Chapter 12 Evaluation in the Global Marketplace
Sales Management: A Global Perspective
Introduction
Sales managers plan, implement and control sales activities
To control, evaluation must occur Without evaluation it is difficult to know what has worked, what has not, and WHY?
The purpose of evaluation is to improve salesperson and firm performance
Source of Deviations
Attributable to incorrectly set goals or weak performance? Evaluation criteria differ depending upon the goal
If goal is to reward, then focus on salesperson activities and results If goal is to promote, then focus on factors related to success as a sales manager
Global Evaluation Guidance
Evaluation allows management to identify substandard performance and take corrective action
Adjust training, compensation, or strategy
Assessing personnel in global markets is more complex
Global evaluations may include technical ability, cultural empathy, adaptability, flexibility, diplomacy, and language ability Cultural skills may be more relevant in global markets
Global Market More Complex
Global system must be accessible, easy to understand, equitable, and motivating
Financial metrics may be less revealing since global firms use transfer pricing and attempts to maximize total company profit Global evaluations are often conducted from a distance with little accurate information about field behavior of sales personnel
Evaluating Sales Force Performance
Sales Managers can evaluate overall sales performance by analyzing sales, cost, and profit data
No one measure of effectiveness best Multiple measures are employed
Three most common methods are:
Sales, Cost, and Profit analyses
Sales Analysis
Gathering, sorting, assessing, and making decisions based upon sales data
Must organize data to show market and salesperson deviations (see Table 12.1) Examine how markets are performing in comparison to one another Sales data most readily available Sales force goal is to increase customer demand and reach sales goals Must define “sold” and compare in local currency or units sold
Cost Analysis
Compares cost to sales generated
Examine the variance between actual and budgeted expenses (See Table 12.2) Areas where actual costs vary significantly from budgeted should be set aside for further analysis Firms can use to set pricing levels, budgets and commission rates Sales and Cost analysis used most frequently
Profit Analysis
When sales and costs are combined profitability can be determined
Managers can identify unprofitable territory, unprofitable products, and year-end bonuses Profitability easier to compute with information technology advancements
Analyzing Performance
Conducting sales, cost, and profitability analysis is a three-step process:
Identify the needed information Establish procedures Analyze results
CRM systems permit managers to play “what if” scenarios to see how different inputs would vary performance
Discussion Questions
What challenges are encountered when firms evaluate sales force efforts globally? What is the difference between sales force effectiveness and salesperson performance? What are the advantages of assessing sales, cost, and profitability data when evaluating sales force performance?
Performance Appraisal
Performance appraisal is the assessment of individual sales force members
Individual appraisal should be conducted regularly
Annually or every six months
Some firms do not evaluate at all!
Without an objective analysis, how can salesperson be developed or advised by sales manager?
What we know about appraisal
Most firms examine both qualitative and quantitative input and output criteria
Greater emphasis put on output – e.g., sales revenue Input is sought for setting quotas & standards Sales objectives receive different weights based upon activities and territories Firms gather multiple sources of information Field sales managers conduct most evaluations Written evaluations normally conducted in office setting
Appraisals should cover wide range of areas
Salesperson responsibilities are diverse Necessitates four areas being assessed:
Activities Outcomes Profitability Personal development
Each area provides managers with different insights about performance
Sales Activities
Important that identical data computed for all salespersons regardless of who compiles
Sales calls per period, required reports completed, customer complaints, customer training sessions completed, letters/phone calls to customers, product demonstrations, service calls, dealer meetings held
Can subdivide by existing vs. potential customers or planned vs. cold calls
Understanding activities
Different probabilities for each activity
How salespersons devote their time
Differences between high and low performers
All sales effort not the same
Planned vs. cold calls
Two sales persons make same effort with different results
Sales managers need to know effort-result ratio
For example, batting average or sales/total calls
Outcome Measures
Activities lead to outcomes, such as:
Sales revenue generated Profits Sales per account Sales revenue as a percentage of potential Number of orders Number of new customers Sales to new customers
Outcomes higher when time and quality devoted to input activities
Supported by a study in Singapore
Profitability Measures
Firms now look at profitability measures
Net profit as a percentage of sales Net profit contribution Net profit dollars Return on investment Gross margin
Salesperson can impact profitability by
Specific products sold and final price negotiated
Qualitative Measures
Judgment by the salesperson’s supervisor
To what the salesperson’s knowledge and performance compare with an ideal person To minimize bias, sales managers should follow a systematic assessment process Includes three steps:
Objectives Techniques Items
Bias in Appraisals
Managers must minimize bias that creep into evaluation efforts
Set standards whenever possible Based upon behavior or results Evaluate from a point of neutrality
Informal evaluations
Often subjective in nature Results in differing amounts and quality of information
Diagnosing Salesperson Performance
Data is collected, organized and interpreted
Why has one product not met expectations? Monitor salesperson performance for a variety of reasons:
Counseling, promotion, bonus, termination, or transfer
Without a systematic evaluation, it is easy to conclude that sales force did not work hard enough
Evaluation and Action
Once evaluation takes place, it is time for action:
Personal development Reallocation of effort Modifying the performance setting
Changes may be needed in sales procedures or methods
New products, selling strategies or credit policies changed Must submit detailed study to upper management
Discussion Questions
What is the relationship of activities and outcome measures? What pitfalls are inherent in informal evaluation systems? Explain the evaluation problems caused by sales manager bias
Chapter Summary
Evaluation tells us what is working, what is not, and most importantly, why! Analysis helps managers identify potential problems Individual salespersons appraised to identify effort and performance level Evaluation leads to greater success for salesperson, sales force, and the firm