Performance Evaluation & Control of Sales Force

Agenda
Overview Purpose Gathering information Measures of performance
Qualitative Quantitative

Evaluation of performance and action Case study

Overview
Sales force evaluation is the comparison of sales force objectives with results.
Profit contribution Market share Customer satisfaction Customer service Expenses Company Regions Products Salespeople Accounts

Set Objectives

Set Performanc e Standards

Take Action

Determine Sales Strategy

Measure and Compar e

Purpose
The prime reason for evaluation is to attempt to attain company objectives.

Attainment and setting of objectives

Compensation

Sales Force Evaluation

Training

Motivation

Gathering Information
Acquiring the right information is crucial for evaluation and objective setting.

Product/Brand related sales Daily/weekly report Expense claims Problems/opportunities revealed

Sales Management (Qualitative)

Field visits Performance indicators Attitude/Work habits Organizational ability

Customer-seller relationship Delivery Product reliability

Company Records
Past sales levels Expense levels Calls achieved

Individual Salesperson (Quantitative)

MR Projects

Determinants of sales force performance

Motivation Skill level Job satisfaction Role perception Personal factors Ego drive Empathy
Environmental factors Organizational factors Communication & work flow Compensation system Sales management functions Sales force planning Forecasting Territory management Compensation Control

Internal Factors

External factors

Quantitative Measures of Performance Output Measures

Sales Revenue Profits/Profit Margin Sales per account Sales revenue as % of potential No. of orders No. of new customers

Input Measures
No. of calls made
Calls per potential account

Calls per active account

No. of quotations No. of calls on prospects

Performance Measurement Ratios

1. Selling expense ratio 2. Territorial net profit

3. Territorial market share

4. Sales coverage effectiveness index 5. Call frequency ratio 6. Order per call ratio 7. Average cost per call 8. Average order size 9. Average order value= Sales revenue/no. of orders

Performance Measurement Ratios

1. Strike rate = Number of orders / Number of quotations 2. Sales revenue per call ratio 3. Profit per call ratio 4. Order per call ratio 5. Average order value= Sales revenue/no. of orders 6. Prospecting success ratio= No. of new customers/No. of prospects visited 7. Average profit contribution per order= Profits generated/No. of orders Unfairness, in terms of sales results, can be exposed by Total salary (including commission)/sales revenue Total salary (including commission)/profits.

Qualitative Measures of Performance

Sales related activities

Features
More subjective

Selling skills

Done during sales visits Assess the productivity and profitability

Personal characteristics

Qualitative Measures of Performance

Sales skills Ability to close the sale Customer relationships Are customers well satisfied with the service? Self-organisation How well does the salesperson carry out the preparation? Product knowledge Does he know his own products and its customer benefits and applications? Co-operation and attitudes How will he respond to the objectives determined by management?

Salesperson Evaluation Matrix

Quantitatively measured results Averag e
-Praise -Reward -Promote

Good

Bad
-Limited Praise -Guide -Train

Good
Qualitatively measured results Averag e

-Limited Praise -Advise -Educate

-Discuss -Train -Punish -Remove

Bad

Key Issues in Evaluating and Controlling Salesperson Performance

Outcome-Based Perspective
Focuses on objective measures of results with little monitoring or directing of salesperson behavior by sales managers

Behavior-Based Perspective
Incorporates complex and often subjective assessments of salesperson characteristics and behaviors with considerable monitoring and directing of salesperson behavior by sales managers

Perspectives on Salesperson Performance Evaluation

Outcome-Based Little monitoring of people Little managerial direction of salespeople Straightforward objectives measures of results Behavior-Based Considerable monitoring of salespeople High levels of managerial direction of salespeople Subjective measures of salesperson characteristics, activities, and strategies

Dimensions of Salesperson Performance Evaluation

Behavioral

Results

Salesperson Performance

Professional Development

Profitability

Criteria for Performance Evaluation

Behavior Consists of criteria related to activities performed by individual salespeople Sales calls, customer complaints, required reports submitted, training meetings, letters and calls
Should not only address activities related to short-term sales generation but should also include non-selling activities needed to ensure long-term customer satisfaction.

Criteria for Performance Evaluation

Professional Development Assess improvements in certain characteristics of salespeople that are related to successful performance in the sales job

Characteristics include - Attitude, product knowledge, initiative and aggressiveness, communication skills, ethical behavior

Criteria for Performance Evaluation

Results Salespeople measured objectively based on results such as sales, market share, and accounts A sales quota represents a reasonable sales objective for a territory, district, region, or zone Some research shows that rewards for achieving results have a negative effect on performance and satisfaction

Criteria for Performance Evaluation

Profitability Salespeople have an impact on gross profits through the specific products they sell and/or through the prices they negotiate for final sale. Salespeople affect net profits by the expenses they incur in generating sales. Criteria Examples
Net profit dollars Gross margin per sale Return on investment Number of orders secured Selling expenses versus budget

Performance Evaluation Methods: Characteristics any method should include:

Job Relatedness Reliability Validity Standardization Practicality Comparability Usefulness

Performance Evaluation Methods:

Graphic Rating/Checklist Methods:

Salespeople are evaluated using some type of performance evaluation form

Especially useful in evaluating behavioral and professional development criteria

Forms may be filled out by customers at times

Disadvantage is providing evaluations that discriminate sufficiently

Performance Evaluation Methods: Ranking Method:

Rank all salespeople according to relative performance on each performance criterion These methods force discrimination as to the performance of individual salespeople

May be complex at times

Rankings only reveal relative performance evaluation

Performance Evaluation Methods:

Objective-Setting Methods

Management By Objectives (MBO)

Mutual setting of well-defined and measurable goals within a specified time period. Managing activities within the specified time period toward the accomplishment of the stated objectives. Appraisal of performance against objectives.

Performance Evaluation Methods:

Behaviorally Anchored Rating Scales (BARS)

Links behaviors to specific results Salespeople are used to develop performance results and critical behaviors Positive feedback about behaviors may be more affective than positive output feedback

Case study: Eureka Forbes

Euro Champs

Supervision

Morning field meeting Cold calling Daily activity reports, depositing payments, and request delivery for closed sales Role-playing and mock demonstrations for new recruits Keeping up to date with product information in terms of innovation and upgrades Closing sales, collecting payments, making courtesy calls on existing customers, and generating references or retraining customers

Reporting and feedback is 3 times in a day At the morning meeting before heading out on cold-calls At the midday meeting to report on door knocking results and morning demos And at the end-of-day review to register afternoon follow ups, demos, and sales numbers

Evaluation and Compensation

Evaluation of a Euro Champ
Base salary is scaled against length of service, total sales, and average sales over the last 6 months A contingency compensation scheme based on number of units sold could be invoked in the event of marriage or hospitalization. An averagely successful salesman earns twothirds of his monthly earnings through commissions This emphasis has an automatic sieving effect: anyone who cannot learn to sell does not get commission and hence earns less and exits very quickly.

Compensation
Salary Rent allowance A special pay A demo allowance (for customer sales specialist probationers) A leave travel concession Holiday bonus Medical reimbursement A travel reimbursement

EFLs Compensation Plan

Doesnt reward only on sales volume Points are given on successful completion of various stages of selling process and compensation linked to the points scored

An averagely successful salesman earns two-thirds of his monthly earnings through commissions This emphasis has an automatic sieving effect: anyone who cannot learn to sell does not get commission and hence earns less and exits very quickly

Thank you