Lecture Dalrymple''s sales management: Concepts and cases – Chapter 13: Evaluating performance

Part V

SALES FORCE LEADERSHIP
Chapter 13:

Evaluating Performance


Why Evaluate Salespeople?


To link compensation and rewards to performance.



To identify salespeople capable of promotion.



To identify training and counseling needs.



To identify criteria for recruitment and selection.



To clarify work expectations.



To motivate salespeople.



To help salespeople set career goals.


A Sales Force Evaluation Model
Set goals and objectives for
sales force, including:
Revenues
Contribution profits
Market share
Expense ratios

Design sales plan

Set product performance standards for:
Organization
Salespeople
Regions
Accounts
Districts

Measure results against
standard

Take Corrective Action

Output Measures Used in Sales Force 
Evaluation
Table 13-1 Output Measures Used in Sales Force Evaluation
Sales

Profit

Sales volume dollars

Net profit

Sales volume previous year’s growth

Gross margin percentage

Sales to quota

Return on investment

Sales growth

Net profit as a percentage of sales

Sales volume by product

Gross margin dollars

Sales volume by customer

Margin by product category

New account sales

Accounts

Sales volume in units

Number of new accounts

Sales volume to potential (market share)

Number of accounts lost

Orders
Number of orders
Average order size
Batting average (orders/calls)

Number of accounts sold
Number of accounts buying full line


Output Measures Used in Sales Force 
Evaluation
Performance Measure
Sales
Sales volume dollars
Sales volume previous year’s sales
Sales to quota
Sales growth

Sales volume by product
Sales volume by customer
New account sales
Sales volume in units
Sales volume to potential
Accounts
Number of new accounts
Number of accounts lost
Number of accounts buying full line

Percent
Using Performance Measure
79%
76
65
55
48
44
42
35
27
69
33
27

Percent
Using

Profit
Net profit

Gross margin percentage
Return on investment
Net profit asa percentage of sales
Margin by product category
Gross margin dollars

69%
34
33
32
28
25

Orders
Number of orders
Average size of order

47
22


Input or Behavior Bases Used in 
Sales Force Evaluation
Table 13-2 Input or Behavior Measures Used in Sales Force Evaluation
Expenses

Effort

Total expenses

Number of calls

Selling expenses to budget

Number of calls per day

Selling expenses as a percentage of sales

Number of calls to quota

Nonselling Activities

Number of days worked

Advertising displays set up

Number of reports turned in

Number of service calls

Number of prospecting phone calls

Number of customer complaints

Selling time vs. non-selling time


Input or Behavior Bases Used in 
Sales Force Evaluation
Base

Selling expenses to budget
Total expenses
Selling expenses as a % of sales
Number of calls

Percent
Using
55%
53
49
48

Base
Number of calls per day
Number of reports turned in
Number of days worked
Selling time vs. nonselling time

Percent
Using
42%
38
33
27


Qualitative Bases Used in Sales Force 
Evaluation
Table 13-7 Qualitative Bases Used in Sales Force Evaluation
Attitudinal and Personality Factors

Time management

Attitude

Ability to plan

Enthusiasm

Appearance and manner

Cooperation

Knowledge

Creativity and resourcefulness

Product knowledge

Initiative and aggressiveness

Pricing knowledge

Motivation

Knowledge of competition

Selling Skills

Ethical and moral behavior

Communication Skills

Team player


Qualitative Bases Used in Sales Force 
Evaluation
Base
Communication skills
Product knowledge
Attitude
Selling skills
Initiative and aggressiveness
Appearance and manner
Knowledge of competition
Team player
Enthusiasm

Percent
Using
88%
85
82
79
76
75
71
67
66

Performance Measure
Time management
Cooperation
Judgment
Motivation
Ethical/Moral behavior
Planning ability
Pricing knowledge
Report preparation and submission
Creativity

Percent
Using
63%
62
62
61
59
58
55
54
54


Sales Data for Bear Computer

 1
 
            Company

             Volume
Year                    ($ millions)

2008
2007
2006
2005

26
24
21
17

   2
  3
            Percentage
              Industry
           Change from               Volume
          Previous Year             ($ millions)

+ 8.3
+14.3
+23.5
   ­­­

300
219
165
125

  4
             Company
          Market Share
              (percent)

  8.6
10.9
15.7
13.6


Comparing Dollar and Unit Sales at 
the Bear Computer Company
 

Products
Computers
Accessories

 

 

----------2007 Sales---------Thousands
Avg Price
of Dollars
Units
Per Unit

----------2008 Sales---------Thousands

Avg Price
Of Dollars
Units
Per Unit

$16,800
4,800

560
4,000

$30,000
1,200

$18,200
5,200

520
4,727

$35,000
1,100

Software

2,400

1,200

2,000

2,600

1,280

2,031

Total

$24,000

5,760

$26,000

6,527


Expense Analysis by Product Line, 
Bear Computer Company, 2008
 

CGS and
Commission
$

CGS as a
Percentage
Of Sales

$18,200

$12,740

70

$5,460

30

Accessories

5,200

3,120

60

2,080

40

Software

2,600

520

20

2,080

80

Total

$26,000

$16,380

Products
Computers

 

 

2008 Sales
(000)

63%

Contribution
Margin

$9,620

Contribution
Margin
Percentage

37%


Evaluating Sales Force Performance: 
Cost Analysis
  What costs are relevant?
  

Net Sales
Less Variable Costs:  Cost of Goods Sold
Sales Commissions
Equals: 
Contribution Margin
Less: 
Direct Fixed Selling Costs
Equals:
Profit Contribution


Evaluating Sales Force Performance: 
Product Costs 


CGS + Commissions higher for computers
–
–
–

paying too much for parts

paying too much for parts
competition has driven down selling prices
competition has driven down selling prices
salespeople cutting computer prices to make deals ­­ 
salespeople cutting computer prices to make deals ­­ 
possible actions:
possible actions:




limit price negotiation capabilities
limit price negotiation capabilities
shift to a gross margin commission
shift to a gross margin commission
change commission structure to emphasize 
change commission structure to emphasize 
accessories and software
accessories and software


A Model of Salesperson Evaluation

Input-based System

Output-based System

Behavior
Calls
Reports

Complaints
Demonstrations
Dealer meetings
Display set up
Travel/entertainment
expenses

Results
Sales revenues
Sales growth
Sales/quota
Sales/potential
New accounts
Contribution margins
Contribution
percentage

Salesperson
Evaluation


Measuring Sales Force Output for 
Bear Computer Company


Measuring Territory Profit Output for 
Bear Computer Company
Territory Performance (thousands)
Jones

Smith

Brown

West

$825

$570

$1,100

$1,000

Less CGS and Commissions

495

428

744

660

Contribution margin

330

142

356

340

40%

25%

32%

34%

55

35

55

65

Travel

15.5

4.1

3.5

5

Food and lodging

12.5

4

3.2

4.5

Entertainment

11.4

0.3

0.5

1

4.5

2.3

2

4.5

$231.10

$96.30

$291.80

$260.00

28%

17%

26%

26%

Net Sales

CM as a percentage of sales
Less direct selling costs
Sales force salaries

Home sales office expense
Profit contribution
PC as a percentage of sales


Ranking Salespeople on 10 
Input/Output Factors
Ranking Factors

Ford

Bell

Dollar Sales

1

2

3

4

5

Sales to Potential

5

3

4

2

1

Sales to Quota

5

4

2

1

3

Sales per Order

5

1

4

3

2

Number of Calls

2

5

1

3

4

Orders per call

4

2

5

3

1

Gross Margin Percent

5

1

3

4

2

Direct Selling Costs

4

3

5

1

2

New Accounts

1

4

2

5

3

Number of Reports Turned In

4

3

1

5

2

36

28

30

31

25

Total of Ranks

Shaw

Mann

Gold


Ranking Salespeople on 10 
Input/Output Factors
Performance factors

Pete Jones

Ann Smith

Sales (annual)

$1,400,000

$1,100,000

210

225

1,200

1,500

480

750

$19,000

$14,900

5.7

6.7

40%

50%

Sales per order

$2,916

$1,466

Expenses per call

$15.83

$9.93

Expenses per order

$39.58

$19.86

1.35%

1.35%

Days worked
Calls
Orders
Expenses
Calls per day
Batting average (orders per calls)

Expenses as % of sales

Ranking Salespeople on 
10 Input/Output Factors
Millions
$
3.87
3.66
3.44

S
A
L
E
S
Y
R
2

3.23
3.02

COMPROMISERS

$3.17

Avg Sales

2.91

Avg contribution

$1.13

Avg contribution

1.09

Avg contribution %

37.4

Avg contribution %

35.8

Age

45

2.80

Calls

2.59

Number of salespeople

2.38

Avg Sales
Avg contribution
Avg contribution %
Age
Calls
Number of salespeople

2.16
1.95
1.74
1.53
1.31
1.10

STARS

Avg Sales

1122
18

Age

37

Calls

888

Number of salespeople

1.78

Avg Sales
Avg contribution
Avg contribution %
Age
Calls
Number of salespeople

0.64
35.8
44
958
11

35.1

2.03
0.75
37.1
35
921
16

SLOWPOKES

LAGGARDS
34.8

11

36.0

36.6

37.2

Contribution Margin (%)

37.8

38.7


Relative Performance Efficiency
for Sales Rep 22
Variable Type
Output
Output
Output
Input
Input
Input
Input

Value
Measured
100
5

45,000
5
20,000
3
60,500

Variable name
Percent Quota Attained (%)
Supervisor Evaluation
Sales Volume ($)
Sales Training
Salary ($)
Management Ratio
Territory Potential ($)
Reference Set
Influence

Salesperson 7

0.49

Salesperson 20

0.43

Salesperson 45

0.08

Value of 100%

Efficient
120
5
50,500
5
18,000
2
50,000
Efficiency=0.85
Iterations=10

Slack
20
0
5,500
0
2,000
1
10,500


Conditions when Outcome versus 
Behavioral Systems are preferred
Outcome 
Systems(OS)
• Customers need
 
Customers 
information
• Customers trust the 

salesperson
• There are ways to 
close the deal
• Sales environment 
is competitive

Behavioral 
System(BS)
• Salespeople lack 
experience
• No need to protect 
the brand image
• Nonselling 
behaviors are a 
priority
• Difficult to assign 
sales credit


The additional slides below are 
not covered in IM


Call Productivity Ratios
Sales to Account    = 

    Dollar Sales
# Accounts

Average Order Size     =      Dollar Sales

       # Orders
Growth Ratio    =   # New Accounts
Total # Accounts
Account Success  =  
    

   Accounts Sold
Total # Accounts


Expense Ratios

 Expense to Sales
   

= Expenses
      Sales

 Cost per Call       =
 

Total Costs
   
# of Calls