Sales Management and Negotiation Skills

Module 2
Vasudevan M

Mission Vision Core Values

Christ University is a nurturing ground for an Excellence and Service Faith in God | Moral Uprightness
individual’s holistic development to make effective Love of Fellow Beings | Social
contribution to the society in a dynamic environment Responsibility | Pursuit of Excellence
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Sales Territory

A sales territory comprises a number of present and

potential customers, located within a given a geographical
area and assigned to a sales person, branch or intermediary

Benefits of Good territory design:

• Enhances customer coverage
• Reduces travel time and selling costs
• Provides more equitable rewards
• Aids evaluation of sales force
• Increase sales for sales organization
• Increases morale

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Procedure for Designing Sales Territories

Select a Determine Location Determine

Control Unit and Potential of Basic
Customers Territories

Set Up
Assign Territorial Evaluate
Salespeople to Coverage Effectiveness
Territories Plans of Design

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Territory Size and Workload Factors

Workload Factor Territory Size

Increase/Decrease
Nature of Job:
Lots of presale and post-sale activity Decreases
Nature of product:
A frequently purchased product Decreases
A limited repeat-sale Increases
Market development stage:
New market--fewer accounts Increases
Established market--more accounts Decreases
Market coverage
Selective coverage Increases
Extensive coverage Decreases
Competition:
Intensive Decreases
(unless market is
oversaturated:
Limited Increases
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 TM 15-3
Buildup Method of Territorial Design (Fig. 15-3)
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Management must determine:

Desirable call patterns:

Call frequency per account per year

Total calls needed

in each control group

Workload capacity:
Total calls possible per rep per year =
number of daily calls x days selling

Tentatively set territorial boundary lines

by combining control units until total
calls needed = total calls possible

Modify territories as needed

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Territory Design: Build-Up Method Worksheet
Control Units
Illinois Iowa Kentucky
Customer Call Calls Calls Calls
class frequency Accounts per year Accounts per year Accounts per year
A 2 per month 10 240 7 168 5 120
B 1 per month 30 360 17 204 10 120
C 1 every 2 months 68 408 55 330 27 162
108 1,008 79 702 34 402

Distribution of one rep’s calls 1,008 + 491 or 402

year (1,500)*
Possible control combinations 100% 70% or 100%
Illinois Iowa Kentucky
Alternative territories 100% Illinois + 100% Kentucky
100% Illinois + 70% Iowa
*6 calls/day x 5 = 30 calls/week x 50 = 1,500 calls/year
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Breakdown Method of Territorial Design Christ
TM University
15-5
(Fig. 15-5)
Management must determine

Company sales potential

Sales potential in each control unit

Sales volume expected from

each sales person

Tentatively set territorial

boundary lines by combining
control units total sales potential
= total sales volume expected

Modify territories as needed

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 TM 15-6
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Territory Design: Break-Down Method Worksheet

Company sales potential = $200,000,000

Targeted volume rep = $ 10,000,000

Number of reps needed = Company sales potential = $200,000,000 = 20
Targeted volume/rep $ 10,000,000

Territory volume as = Targeted volume/rep = $ 10,000,000 = 5%

Company sales potential $200,000,000

Each territory should comprise 5% of sales potential or $10,000,000

Combine adjacent control units until each sales potential of $10,000,000

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Continued…

Using Computers in Territory Design

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Continued…
Assigning Sales People to territories
Sales Rep differ in selling effectiveness
Intentionally designing with differences based on
experience – Small territories to beginners
Revising sales territories
Dynamic business environment – Obsolete territory
design
Indications of Need for adjustments
Out of date measures of sales potential
Claim Jumping
Reasons for territories being unbalanced
Designer – Area Sales Manager
Poor understanding towards sales potential and work load

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Territorial Coverage

Managing a Sales Rep’s Time

Routing the Sales Force

Linear Route Pattern
Clover leaf pattern
Major City pattern

Time Management and Computer Support Systems

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Segmenting a territory for coverage: mapping

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The Curious Case of FMCG Sales Beats

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Sales Quota

A sales quota is a performance goal assigned to a marketing

unit for a specific period of time.

A marketing unit be a sales person, a branch office, a district

or a region, or a dealer or distributor.

This quota goal may be stated as product units, monetary

terms, or selling activities

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Types of Sales Quotas

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Combination Quotas

Gross Margin, all products

Product demonstrations made

Customer satisfaction score

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Type of Quota Quota Actual Percent Weight Percent

Quota (Importance) Quota x
Weight
Sales Volume (Rs) 5,00,000 4,50,000 90 3 270
Receivables (days) 45 50 89 2 178
New Customers 04 05 125 1 125
(Nos)
Total 6 573

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Points to Ponder

If a company wants to correct an unbalanced inventory,

what type of quota may be fixed?

If management wants to develop a new territory, Which

quota is preferable?

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Points to Ponder

How sales quotas are fixed in these industries???

• Telecom

• Media

• Retail

• Banking

• FMCG

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How sales quotas must be set?

Goals differ based on perceived potential

Quotas set based on historical data

Executive Judgement

Compensation Plan

Salespeople setting their own quotas

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Need Answer………..

Is it fair to set a quota achievable by the entire team?

What is said to be a fair quota in terms of achievability?

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Purposes of Sales Quotas

• Indicates strong weak spots of a sales structure

• Controls salespeople’s activities

• Evaluates productivity of salespeople

• Improves effectiveness of compensation plans

• Controls selling expenses

• Evaluates sales contest results

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Sale Force Compensation - Compensation Plan

Objectives of Compensation Plans:

• To Motivate Salespeople

• To correlate performance with rewards

• To control salespeople’s activities

• To ensure proper treatment of customers

• To attract and keep competent salespeople

• To be economical yet competitive

• To be flexible yet stable

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 TM 10-3
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Steps in designing a sales compensation plan

Include job elements

Review job Identify plan’s controllable by sales force
description objectives and measurable

Decide on indirect
Establish level of Develop the method monetary
compensation of compensation compensation

Pretest and
install plan

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Developing the method of compensation

Elements to be considered

• Salaries

• Commissions

• Bonuses

• Indirect Monetary Benefits

• Expenses

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Basic types of compensation plans:

A straight Salary

A straight Commission

Some combination of compensation elements

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Building Blocks for a Sales Compensation Plan

Others

Company Car

Profit Sharing Pension

Bonus Moving Expenses

Drawing Account Insurance Other Business

Expenses
Salary Commission Paid Vacation Travel

SECURITY INCENTIVES BENEFITS EXPENSES

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Methods of Compensation
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Method Advantage Disadvantage Best Used

Straight Provides security and Direct incentive is easily For products that require a lot of presale
salary stability for reps lost if not administered and/or post-sale service
properly
Better for directing and For building long-term customer relationships
controlling sales Represents a fixed cost
When supervision is available for new recruits
activities
Requires supervision to
For new territories
Ensures proper direct, control, and evaluate
treatment of customers For missionary sales

Provides a strong Difficult to direct and When a strong incentive is needed to attain
Straight incentive supervise sales people sales
commission Sales people have Customers’ best interests For products that require little presale and/or
more freedom may be ignored post-sale service
Acts as a screening Sales people’s earnings The sale is a one-time sale
method may fluctuate widely
Adequate field supervision is not available
Company is in a weak financial position
Company uses part-time or independent sales
people

Added cost
Added incentive To encourage above-normal performance of
Bonus May be seen as specific activities
Can be used for specific
inequitable if not
activities - flexible
administered properly

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Possible Combination Compensation Plans

COMMISSION

BONUS
SALARY

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Onida: The fallen star.

Will it gain its spark
back
?

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