salesperson.
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Guidelines for Developing a
High-Quality Sales Organization
•
•
•
•
•
•
•
•
Be willing to delegate.
Be sure authority equals
responsibility.
Put salespeople where they fit
best.
Be more than just an efficiency
expert.
Hold sales personnel accountable
for what they do.
Be flexible.
Know what needs to be done.
Organize the sales force to avoid
unequal workloads.
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Developing Sales Organizations
• To learn about optimizing sales organizations, go to
– http://www.optimalthinking.com/sales-optimization.html
• To read a good article on sales force planning, go to
– http://www.allaboutmedicalsales.com/articles/salesforcebusiness
planning_julianashley_291101.html
• To read white papers on organizing the sales force, go to
– http://whitepapers.zdnet.com/presentation.aspx?&docid=81288&
promo=100511 (sign-in required)
– http://whitepapers.zdnet.com/presentation.aspx?&docid=81296&
promo=100511 (sign-in required)
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Ethical Situation: What Would You Do?
Discussion Question
Each year, your regional sales manager asks you and
the other district sales managers reporting to him to
submit their requests for additional salespeople, if
needed. You know that you already have enough
salespeople to achieve next year’s assigned quota for
your district, but you generally follow the self-serving
budgeting rule: “Always request more salespeople
and a higher sales budget than you actually need.”
Even if you don’t get the additional resources, you
can always use the lack of adequate resources as an
excuse if your district underperforms.
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