MAR4418 - Exam 2

Leadership

The activities performed by sales managers to influence salespeople to achieve goals that contribute to the success of the entire organization.

• Composed of the combination of Personal Characteristics and Managerial Skills.

• Sales Managers must be more than just Managers; they need to be Leaders.

What are some examples of Personal characteristics of a (Sales Manager) Leader?

• Self-Confidence

• Initiative

• Energy

• Creativity

• Maturity

What are some examples of Managerial Skills of a (Sales Manager) Leader?

• Problem-Solving Skills

• Interpersonal Skills

• Communication Skills

• Persuasive Skills

What are the 4 types of Leadership styles?

1. Coaching

2. Directing

3. Supporting

4. Delegating

Situational Leadership

Ability to tailor leadership style, between transactional and transformational, to the needs of the current situation and the individual person.

Transactional Leadership

Simple supervisory activities regarding the day-to-day operation and control of the sales force.

• USED BY MANAGERS.

• Example:

  • Clarifying Rules

  • Task Orientation

  • Verbal Feedback

Transformational Leadership

Transforms basic values, beliefs, and attitudes of followers so that they are willing to perform beyond expectations.

• USED BY LEADERS.

• Examples:

  • Fostering Group Goals

  • Articulating a Vision

  • Role Modeling

  • Individualized Support

What are some of the main differences between a Manager and a Leader?

• Leaders use Transformational Styler, and Managers use Transactional.

• Managers use one-way communication, and Leaders use two-way communication.

• Managers react to what just happened, Leaders take proactive steps to avoid things from happening.

What are some tools and techniques used by Leaders in Sales?

• Sales Reports

• Telecommunications

• Printed Aids

• Meetings

• Personal Contact

• Indirect Supervisory Aids (Expense Accounts, Quotas, Territories, Compensation Plans)

Citizenship Behaviors

Voluntary behaviors important to the success of the firm.

• Examples: When a Salesperson gives encouragement to a fellow or struggling colleague.

Sales Force Morale

A sense of common purpose and belief among members that group goals can be attained.

• Job Satisfaction must be high = for Morale to be high as well.

Job Satisfaction (Individual Morale)

An individual Salesperson’s emotional and evaluative feelings toward various dimensions of the job, including their feelings toward factors such as:

• Pay

• Job Security

• Benefits

• Co-Workers

• The Sales Manger or Leader

What are some problems encountered in Leadership?

• Poor performance

• Substance Abuse

• Sexual Harassment

Third-Party Harassment

Harassment is done by someone outside the firm.

Forecasting

Estimating how much sales will be generated by the company in the upcoming time period.

• Key factor in all operational planning throughout the company.

What is the first step to Forecasting?

Estimating the Market Potential.

Market Potential

The total amount of sales possible for a product or product category across the entire industry (ALL OF THE US), in a specific place and time.

Sales Potential

The maximum sales a SINGLE COMPANY could achieve in that market if conditions were perfect.

Sales Forecast

The sales a product or product category, a SINGLE COMPANY realistically expects to achieve in a future period based on its marketing plan and current conditions.

• Often inaccurate.

What are some methods of estimating Potential based on an analysis of the customer?

• Customer Analysis

• Market-Factor Derivation

• Survey of Customer Actions

• Test Markets

What are some methods of estimating Sales Forecast?

• Survey Methods

• Mathematical Methods

• Operational Methods

Moving Average Formula

(Add the Last # of Period Needed Sales / # Period Needed)

• Example:

  • You need to find the 2nd Moving Average, the formula would be:

    • (Add the last 2 Sales periods / 2)

Exponential Smoothing Formula

Weight (Actual Sales) + (1 - Weight) (Forecasted Sales)

Regression Analysis Formula (Using Years as a Predictor)

Starting Sales in Year 0 + Slope (Years)

Regression Analysis Formula (Using # of Reps a Predictor)

Starting Sales in Year 0 + Slope (# of Reps)

What are some methods of determining Sales Budgets?

• Percentage of Sales Method

• Objective-and-Task Method

Percentage-of-Sales Method

The manager multiplies the Sales Forecast by various percentages for each category expense.

Objective-and-Task Method

The Manager determines the task that must be accomplished in order to achieve specific objectives, and then estimates the costs of performing those tasks.

Sales Territories

Comprises a number of present and potential customers, located within a given geographical area and assigned to a Salesperson, branch, or intermediary (Retailer or wholesaling intermediary).

• Usually all equal in Sales Potential and Size.

What are some Benefits of a Good Territory Design?

• Enhances Customer Coverage

• Reduces Travel Time and Selling Costs

• Provides More Equitable Rewards

• Aids Evaluation of Sales Force

• Increases Sales for the Firm

• Increases Morale for the Salespeople

What are the Steps to Designing Sales Territories?

1. Select a Control Unit (Are you dividing territories by States, Sales Potential, Number of Customers, or what?)

2. Determine Location and Potential Customers

3. Determine Basic Territories

4. Assign Salespeople to Territories

5. Set Up Territorial Coverage Plans (Aka, the Game Plan for each Salesperson)

6. Evaluate the Effectiveness of the Design

Workload

The amount of traveling (Total Square Miles) and the required number of calls associated with a territory.

New Sales Reps usually have less Sales Potential and less Workload.

True, this is in order to let them get acclimated.

What are some Territorial Control Units?

• States (Large)

• Countries (Large)

• Zip Codes (Small)

• Cities (Small)

• MSAs (Metropolitan Statistical Areas)

What is the advantage of using smaller Control Units?

Allows the Sales Manager to adjust territory sizes more precisely.

• Also, better targeting of customers, such as by wealth and customer type.

Some companies may give larger territories as rewards to high-performing Salespeople.

True.

Studies show that over half of all Sales Territories need to be realigned because they are either too big or too small.

True. This is why Sales executives should review territories at least once a year.

What are the steps of Sales Volume Analysis and Planning?

1. Planning

2. Implementation

3. Evaluation

Planning

• Setting goals

• Developing strategies and tactics

Implementation

• Organize

• Staff

• Operate

Evaluation

• Compare goals and results

• Explain variances

Marketing Audit

A comprehensive, periodic review and evaluation of the marketing functions in an organization.

• Expensive and Time-Consuming.

• Decision-making aid that should anticipate future decisions.

A traditional accounting audit is a after-the-fact review.

True.

Steps of the Evaluation Process

1. What Happened

2. Why It Happened

3. What To Do About It

Sales Volume Analysis

A careful study of a company’s records as summarized in the net sales section of its profit- and-loss statement.

Marketing Cost Analysis

A study of the marketing expenses to determine the profitability of various marketing segments in the organization.

Marketing Profitability Formula

SVA + MPA

Pareto Principle (80/20 Principle)

80% of Sales come from 20% of Customers

Methods to Analyze Sales Volume

• Total Sales Volume

• Sales by Territories

• Sales by Products

• Sales by Customer Classifications

Company Market Share Formula

Company Volume / Industry Volume

Sales Goal Formula

Total Sales x Market Index %

Performance Percentage Formula

Actual Sales / Sales Goal

Dollar Variation Formula

Actual Sales - Sales Goal

Customer Probability Cube

Shows Salespeople what to sell, when, and to whom.

Marketing Cost Analysis

A detailed study of a firm’s marketing costs.

• Not usually part of a company’s regular accounting system.

• Discover’s Unprofitable Segments.

• More complex for computing costs.

• VOLUME IS A FUNCTION OF COST! V=F(C)

• Cost-Volume relationship is difficult to measure.

• The source of cost incurred is less exact.

Types of Marketing Cost Analyses (MCAs)

• Analysis of Ledger Expenses

• Analysis of Activity Expenses

• Analysis of Cost by Market Segments

Analysis of Ledger Expenses

• Simplest and least expensive.

• Examines costs as they are recorded in the company’s accounting ledgers.

Analysis of Activity Expenses

• Involves identifying the major activities associated with the firm’s marketing program.

• AND THEN, dividing each ledger expense so that it is appropriately allocated into various activities.

Analysis of Activity Costs by Market Segments

Studies not only costs, but also profitability of each segment of the market.

Contribution Margin Formula

Sales Volume

(-) COGS

= Gross Margin

(-) Direct Expenses

= Contribution Margin

Full-Cost Formula

Sales Volume

(-) COGS

= Gross Margin

(-) Direct Expenses

(-) Indirect Expenses

= Net Profit

OR

Total Indirect Expenses * Weight

Direct Costs

Those costs are incurred in connection with a single unit of sales operations.

Indirect Costs

Costs that are shared by more than one market segment.

• Most marketing costs are totally or partially indirect.

• CEO Compensation is indirect.

Method of Analyzing Indirect Cost (Every territory (or product) gets the same share of indirect costs, no matter what)

• Pros: Simple and perceived to be fair.

• Cons: Does not consider differences in performance between regions.

Method of Analyzing Indirect Cost (Costs are based on how much each territory sells)

• Pros: We help lower-performing territories improve.

• Cons: Does not consider differential sales ability or efficiency.

• Higher Sales = Higher Indirect Costs

Method of Analyzing Indirect Cost (Costs are based on how much each territory already spends directly)

• Pros: Prevents some territories from having a poor performance record.

• Cons: Direct Costs are not necessarily highly correlated with indirect costs.

Determining Weights for Each Region Formula

Net Sales / Total Net Sales

Ways to Increase Order Size

• Stress the advantages of shopping from one supplier.

• Stress the advantages of ordering once a month instead of once a week.

• Change the compensation plan to discourage the acceptance of smaller orders.

• Establish a minimum order size.

Return on Interest (ROI) Formula

Net Profit / Sales x Sales / Investment

Return on Assets Managed (ROAM) Formula

Contribution Margin / District Sales Volume x District Sales Volume / Average Account Receivable + Inventory

OR

Contribution Margin / Assets Managed

Steps of Evaluating Salespeople

1. Establish Basic Policies

2. Select Evaluation Basis

3. Set Performance Standards

4. Compare Performances to Standards

5. Discuss Results with Salespeople

• Expensive and time-consuming process!

Who usually evaluates sales people?

• Sales Manager

• Customers

• Self-Evaluation

• Assistants/Interns

What are some OUTPUT factors evaluated in STEP 2?

• Number of new accounts

• Customer satisfaction with rep

• Average Order Size

• Customer Retention rep

What are some INPUT factors evaluated in STEP 2?

• Selling expenses

• Number of calls

• Workload %

• Hours Spent Training

Input

Salesperson behaviors or activities (that go into the sale).

• can be qualitative or quantitative.

Output

Relate to Salesperson results, that is, things that happen when a sale is made.

Ratio Measures Formula

Sales = Days worked x Calls / Days Worked x Orders / Calls x Sales / Order

Halo Effect

Bias where a customer’s positive perception of one aspect of a brand (such as a popular product, celebrity endorsement, or strong, first impression) causes them to assume other products or the overall company are equally high-quality.

Behaviorally Anchored Rating Scales (BARS)

Expected behavior ranked. (1-5)

Total Marketing Costs

Direct + Indirect Costs