Tanner 11

Sales Management: Shaping Future Sales Leaders

Setting Goals and Managing the Sales Force’s Performance Chapter 11

11-1 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Learning Objectives  Describe how sales managers use goals to guide and control the efforts of their sales forces  Summarize the elements of an effective goal  Distinguish when different outcomes and behavioral sales goals should be used  Identify different resources available to capture information used for making effective decisions on goals  Apply goal-setting theory in order to improve managerial and motivational practices 11-2 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

What’s Involved with Goal Setting? Monitoring Salespeople Market Conditions Competitor Reactions Following Up Instituting Corrective Actions 11-3 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Why Set Sales Goals (Quotas)?  Sales goal (quota): performance standard by which salespeople are measured  Sales goals are useful for several reasons  Synchronize direction and efforts of sales force with plans developed by top managers  Benchmark performance  Achievement of goals can be motivating and is usually tied to compensation 11-4 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Using Goals to Guide and Manage Performance of a Sales Force Motivate Sales Force

 Achievable goals can help motivate the sales force  Goals serve as benchmarks to help gauge how reps are doing

Focus Selling Efforts

 Goals help direct efforts toward certain sales activities  Example: growing markets

Assess ROI

 Ensure the effort put into selling products earns good return  When sales are short of expectations, may need to revise marketing mix variables

Compare Results

 Comparing results helps determine what factors cause sales to be lower or higher in one area than another  Example: competition, customer demographics, etc.

11-5 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Global Sales Management: Goals Are Goals, Right? Not Quite.  Most people agree on the big picture, but their implementation of sales management practices reflects nuances unique to their home cultures E lle s m e re Is la n d

A rc tic O c e a n B a n k s Islan d

V ic to r ia I s la n d

B a ff in

S e v e r n a y a Z e m ly a

A rc tic O c e a n

G r e e n la n d ( D e n .)

J a n M a y e n ( N o r.)

N o v a y a Z e m ly a

W ra n g e l Isla n d

Isla n d

F a r o e I s . ( D e n .)

U .S .A .

N o rw a y

F in la n d

Ic e la n d

I re la n d

Is la n d o f N e w f o u n d la n d

N o rth A tla n tic O c e a n

U n ite d S ta te s o f A m e ric a

P o rtu g a l

N o rth P a c ific O c e a n

R u s s ia

E s to n ia L a tv ia L ith u a n ia B e la r u s N e th . P o lan d G e r m a n y B e l. U k ra in e C zech. S lo v a k . A u s. H u n g. M o ld o v a F ra n c e S w itz . S lo v . C r o . Y u g Ro .o m a n i a B o s. I ta ly M a c . B u lg a r ia A lb a n ia S p a in G re e c e T u rk U n ite d K in g d o m D en.

C anada

Sw eden

K u ril I s la n d s

K a z a k h s ta n

G e o rg ia A r m e n ia A z e r b a ija n

ey

U z b e k is ta n

T u r k m e n is ta n

M o n g o lia

K y rg y z s ta n

N . K orea

T a jik is ta n

Japan

S . K o rea

C y p . L e b . S y r ia Ira q Isra e l

T u n is ia

60°

A le u tia n Is la n d s (U S A )

C h in a

A fg h a n is ta n

N o rth P a c ific O c e a n

 Some researchers believe that globalization is causing sales management practices to converge M o ro c c o

C a n a r y Is la n d s ( S p .)

M e x ic o

Cuba

Jam .

G u a te m a la E l S a lv a d o r

B e liz e H o n d u ra s

L ib y a

W e s te r n S a h a r a ( M o r.)

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M a u rita n ia

H a iti P u e rto R ic o (U S )

D o m in ic a

B a rb a d o s

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V e n e z u e la

Panam a

C o lo m b ia

T r in id a d a n d T o b a g o G uyana S u r in a m e F r e n c h G u ia n a ( F r.)

M a li

Senegal T h e G a m b ia G u in e a -B is s a u G u in e a S ie rra L e o n e

N ig e r

K u w a it

E r itre a

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N ig e ria

B hu.

B ang.

L aos

T h a ila n d

C ongo

B ra z il

M a la w i

A n g o la

B u ru n d i T a n z a n ia

 Short-term goals in US  Long-term goals in Japan  “God willing” in Middle East

Z im b a b w e

B o tsw a n a

P a ra g u a y

P h ilip p in e s

F e d e r a te d S ta te s o f M ic ro n e s ia

S ri L an k a

B run ei

M a ld iv e s

M a rs h a ll I s la n d s

G u am (U S A )

M a la y s ia S in g a p o re K irib a ti

In d o n e s ia

P a p u a N ew G u in e a

S e y c h e lle s

S o lo m o n

Isla n d s

M o z a m b iq u e

Z a m b ia N a m ib ia

V ie tn a m

A n d a m a n I s l a n d s ( I n d iCa a) m b o d i a

K enya

R w anda Z a ire

T a iw a n

M y an m ar (B u rm a)

S o m a lia

U ganda G abon

S a o T o m e & P r in c ip e

B o liv ia

In d ia

Yem en

E th io p ia

C .A . R .

C a m e ro o n

G hana Togo E q . G u in e a

F r e n c h P o ly n e s ia ( F r.)

A rU a . bA i .a E . O m an

D jib o u ti

B e n in

L ib e ria

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P a k is ta n

Q a ta r

Sudan

C had

B u rk in a F a so

 There is still variation E cuador

P e ru

Ira n

Saudi

D o m in ic a n R e p u b lic

C o s ta R ic a

G a la p a g o s I s la n d s (E c u a d o r)

Jo rda n

A lg e r ia

T h e B ah am as

H a w a iia n Is la n d s U . S.A .

A r Nc etwi cS i b Oe r i a cn Ies l aa n nd s

F ra n z Jo se f L a n d

S v a lb a rd ( N o r.)

M a d ag asc ar M a u ritiu s

F iji

In d ia n O c e a n

S w a z ila n d

N e w C a le d o n ia

A u s tra lia

S o u t h A f r i Lc ae s o t h o

S o u th P a c if ic O c e a n

U ru g u a y

C h ile

A rg e n tin a

S o u th A tla n tic O c e a n

N e w Z e a la n d T a sm a n ia

F a lk la n d Is la n d s (I s la s M a lv in a s ) ( a d m . b y U K , c la im e d b y A rg e n tin a )

Î le s C r o z e t (F ra n c e )

S o u th G e o rg ia (a d m . b y U K , c la im e d b y A rg e n tin a )

Sources: Cravens, David W., Nigel F. Piercy, and George S. Low (2006). “Globalization of the Sales Organization: Management Control and Its Consequences,” Organizational Dynamics (35)3: T. Garrison (2001). International Business Culture. 3rd ed. A n t a r c t i291–303; ca Cambridgeshire, England: ELM Publications; and Honeycutt, Earl D., John B. Ford, and Antonis C. Simintiras (2003). Sales Management: Global Perspective. London: Routledge.

11-6 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Different Types of Goals or Quotas Input-Based Goals (Activity-Based Quotas)  Relate to the observable selling efforts a salesperson must make  Number of sales calls  Number of presentations  Number of proposals  Number of new clients contacted  Ensure the reps are performing core selling activities

11-7 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Output-Based Goals (Outcome-Based Goals)  Selling results a rep is expected to achieve  Number of orders received  Revenue generated  Sales volumes  Profits

Using a Combination of Goals  Sales volume traditionally most frequent measure  Advantage: easily counted and analyzed  Advantage: reps understand these goals  Disadvantage: sole metric may not accurately provide complete picture

 Input + output goals  Ensure certain customer service activities are performed  And certain amount of profitable sales are made

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Pipeline Analysis  Pipeline analysis: how well rep maintains stream of customers at different stages in sales process  Broken into the list of the top 5 measurements in recent years

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Typical Input and Output Goals

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Where Should Your Salespeople Find Their Leads?

Source: CSO Insights 11-11 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Metrics Related to Customer Service  <15% include customer retention and satisfaction metrics in their goals  Customer satisfaction can be difficult to measure  Sometimes easier to count number of customer complaints than gauge the service customers are getting  More accurate but time-consuming approach is to develop customer satisfaction measure consisting of a number of metrics  Example: student advising 11-12 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Discussion Question  Customer service receives a lot of lip service and press, but when it comes down to using it as a sales goal, it presents some problems  Develop a possible customer service goal that could be used in a B2B setting

11-13 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Expense Quotas  Keep the costs associated with rep’s sales in line with what the firm thinks the rep should spend in order to be successful  Often calculated as % of sales

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Assigning Weights to Goals

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Choosing the Right Metrics and Time Period to Track  Too many measures makes it more difficult to focus on the “critical few” metrics  More than 7-9 metrics becomes difficult to manage

 Most sales organizations establish their sales goals on a yearly basis  Break down yearly figure into quarters and sometimes monthly units  Short or rapid sales cycles, such as in-bound call centers or retail establishments, might use weekly or hourly units

11-16 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Self-Assessment Library  Go to http://www.prenhall.com/sal/  Access code came with your book

 Click the following  Assessments I. What About Me? D. Decision-Making Insights 5. What’s My Decision-Making Style?

11-17 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

What About Almost Meeting a Goal?  All-or-nothing approach vs.  Reward for reaching part of a goal  90% threshold goal  100% actual goal  110% stretch goal

11-18 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Should Salespeople Be Involved in Setting Their Own Goals?  >60% solicit input from sales force about goals set for them  Helps improve rep morale because managers better understand obstacles  Disadvantage: reps have incentive to lowball goals

11-19 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

When Is a Sale a Sale?  Count the sale when the product is either shipped or paid for  Difficult with long sales cycle  Compromise: offer partial credit (30%) when order is placed, remainder (70%) when order ships  Must clearly communicate this info to reps 11-20 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Reasons for Not Reaching Sales Goals  Flawed sales projections based on limited marketing research  Changes in marketing mix variables resulting in inferior products or services  Increase in cost of supplies passed on to buyers via higher product prices  Promotional campaigns don’t produce projected results  Delays or other problems with distribution of products

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 New competitors and competing products entering marketplace  Environmental factors affect customer demand and cause customers to postpone or cancel their purchases  Change in laws and regulations preventing or restricting use of products and services or making them more expensive  Changes in the way firms do business, for example, as a result of new technology

False Reporting of Activities  Recently 2 inside salespeople had erroneously reported the number of leads that they had counted as part of their goals; their manipulation of these reports cost the company over $100,000 in lost opportunity costs  Their sales manager found their reporting inaccuracies  If you were the sales manager what would you do?  In this case, they were fired on the spot. Do you think this was too harsh? For more details see, “The Right Path,” Gwen Moran, Selling Power, Nov./Dec. (2008), 28/9, 30-33. 11-22 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Do Goals Ever Get Changed or Altered?  Most companies adjust goals yearly  Also common to adjust during the year  Shouldn’t adjust too many times through year  Confusion  Reps feel cheated

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The Process of Setting Good Goals  SMART format for establishing goals

S pecific Measurable A chievable, yet challenging R ealistic T ime-based 11-24 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

The Process of Setting Good Goals  Difficult goals lead to higher levels of performance  Reps will put forth more effort when their goals are somewhat difficult vs. too easy or too difficult

 Specific, difficult goals lead to higher levels of effort than general ones  Specific, difficult goals–for example, calling on 8 clients a day–will lead to higher levels of performance

11-25 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Ethics in Sales Management: When Do Difficult Goals Become Too Difficult?  Setting quotas so high that the average rep thinks it’s unobtainable can result in unethical behavior  Example: dot-com ad sales, “just get the job done,” led to rep lying to customers  Example: Sears Automotive Centers, reps overcharged for repairs and recommended unnecessary repairs

 Damages reputations, sometimes causes businesses to close Sources: Strout, Erin (2002). “To Tell the Truth,” Sales & Marketing Management (154)7: 40–47; and Mitchell, Carol Vallone, Patricia M. Schaeffer, and Katherine A. Nelson (2005). “Rewarding Ethical Behavior,” workspan magazine (July), Vol. 48, No. 7. 11-26 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Goal-Setting Impacts Performance Direct Efforts

 Goals provide focus and direction  Direct attention and efforts toward goal-relevant behaviors and away from less relevant behaviors

Energize Reps

 Goals are energizing  Higher goals produce more effort than lower goals  Knowing what’s expected gives reps a target

Affect Persistence

 Harder goals will prolong effort  Tight deadlines lead to meeting completion dates, which helps work get accomplished

Increase ProblemSolving

 Goals affect problem-solving skills  People will seek new ways to accomplish difficult goals

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Practical Guidelines for Setting Goals 1 Set goals that are easy for sales representatives to understand,

difficult to achieve, and have exact deadlines for completion 2 Important tasks not included as a goal may get ignored; if it’s

important, then set a goal for its accomplishment 3 Having too many goals can create stress, keep the number of goals

to a reasonable number; clarify importance for prioritization 4 Get reps to commit to their goals by explaining how they have been

set

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Practical Guidelines for Setting Goals 5 Clearly indicate how the sales performance will be measured and

rewarded 6 Provide feedback as frequently as possible; encourage reps to use

alternative approaches to sell if initial approaches don’t work 7 Make sure people know you have confidence in their ability to

achieve their goals 8 Failing to achieve a goal should not be viewed as failure, it should be

considered progress on the road to success

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Role Play: Oval Track Promotions  OTP publishes magazine about NASCAR and other auto races  Offers 6 geographic versions of magazine  Each geographic area has own sales force  OTP has 7 years of growth, want next year to be better  Research indicates more will spend $$ on auto racing

 Sales goals set by managers, agreed to give reps resources and expense accounts commensurate with goals 11-30 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Role Play (continued): Assignment  Divide into pairs  1 person is sales rep KR  1 person is KR’s sales manager  Your district has the least interest in racing  Selling promotions here is harder than elsewhere

 KR hired by previous mgr, works hard, driven by compensation, routinely meets goals, has abrasive personality  Clients generally pleased, struggles with winning new clients

 KR email, feels taken advantage of, goals are unrealistic  Conduct a goal-setting meeting with KR  Discuss the new goal from your character’s perspective  Explain why or why not you think it’s fair 11-31 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Sales Manager’s Workshop  Your boss wants to incorporate more input from sales mgrs and reps before establishing goals  Rep territories vary by number of opportunities  You’ve always voiced concern about increasing goals by straight % across the board

 Examine performance of your reps over last 24 months  Develop series of threshold, actual and stretch goals recommended for each rep for each product line 11-32 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Caselet 11.1: All in a Day’s Work  “Helpful Hannah” sales manager  Hannah accidentally learns from a large client that rep Ella is using webcams to do half her sales calls instead of biweekly visits  Client isn’t sure she likes this system  Ella is doing her part environmentally, believes video visits are as effective as face-to-face, claims sales to prove it

 Syd Vance needs to increase new accounts, improve “adequate” customer service ratings  Syd says he’s been very busy and really working hard  Syd would like Hannah’s help in establishing new goals to improve performance 11-33 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Caselet 11.1 (continued): Questions 1. If you were Hannah, how would you handle your meeting with Ella? 2. If you were Hannah, how would you approach your session with Syd? 3. What specific goals would you suggest for Ella and Syd to improve their performance?

11-34 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Caselet 11.2: Sandwiched In  Devin taking care of grandparents, children of his own (sandwich generation)  Devin’s not meeting his goal this quarter  Loyal customer could buy enough if he presses them to place large order  Seeking your advice  Could use the money, worried that he could upset client and lose account

 Question: if you were Devin’s sales manager, what would you recommend? 11-35 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.