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
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•
•
•
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
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•
•
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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.