Sales

Management
(An overview)
Javeed Lodhi
June 2005
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Sales Management
• Successful sales management is an important factor in
helping any business to compete and survive in their
industry.
• Sales management revolves around eleven key activities:

– Setting sales force objectives

– Developing sales force strategy
– Creating a sales force structure
– Determining the sales force size
– Setting sales force compensation levels
– Recruiting and selecting sales representatives
– Training sales representatives
– Directing the sales force
– Motivating sales representatives
– Evaluating sales representatives
– Controlling sales-related costs

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Setting Sales force Objectives

• Objectives set for the sales force must be clear, specific

and attainable.
• Typically, sales force objectives set out which target
markets the enterprise will focus on (or compete in) and the
position that the enterprise wishes to attain in each of these
markets.
• Once the overall objectives for the sales force have been
set, the specific targets for each sales representative and
their territory can be developed.
• Sales force objectives are important because they give
sales representatives direction and purpose.
• In addition, the sales manager can use the objectives and
targets set as performance standards for evaluating and
controlling sales representatives.

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Setting Sales force Objectives
• Apart from setting the sales targets that a sales representative is
expected to achieve in a given time period (such as the value of
orders obtained), many companies also set objectives that relate
to other aspects of the sales representatives job.

– For example, some firms may require their sales force to spend an
additional 5% of their working time with existing customers to obtain
additional information of use in the new product development process.
– Other companies may require their sales representatives to cultivate
at least three new prospects (potential new customers) a week from
their sales territories.
– Obviously, the nature of the objectives set for the sales force varies
considerably from one business to another and from one industry to
another.
– However, irrespective of the company or industry, all objectives set
should help the sales force to focus on the market and help them to
be customer oriented.
– Obtaining a sale is important, but so too is retaining a customer in the
long-term.

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Developing Sales force Strategy
• Developing a sales force strategy requires an enterprise to think
very carefully about how they will reach the right customers at the
right time and in the right way. This is not just a theoretical
exercise; the objective is to increase the ratio of orders to sales
calls, by minimizing the amount of futile sales calls made.
• For a sales representative to find the right customers, they must
first understand the dynamics of the territory they are operating in.
This requires the sales representative to obtain accurate market
information.
• The only right time to make a sales call is when the customer or
potential customer considers it to be the right time! Whereas it is
essential to plan sales routes to maximize the number of sales
calls during a given day, all good sales representatives know that
there are times when the customer is just too busy to see them.
Therefore, sales route planning should have some degree of
flexibility to accommodate the needs of the buyer. As sales
representatives become more knowledgeable about their
territories, they also find it easier to determine the likelihood of
obtaining a meeting with a buyer or customer at different times on
any given day.

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Developing Sales force Strategy
• There are many ways for sales representatives to reach buyers.
The methods selected by a firm will reflect the product line sold by
the sales representatives and may include:
– Sales representative to buyer – The sales representative talks to the
buyer or potential buyer in person.
– Sales representative to buyer group/centre – The sales representative
makes a sales presentation to the members of a firm’s buying
group/centre.
– Sales team to buyer group/centre – The Company sends a sales team
to make a sales presentation to the members of a firm’s buying
group/centre.
– Seminar selling – The Company conducts an educational seminar for
a technical group in a customer company about cutting edge
developments.
– Missionary selling – The sales representative makes a presentation to
a customer or potential customer with the aim of educating them
about the merits of the product. The sales representative does not ask
for an order. This approach is often used in the pharmaceutical
industry in situations where sales representatives make sales
presentations to doctors, who will later make a decision about which
drugs to prescribe for patients.

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Developing Sales force Strategy

• In addition to deciding which approach will be

used to reach customers, enterprises must also
decide whether or not to employ their own sales
force to sell their product lines.
• In some instances a firm will choose to use a
’contractual sales force’ such as sales agents
who are paid a commission based on sales, and
who sell the products of several companies.
– This approach is often used to help expand sales
territories, when there is a limited amount of capital
available in a business to hire new sales
representatives

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Creating a Sales force Structure
• There are a number of alternative sales force structures for an
enterprise to choose from.

– Territorial-structured sales force. Each sales representative is

assigned an exclusive territory in which they sell the company’s full
product line.
– Product-structured sales force. In this situation, each sales
representative sells specific product lines in a given territory. This
structure is frequently used where companies operate product
divisions, or sales representatives are selling technically complex
products requiring specialist knowledge.
– Market-structured sales force. Companies may also structure their
sales forces so that they focus on selling to specific industries or
specific buyers.
– Complex sales force structures. Organizations that sell a diverse
range of products or services to many types of buyers may choose to
use a combination of the structures outlined above.
– The best structure to develop is one which allows the customer to be
served effectively, within the operating requirements of the company.

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Determining the Sales force Size
• The size of a company’s sales force has a direct bearing on
the level of sales and profits it is able to generate, and it
therefore requires serious consideration. The primary
factors to bear in mind when determining sales force size
include:
– The number of customers that the business wishes to reach.
– The workload allocated to each sales representative.
– The number of large, medium and small customers the
company has, where size is determined by the level of sales
and profit generated from each customer account.
– The use of internal sales representatives and telemarketers in
the company.
– The availability of distributors and agents in the market.
– Determining the optimal sales force can be a very complex
affair in very large businesses. Hence, such companies
frequently use software generated models to help determine
their sales force size.

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Setting Sales force Compensation Levels

• To attract good quality sales representatives, companies must

develop attractive compensation packages. This activity requires
careful planning, as the level of compensation awarded to sales
representatives must encourage them to achieve their sales
targets. Compensation packages vary considerably from one
company to another. Some of the factors that a sales manager will
have to consider when setting compensation levels include:

– The "market price" for the type of sales job the sales representative
carries out as well as the abilities required to do the job. This can be
very difficult to determine as there is usually significant variation
between the ability levels of competitors’ sales forces.
– The components of compensation which may include: a fixed basic
salary, variable commission and bonuses for sales targets reached,
expense allowances, pension contributions, sickness benefits, life
insurance, paid vacations and so on. The sales manager must decide
on the relative importance of each of these components to individual
sales representatives when the compensation plan is being
developed.

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Recruiting and Selecting Sales Representatives

• A sales manager should develop a list of qualifications and

personal attributes that he/she expects a sales representative to
possess, to guide them in their recruitment and selection choices.
Desirable characteristics include enthusiasm, intelligence,
confidence, and courtesy.
• In addition to these characteristics, a potential sales
representative should display knowledge about his/her company,
the sales territory, products and services, competitors and buyer
behaviour.
• Any new company sales representative should also display their
ability to exercise good judgment in practical business matters and
their abilities to be persuasive when making sales arguments or
presentations. Sales representatives must also be able to deal
with a key part of their work, namely handling customer
complaints.
– Furthermore, the sales representative should demonstrate an ability to
conduct a successful sales interview. A typical sales interview
comprises of five parts: the preparation, the approach, demonstration
and presentation, negotiation, and the close.

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Selling Styles
• Though the characteristics required in a sales representative may be
similar across companies and industries, the selling styles adopted by a
company’s sales representatives should be considered as a separate
factor. Specifically, each sales representative should develop a personal
selling style that is a natural part of their communication style. This point is
particularly important to consider in the context of international sales,
where a sales representative may be particularly successful in the home
market with the selling style that they have developed over time, but find
that it may not transfer well into a foreign market selling situation. For
example, a sales representative who likes to include a lot of humour into
his/her sales presentations at home may find that such humour is not
considered quite so funny when used in another country! As a result
his/her sales presentation fails to impress the potential buyer.

• Most sales managers develop recruitment procedures to help them to

attract good quality applicants. Sales representatives may be sourced
through employment agencies, job advertisements, personal contacts,
college notice boards and through direct enquiries resulting from details
posted at the company web site. Recruitment procedures will help to
screen suitable applicants in an effective manner. Recruitment procedures
will also enable cost-effective methods of recruitment to be utilized.

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Training Sales Representatives
• Training for sales representatives is an on-going
process in most companies. Many large
organizations have training departments in-house
that ensure that each sales representative has
sufficient knowledge of the company, customers,
competitors, how to make a sales presentation,
and company sales procedures. Alternatively, this
training can be provided by external sales
trainers at intervals predetermined by the
company. Most experienced sales
representatives would agree that there is always
something new to learn, and experienced sales
representatives should be provided with
opportunities to enhance their skills.
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Directing the Sales force
• All sales representatives, irrespective of their sales
experience, require a certain level of supervision. The level
required usually varies from one sales representative to the
next. The type of direction that most sales managers
provide to their sales representatives includes:
– Developing standards for customer calls e.g. determining how
many calls should be made to an individual customer during
one year.
– Developing standards for calls made to prospective customers
e.g. how much of the sales representatives time should be
spent on this activity.
– Advising how best to use sales time efficiently e.g. the amount
of time devoted to "sales talk" and "social talk" during a sales
interview.
– Providing direction based on performance feedback.
– Informing sales representatives of key organizational issues,
news and policy changes.

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Motivating Sales Representatives
• Financial incentives alone are not enough to satisfy most
sales representatives. Sales representatives also need to
satisfy personal needs and achieve personal goals. Sales
managers need to understand their sales representative’s
motives and goals, with a view to creating an organizational
climate that allows their sales personnel to satisfy their
personal needs.
• Many companies use sales contests to motivate their sales
representatives. Such contests help sales personnel to
focus on increasing sales, new accounts or promotion of
special items. To be successful, such an incentive system
must be accepted by the participating sales representatives
and have positive consequences in the marketplace. Sales
personnel should not damage customer relations in an
attempt to generate orders at any cost because of their
desire to win a contest.

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Evaluating Sales Representatives

• Sales managers should develop a formal system

for evaluating the performance of their sales
representatives. This should not be approached
as just another load of paperwork to be
completed; it is an essential part of helping a
sales manager to determine how individual
members of his/her sales team are performing.
Based on such evaluations, the sales manager is
in a position to provide meaningful direction to
team members as required. It also keeps the
sales manager in touch with what is happening in
each of the sales territories for which he/she has
responsibility.

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Evaluating Sales Representatives
• Sales managers obtain information about their sales representatives from
a number of sources such as sales reports, a sales representatives work
plan, comments from other organizational colleagues, comments from
customers, as so on. The methods used to evaluate performance vary but
may include the use of one or more of the following:

– Comparison of sales representatives with each other. Sales managers using

this approach should be careful to investigate all factors affecting an individual
performance as not all sales territories provide the same sales opportunities.
– Comparison of current sales performance with past sales performances with a
view to tracking how individual sales representative’s sales performances have
changed. Serious problems obviously need to be addressed.
– Customer satisfaction evaluations. Customer opinions present an interesting
picture of an individual sales representative, and should be treated seriously.
– Evaluation of the sales representative’s characteristics, knowledge, judgment
and persuasiveness. Additional sales training may prove beneficial where
problem areas are identified.
– Comparison of sales performance with sales objectives and targets set for the
sales representative to achieve.

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Controlling Sales-related Costs
• Sales managers are typically allocated a specific sum of
money to cover the costs of managing the sales force and
implementing the sales plan. The amount of money
allocated varies from one business to another, as does the
methods used for determining how much money should be
allocated. For example, some enterprises may allocate a
fixed sum that may be spent during the year, whereas other
organizations will allocate money based on a percentage of
sales. In this latter case, as sales increase, so too does the
amount of money available to the sales manager to cover
planned expenditure. Sales managers must develop their
sales plans bearing in mind the amount of money that they
have available to cover costs. This is important to help
avoid a situation where money runs out before the sales
plan has been fully implemented

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