Flashcards in Sales Force and Channel Management Deck (30)
Role of Personal Selling
- Critical go-to market tool in many industries (majority of B2B and many consumer industries.
- Serves as personal link to consumers
- Salespeople have a strategic role: analysing sales data, measuring market potential, developing marketing strategies and plans
Purpose of Sales coverage metric
To balance sales territories in terms of (1) the potential different territories represent and (2) the workload needed on salespeople to adequately serve these territories
- Districts: larger geographic areas where potential accounts may exist
- Territories: accounts assigned to individual salespeople within a district
Setting sales objectives purpose
to motivate sales personnel and establish benchmarks for evaluating performance. Should set realistic goals, hope to achieve the target, rather than not reaching a goal.
Problems with sales coverage and sales goals
- Territories need to be balanced not just in terms of workload and potential but also logistics (e.g. travel time)
- Always need to consider salesperson's historic percentage of sales and the sales potential of the territory
- Forecasts are notoriously unreliable, most objectives need to be reset midway/midyear
- Using a combination of methods for sales goals is better than relying on performance/potential alone
Measure of effectiveness problems
- Disaggregating sales by contribution levels is important in some situations (so salespeople are evaluated not just by overall sales but whether they sold the right thing)
- Careful about the tendency to rely on one or two metrics for performance review
- Since not one measure is best, a portfolio approach is recommended.
Measures of compensation purpose
Effectiveness is closely related to compensation - the firm needs to monitor appropriate compensation levels
Sales force compensation considerations
- Level of pay, mix between salary and incentive, measures of performance and performance payout relationships
- Context of salespersons past, present and potential performance
- Measured based on a time period
Incentives includes quarterly bonuses and social pressure
Incentives includes multi-tier targets, sales contests with prizes that vary in nature and value
Incentives include no caps on pay, overachievement commission rates
Problems with measures of compensation
- The more sales are attributable to individual performance, the more appropriate the use of incentives is
- Needs to be comparable to past numbers
- Various measures used as a base in commission schemes: sales, contribution, market share, customer retention, complaints
Sales pipeline purpose
tracking upcoming sales to aid financial planning (forward sales)
Sales pipeline context
- Only a subset of potential customers will actually make a purchase
- By keeping track of potential customers at each stage of customer interaction, sales managers can balance the workload and make accurate forecast of sales (utilising historical averages)
- Pipeline analysis helps support for inventory management and achieving sales objectives
Sales pipeline problems
- The critical variable in the model is the weighting: it can be very difficult to determine
- Salespeople may want to advise finance about more precise weights applied to individual customers than the average
-Over-prospecting: incremental contribution generated by a customer is less than the cost of acquiring that customer
Importance of marketing channels
- Most manufacturers do not sell directly to consumers
- Channel members collectively earn margins that account for 30-50% of the selling price (Advertising is 5-7%)
- Channel members perform many functions (physical flow, adding value, transfer of title, demand generation, information flows)
- Cold leads
- Warm leads
- 1st, 2nd and 3rd meetings
Availability metrics purpose
To measure how successful the firm is "going to market" - making its products available through distribution channels
Availability metrics are used to quantify?
- The number of outlets reached by a product
- The fraction of the relevant market served by those outlets
- The percentage of total sales volume in all categories held by the outlets that carry the product
to understand how many physical locations stock a product/brand within the universe of stores in the relevant market
All commodity volume (ACV)
- $ value of store sales in all product categories by stores, or the % in comparison with all stores in the relevant universe
- A superior measure of customer traffic in the stores that stock a brand
- Does not provide information about how well each store merchandises and competes in a particular product/category. A store can do great business, but sell very little of the product category under consideration.
Product Category Volume (PCV)
- Refinement of ACV
- Examines the share of the relevant product category sold by the stores in which a given product has gained distribution
- Understand whether a given product is gaining distribution in outlets where customers look for its category, as opposed to simply high-traffic stores where the product may get lost in the aisles.
Category performance ratio
- The relative performance of a retailer in a given product category, compared with its performance in all product categories.
- If a distribution network category performance ratio is greater than 1, then the outlets comprising the network perform comparatively better in selling the category in question than in selling other categories, relative to the market as a whole.
Availability metrics problem
- PCV data is often hard to get - firms have to estimate
- Store size (square meters devoted to the relevant category) is often used to estimate overall volume
- For low value categories it is almost impossible to account for all the different outlets
Supply chain metrics purpose
- To monitor the effectiveness of distribution logistics - a lot can be lost at the potential point of purchase if the right goods are not delivered to the appropriate outlets on time, where there is demand
- Are we losing sales because the wrong items were shipped to the store/supplies are inadequately planned or they were shipped to late
- Another issue is how quickly inventory is sold (at a particular retailer or overall): it is a measure of product popularity
- Monitoring core metrics and comparing these with historical norms and guidelines, marketers can determine how well their distribution channel is functioning as a supply chain for their customers
Out of stock
quantifies the number of retail outlets where an item is expected to be available for customers, but is not. Expressed as a % of stores that list the relevant item
Percentage on time delivery
captures the percentage of customer orders that are delivered in accordance within the promised schedule
Why track inventory?
marketers can determine the % of goods at each stage of the logistical process (warehouse, in transit to stores, on the retail floor, etc.
details how much inventory is sold over a period of time.
- Usually, a higher inventory turnover ratio is preferred, as it indicates that more sales are being generated given a certain amount of inventory
- Sometimes a very high inventory ratio could result in lost sales, as there is not enough inventory to meet demand. It is always important to compare the inventory turnover ratio to the industry benchmark to assess if a company is successfully managing its inventory.
- Details the speed at which inventory moves through the sales process.
- High inventory turns and low inventory days tend to increase profit due efficient use of firms investment in inventory. But can also lead to higher out of stocks resulting lost sales.