CHAPTER 15 Evaluating Sales force Performance
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Transcript CHAPTER 15 Evaluating Sales force Performance
CHAPTER 15
Evaluating Sales force
Performance
THE SALES AUDIT
• ...a comprehensive, periodic review
and evaluation of the sales function
THE SALES AUDIT
• The audit includes an appraisal of
– objectives
– personnel
– tactics
STEPS IN THE SALES
AUDIT
• Find out what happened
• Find out why it happened
• Decide what to do about it
EVALUATING
EFFECTIVENESS
•
•
•
•
Sales Volume Analysis
Cost Analysis
Profitability Analysis
Productivity Analysis
SALES VOLUME ANALYSIS
• A study of the net sales section of
the profit and loss statement.
• Examine sales by product lines,
territories, key accounts, and general
classes of customers.
SALES VOLUME ANALYSIS
• Two approaches:
– Hierarchical Sales Analysis
– Effectiveness Analysis
HIERARCHICAL SALES
ANALYSIS
• A multistage analysis which
proceeds from one sales
organization level to the next by
– identifying major deviations
– investigating these in more detail at the
next lower level.
Example of
Hierarchical Sales Analysis
Main Office
Region 1
$40,000,000
Region 2
$ 45,000,000
District 1
$ 7,000,000
Region 3
$ 35,000,000
District 2
$ 8,000,000
Territory 1
$ 700,000
District 3
$ 7,500,000
District 4
$ 4,000,000
Territory 2
$ 800,000
Territory 3
$ 750,000
Territory 4
$ 850,000
Territory 5
$ 200,000
Additional Analysis
EFFECTIVENESS INDEX
• Examine territory performance
relative to potential
STEPS IN AN
EFFECTIVENESS ANALYSIS
Select a market index that indicates
what percentage of total sales
should be obtained from each sales
territory.
STEPS IN AN
EFFECTIVENESS ANALYSIS
Determine the company’s actual total
sales in dollars or units during the
period being studied.
STEPS IN AN
EFFECTIVENESS ANALYSIS
Multiply the territorial index by the
total sales figure to determine the
goal in each district.
STEPS IN AN
EFFECTIVENESS ANALYSIS
Compare actual regional sales with
the regional goals to see how much
variation has occurred.
Example
Effectiveness Analysis
Region Market Actual Sales
Index Sales Goals
A
27%
$900 $1,215
%
74%
Dollar
Variance
$-315
B
22%
1,230
990
124
240
C
15%
828
675
123
153
D
20%
852
900
95
-48
E
16%
690
720
96
-30
Total
$4,500
HIERARCHICAL AND
EFFECTIVENESS ANALYSIS
•
•
•
•
Territories
Different products
Sales by accounts
Channels of distribution
MARKETING COST
ANALYSIS
• A study of marketing expenses to
determine profitability of marketing
segments in the firm.
• Two Approaches
– Variance Analysis
– Percentage of Sales
VARIANCE ANALYSIS
• Variance represents the difference
between actual costs and budgeted
costs.
• High variances should be examined
further.
PERCENTAGE OF SALES
• Examines costs as a percentage of
sales.
PROFITABILITY ANALYSIS
• Return on Assets Managed (ROAM)
RETURN ON ASSETS
MANAGED (ROAM)
• Measures how productively the
assets in each segment of the
business have been employed.
ROAM=
Profit contribution/Assets Managed
ROAM Example
District 1
Sales
$ 12,000,000
COGS
6,000,000
Gross Margin
6,000,000
Selling Expenses
3,600,000
Profit Contr’n
2,400,000
Acc’ts Receivable
4,000,000
Inventory
4,000,000
Assets Managed
8,000,000
Profit Contr’n %
20%
Asset Turnover
1.5
ROAM
30%
District 2
$ 12,000,000
6,000,000
6,000,000
4,800,000
1,200,000
2,000,000
2,000,000
4,000,000
10%
3.0
30%
District 3
$12,000,000
7,000,000
5,000,000
2,600,000
2,400,000
8,000,000
8,000,000
16,000,000
20%
.75
15%
PRODUCTIVITY ANALYSIS
• Additional productivity analysis may
be required to get a fuller picture of
organizational effectiveness.
• Measured in terms of inputs and
outputs.
Example
Productivity Analysis
District 1
Sales
Expenses
Sales Calls
Proposals
Salespeople
Sales/Person
Expenses/Person
Calls/Person
Proposals/Person
District 2
District 3
$ 10,000,000 $ 12,000,000
$ 10,000,000
1,000,000
1,200,000
1,500,000
5,000
4,500
4,500
100
105
120
10
15
10
1,000,000
800,000
1,000,000
100,000
80,000
150,000
500
300
450
10
7
12
WHAT IS DONE WITH THIS
INFORMATION?
• Adjust territorial boundaries
• Adjust product line
• Change classes of customers
FROM THE TEXT
• Read everything except Residual
Income Analysis on pages 724 to
726.