Sales Force and Channel Management

Question 1

Role of Personal Selling

Answer 1

• 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

Question 2

Purpose of Sales coverage metric

Answer 2

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

Question 3

Setting sales objectives purpose

Answer 3

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.

Question 4

Problems with sales coverage and sales goals

Answer 4

• 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

Question 5

Measure of effectiveness problems

Answer 5

• 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.

Question 6

Measures of compensation purpose

Answer 6

Effectiveness is closely related to compensation - the firm needs to monitor appropriate compensation levels

Question 7

Sales force compensation considerations

Answer 7

• 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

Question 8

Laggards

Answer 8

Incentives includes quarterly bonuses and social pressure

Question 9

Core Performers

Answer 9

Incentives includes multi-tier targets, sales contests with prizes that vary in nature and value

Question 10

Stars

Answer 10

Incentives include no caps on pay, overachievement commission rates

Question 11

Problems with measures of compensation

Answer 11

• 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

Question 12

Sales pipeline purpose

Answer 12

tracking upcoming sales to aid financial planning (forward sales)

Question 13

Sales pipeline context

Answer 13

• 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

Question 14

Sales pipeline problems

Answer 14

• 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

Question 15

Importance of marketing channels

Answer 15

• 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)

Question 16

Sales Pipeline

Answer 16

Comprises of

• Cold leads
• Warm leads
• Prospects
• 1st, 2nd and 3rd meetings
• Delivery

Question 17

Availability metrics purpose

Answer 17

To measure how successful the firm is “going to market” - making its products available through distribution channels

Question 18

Availability metrics are used to quantify?

Answer 18

• 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

Question 19

Numeric distribution

Answer 19

to understand how many physical locations stock a product/brand within the universe of stores in the relevant market

Question 20

All commodity volume (ACV)

Answer 20

• $ 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.

Question 21

Product Category Volume (PCV)

Answer 21

• 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.

Question 22

Category performance ratio

Answer 22

• 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.

Question 23

Availability metrics problem

Answer 23

• 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

Question 24

Supply chain metrics purpose

Answer 24

• 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

Question 25

Out of stock

Answer 25

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

Question 26

Percentage on time delivery

Answer 26

captures the percentage of customer orders that are delivered in accordance within the promised schedule

Question 27

Why track inventory?

Answer 27

marketers can determine the % of goods at each stage of the logistical process (warehouse, in transit to stores, on the retail floor, etc.

Question 28

Inventory turnover

Answer 28

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.

Question 29

Inventory days

Answer 29

• 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.

Question 30

Problems with supply chain metrics

Answer 30

• Stock-out and on-time delivery are usually based on numeric distribution but could/should be ACV/PCV based
• Data availability from wholesalers/retailers is often an issue
• Inventory turnover can refer to each step in the chain - revenues and inventory figures should be measured at the SAME step and not mixed across different steps in the supply chain