Sales management

Salesforce Evaluation Objectives

• After studying the chapter, you should be able to:

  • Understand the meaning of salesforce evaluation.

  • Understand the salesforce evaluation process.

  • Know how standards of performance are set to achieve sales.

  • Understand the role of information in the evaluation process.

  • Set qualitative and quantitative measures of performance.

Key Concepts

• Appraisal interviewing: A systematic assessment of a salesperson's performance, often through structured discussions.

• Qualitative performance measures: Non-numerical indicators of performance that assess quality attributes such as skills or behaviors.

• Quantitative performance measures: Numerical indicators used to evaluate performance, such as sales figures or profit margins.

• Salesforce evaluation: The process of comparing actual performance against established sales objectives.

• Salesforce evaluation process: A structured method for assessing the performance of a sales team in relation to defined objectives.

The Salesforce Evaluation Process

• Definition: Salesforce evaluation involves comparing salesforce objectives with actual results.

• Evaluation Process Steps:

  1. Setting Salesforce Objectives:

  • Objectives can be:

    • Financial (e.g., sales revenue, profits, expenses).

    • Market-related (e.g., market share).

    • Customer-oriented (e.g., customer satisfaction and service levels).

  1. Determining Sales Strategy:

  • Outline methods for achieving set objectives.

  1. Setting Performance Standards:

  • Standards should be established for:

    • Overall company performance.

    • Different regions.

    • Specific products.

    • Individual salespeople.

    • Customer accounts.

  1. Measuring Results:

  • Compare actual performance against performance standards.

  1. Assessing Differences and Taking Action:

  • Investigate reasons for any discrepancies and implement actions for performance improvement.

The Purpose of Evaluation

• Main Reason: To help achieve company objectives by identifying performance shortfalls and enabling corrective action.

• Other Benefits:

  • Motivation and Skills Improvement: Evaluation clarifies expectations and performance standards, boosting motivation.

  • Recognition: Identifying above-average performance can enhance confidence and motivation.

  • Skill Development: Evaluations can highlight areas needing improvement, facilitating focused training efforts.

  • Compensation Plans: Insights from evaluation can help in designing compensation plans that incentivize focus on underperforming product lines.

  • Impact on Decision-Making: Evaluation informs decisions on training, compensation, motivation, and setting future objectives.

Setting Standards of Performance

• Performance Standards: Benchmarks believed to be essential for sales success, guiding the evaluation process.

  • For the sales team, the sales budget serves as the primary evaluation standard.

  • Individual sales quotas are critical success measures, enabling fair assessments.

  • It is essential to acknowledge the differences across sales territories when comparing individual performances.

Gathering Information for Evaluation

• Sources of Information:

  • Salesperson Reports: Sales data, customer interactions, problems, opportunities, and expense claims submitted by the salesperson.

  • Sales Management Visits: Field observations that provide qualitative insights into individual salesperson performance and attitudes.

  • Market Research Projects: Data from customers providing evaluation insights on the salesforce's performance and customer relationships.

  • Company Records: Historical sales levels and activity data that help in trend analysis and performance evaluation.

Measures of Performance

Quantitative Measures of Performance

• Input Measures (Behavioral):

  • Number of calls made.

  • Calls per potential and active account.

  • Quotations issued.

  • Calls on prospects.

• Output Measures:

  • Sales revenue achieved.

  • Profits generated.

  • Gross profit margin percentages.

  • Sales per potential and active accounts.

  • New customer acquisition.

• Hybrid Ratios:

  • Sales revenue per call ratio.

  • Profit per call ratio (call effectiveness).

  • Order per call ratio.

Diagnostic Use of Ratios

• Ratios help identify potential issues such as:

  • Low call effectiveness;

  • Call rates that are satisfactory but yield insufficient sales;

  • An imbalance in focusing on established versus new accounts.

  • Poor performance indicators suggesting further investigation.

Compensation and Expense Measures

• Comparison of expenses among salespeople and year-on-year changes is critical.

• Ratios for evaluating compensation effectiveness include:

  • Expenses/sales revenue generated.

  • Expenses/profit generated.

  • Average expense per call.

Qualitative Measures of Performance

• Evaluation may focus on the following subjective dimensions:

  1. Sales Skills:

  • Rapport establishment;

  • Customer need identification;

  • Quality of presentations;

  • Objection handling and closing abilities.

  1. Customer Relationships:

     • Satisfaction levels and feedback from customers.

  2. Self-Organization:

     • Effectiveness in preparation, record-keeping, and self-analysis for performance improvement.

  3. Product Knowledge:

     • Understanding of products, competitor offerings, and relevance to customer needs.

  4. Cooperation and Attitudes:

     • Willingness to align with management objectives and proactively engage in performance improvement efforts.

Sales Management Response to Evaluation Results

• Matrix response scenarios:

  • Good Quantitative / Good Qualitative:

  • Praise, monetary rewards, potential promotions.

  • Good Quantitative / Poor Qualitative:

  • Guidance and education regarding qualitative deficiencies.

  • Poor Quantitative / Good Qualitative:

  • Identify causes of quantitative deficiencies and provide additional training.

  • Poor Quantitative / Poor Qualitative:

  • Critical discussions to identify issues and implement necessary training or corrective measures.

Appraisal Interviewing

• Method: Encourage salespeople to describe expectations for the upcoming year, breaking down objectives into quarterly targets.

• Performance Review Meetings: Held quarterly to assess progress towards expectations, allowing recognition and adjustments as necessary.

Conclusions

• The chapter outlined the sales evaluation process from objectives setting to performance evaluation using quantitative and qualitative measures.

• Emphasis is placed on the interconnection between both measurement types for a comprehensive understanding of salesperson performance.

Practical Exercises

• Dynasty Ltd Case Study:

  • Discussion on recruitment considerations for a salesforce in the telecommunications space, evaluating performance and ideal commission structures.

• MacLaren Tyres Ltd Case Study:

  • Analysis needed to evaluate individual salespeople's performance and necessary data for comprehensive appraisal.

Examination Questions

1. Discuss potential misleading aspects of relying heavily on quantitative measures for sales evaluation.

2. Present a comparative argument relating qualitative and quantitative performance measures for sales evaluation.

3. Outline strategies for sales management to mitigate the risk of lost major orders in the future.