The sales force evaluation process
Sales force evaluation is the comparison of sales force objectives with results. It begins with the setting of sales force objectives which may be financial, such as sales revenues, profits and expenses; market-orientated, such as market share; or customer-based such as customer satisfaction and service levels. Then, the sales strategy must be decided to show how the objectives are to be achieved. Next, performance standards should be set for the overall company, regions, products, salespeople and accounts. Results are then measured and compared with performance standards. Reasons for differences are assessed and action taken to improve performance.
Sources of Information
Management can obtain information about reps in several ways, including sales reports, personal observation, customer letters and complaints, customer surveys, and conversations with other sales representatives. Many companies require their representatives to develop an annual territory marketing plan in which they outline their program for developing new accounts and increasing business from existing accounts.
This type of report casts sales reps into the role of market managers and profit centers.
Sales managers study these plans, make suggestions, and use them to develop sales quotas.
Sales reps write up completed activities on call reports and, in addition, submit expense reports, new-business reports, lost-business reports, and reports on local business and economic conditions. These reports provide raw data from which sales managers can extract key indicators of sales performance:
(1) average number of sales calls per rep per day,
(2) average sales call time per contact,
(3) average revenue per sales call,
(4) average cost per sales call,
(5) entertainment cost per sales call,
(6) percentage of orders per hundred sales calls,
(7) number of new customers per period,
(8) number of lost customers per period, and
(9) sales force cost as a percentage of total sales.
There are several approaches to conducting evaluations. One type of evaluation compares the rep’s current performance to that individual’s past performance and to overall company averages on key sales performance indicators. These comparisons help management pinpoint specific areas for improvement. For example, if one rep’s average gross profit per customer is lower than the company’s average, that rep could be concentrating on the wrong customers or not spending enough time with each customer.
Evaluations can also assess the rep’s knowledge of the firm, products, customers, competitors, territory, and responsibilities; relevant personality characteristics; and any problems in motivation or compliance. As indicated earlier, an increasing number of companies are measuring customer satisfaction not only with their product and customer support service, but also with their salespeople. The sales manager can also check that salespeople know and observe the law. For example, under U.S. law, salespeople’s statements must match the product’s advertising claims. In selling to businesses, salespeople may not offer bribes to purchasing agents or others influencing a sale; they may not obtain or use competitors’ technical or trade secrets through bribery or industrial espionage. Finally, salespeople must not disparage competitors or competing products suggesting things that are not true
The purpose of evaluation
The prime reason for evaluation is to attempt to attain company objectives. By measuring actual performance against objectives, shortfalls can be identified and appropriate action taken to improve performance. However, evaluation has other benefits.
Evaluation can help improve an individual’s motivation and skills. Motivation is affected since an evaluation programme will identify what is expected and what is considered good performance. Second, it provides the opportunity for the recognition of above-average standards of work performance, which improves confidence and motivation. Skills are affected since carefully constructed evaluation allows areas of weakness to be identified and effort to be directed to the improvement of skills in those areas.
Thus, evaluation is an important ingredient in an effective training programme.
Further, evaluation may show weaknesses, perhaps in not devoting enough attention to selling certain product lines, which span most or all of the sales team.
This information may lead to the development of a compensation plan designed to encourage salespeople to sell those products means of higher commission rates.
Evaluation provides information that affects key decision areas within the sales management function. Training, compensation, motivation and objective setting are dependent on the information derived from evaluation.
The sales budget may be said to be the total revenue expected from all products that are sold, and as such this affects all other aspects of the business. Thus, the sales budget comes directly after the sales forecast.
It can be said that the sales budget is the starting point of the company budgeting procedure because all other company activities are dependent upon sales and total revenue anticipated from the various products that the company sells. This budget affects other functional areas of the business, namely finance and production, because these two functions are directly dependent upon sales.