Sales performance - Marketing Management

Unlike performance measurement in production, which deals with material that can be seen and easily measured, a salesperson’s routine activities cannot be directly seen, so measurement is difficult, especially when sales are of a long-term nature e.g. a construction company that is seeking a contract to build a hospital. Some sales operations are simple; when selling to retailers the number of calls made, number of orders obtained and their value can be calculated reasonably accurately. Sometimes effective sales performance will require the salesperson to carry out activities that are not easily measured such as giving advice to customers about how best to display their stock in the retail outlet. In effect, this is merchandising where sales representatives visit retailers to take orders, and organize displays to stimulate consumer purchases.

Merchandising is recognized as an essential skill in retailing and often it is the sales force who provide merchandising advice to their retail customers.

Numark markets to pharmacists who are by necessity of course experts in dispensing but often do not necessarily know the best way to lay out their merchandise. A common mistake is to pack too much stock into one area which can lead to products slipping behind other products or facingthe customer side-on, making it hard for customers to find what they are looking for. Numark maintain that gondola ends, or end of aisles, are ‘hotspots’ that are not used to their full potential as they are often full of inappropriate products, so pharmacists lose out on impulse purchases. Numark offers retail pharmacists data on top selling lines, collected from the individual store’s electronic point of sale (EPoS) system. Better performing products in each category of merchandise are identified, and information is provided about which ones are moving up or down the best-sellers’ list. Numark maintains that in the late 1990s hair care and baby care products were big sellers in pharmacists. Now these sectors have been lost to supermarkets, but many pharmacists still overallocate space for their display instead of concentrating on more appropriate merchandise. They suggest that pharmacists could learn a lot from a trip to their local supermarket to see how gondola ends are designated to promotions.

Although performance standards are necessary to ensure that the sales force is operating efficiently, they need to be applied with forethought and in consultation with the salesperson from the outset. They should also be relevant to the kind of operation being conducted and these are now discussed.

Sales analysis and performance analysis

Sales analysis begins with a detailed breakdown of the company’s sales records, while performance analysis seeks exceptions or variations from planned performance. Sales analysis is the listing of facts and figures, but performance analysis is comparing pre-determined standards with results that are useful in pinpointing operating problems as well as identifying areas in which the company may be performing well or not so well.

Continuous use of sales and performance analysis enables operating problems to be detected before they become serious; they cannot uncover the cause of the problem, nor can they provide the solution.

We now define what is meant by a ‘sales performance index’ which is computed by dividing actual sales for an area (or salesperson or product) by the sales quota and then multiplying this figure by 100 as follows:

Sales (for area and the salesperson)
Sales quota
_ 100

Performance indices enable sales management to compare what ought to have happened to what did happen. Analysis of sales for evaluation purposes is usually based on a geographical breakdown; other ways include analysis by product line or by customer category, e.g. industrial customers or key customers.

Analysis of sales may not be enough. Such analysis may present a favourable picture as far as sales volume versus quota is concerned. Actual sales can be equal to, or over the quota and yet the company might be losing its market position because the area that the firm is operating is expanding at a greater rate than the firm’s expansion of sales.

Evaluating performance – quantitive criteria

The effectiveness of the salesperson is evaluated against pre-determined performance standards. To help the sales manager determine whether or not corrective action is required the control technique deals with three elements:

Market share analysis

Market share analysis

  1. information on performance;
  2. standards;
  3. evaluation of performance (against standards).

While types of standard used in a company vary; most are linked to the following:

  • sales volume;
  • profit contribution on sales/product mix;
  • number of service calls made;
  • number of calls for an order;
  • percentage of quota achieved;
  • amount of market intelligence gathered.

All these performance standards (targets against which results are measured) are quantitative measures. Such standards, when communicated to the sales force, become a basis for sales planning. Where, then, does sales management obtain information about the salesperson/s performance?

Reports that include the following:

  • call reports, showing which customers were visited, competitive brands used, best time for calling, degree and type of sales resistance, results achieved and future account promise;
  • expense reports, showing a breakdown of expenses incurred;
  • new business reports, showing new accounts opened and potential new business which evaluates the extent and effectiveness of the salesperson’s prospecting work;
  • lost business reports, showing what business was lost and why;
  • work plan reports, showing what calls the salesperson will make and the routine he or she will use for a future specified period (providing a basis for comparing plans with achievements);
  • Reports on a local market condition and competitive activity. Care must be taken when interpreting and evaluating this report as the salesperson might distort the local picture if it is to be linked to sales targets.

Observation is where the district sales manager goes out with the salesperson and observes him or her in the real situation. This can be a meaningful input to the evaluation-control system.

Checklist of quantitative standards for performance evaluation

1 Sales

  • sales volume in money terms;
  • sales volume in previous year’s sales;
  • sales volume in units;
  • sales volume in quota;
  • sales volume in relation to market potential;
  • sales volume by customers;
  • sales by outlet type;
  • sales by product or product line;
  • sales volume per order;
  • average sales volume per call;
  • amount of new account sales;
  • amount of repeat sales.

2 Accounts

  • percentage sold to existing accounts;
  • number of new accounts;
  • number of accounts lost.

3 Profit

  • net profit by salesperson.

4 Orders

  • number of orders delivered;
  • number of orders booked;
  • number of cancelled orders.

5 Selling expense

  • compensation in relation to sales volume;
  • salesperson’s expenses in relation to sales volume or quota;
  • total direct selling expenses per sales value.

Evaluating performance – qualitative measures

A salesperson can be assessed qualitatively through a number of measures:

  • How does the salesperson demonstrate knowledge of markets, competition, the company’s lines and each customer’s business and how is it applied?
  • How does the salesperson break down the quota given into separate goals, customer by customer?
  • How does the salesperson create effective plans of action?
  • How capable is the salesperson in preparing and making sales presentations?
  • How well does the salesperson deal with awkward customers?
  • How well does the salesperson evaluate results and take corrective action?

These questions are at the base of qualitative evaluation, and other qualitative measures of performance are in the areas of:

  • motivation;
  • personality characteristics e.g. general manner, speech, appearance, tenacity, patience, temperament;
  • contribution to the flow of market intelligence;
  • managerial ability;
  • personal development;
  • self-organization (time management).

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