Discussion

BUS 3302, Sales Management 1

Course Learning Outcomes for Unit VII

Upon completion of this unit, students should be able to:

5. Identify the role of the sales manager in forecasting sales, developing budgets, and managing sales
territories.
5.1 Describe how to use a sales organization audit.
5.2 State the role of sales volume, cost, and profitability in evaluating effectiveness.
5.3 Define benchmarking and its role in salesforce effectiveness.

7. Explore ethical situations facing salespeople and sales management.

7.1 Explain why it is important to submit accurate expense reports and follow ethical guidelines
within the salesforce.

7.2 Discuss ethical lapses that may occur within the salesforce.

Required Unit Resources

Chapter 9: Evaluating the Effectiveness of the Organization

In order to access the following resource, click the link below.

Using the Business Source Complete database in the CSU Online Library, please read the following article
that studies the consequences of sales contests versus quota systems.

Schwepker, C. H. (2015, December). Influencing the salesforce through perceived ethical leadership: The role

of salesforce socialization and person–organization fit on salesperson ethics and performance.
Journal of Personal Selling & Sales Management, 35(4), 292–313.

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Unit Lesson

Marketing has progressed through four major eras in the last century (Ingram et al., 2020). The first was the
production era. Companies like Ford Motor Company and Coca-Cola produced products that were new to
consumers. The concept was that if the product was produced, consumers would buy it. The production
function was evaluated, but the marketing function was not.

Next, there was the sales era. The marketplace had become more competitive, and companies relied on
salespeople to sell their products. Many companies, including icons of the era like Hoover Vacuum Cleaner
and World Book Encyclopedia, sent salespeople door-to-door. Salespeople were evaluated based on how
many sales they made.

As mass media expanded, companies moved into the marketing era. Advertising and public relations joined
the sales staff in carrying commercial communications to customers. The concept of integrated marketing
communications (IMC) was introduced (Ingram et al., 2020). Marketing research showed that there was more
impact on the consumer when different methods of communicating were integrated, allowing the firm to send
a consistent message. This meant that the company spoke with one voice. The increasing complexity of
marketing made it much more difficult to evaluate the effectiveness of the sales organization and
individual salespeople.

We have now moved into the fourth era—the customer era. The focus is no longer just on production, sales,

UNIT VII STUDY GUIDE
Determining Salesforce
Effectiveness

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UNIT x STUDY GUIDE
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and marketing. Now the focus is on fulfilling a customer’s needs, desires, and expectations. This means that a
smart sales manager has to evaluate customer reaction when evaluating the sales organization and individual
salespeople. This is just as important with business customers (B2B) as with individual consumers (B2C).

This is a two-step process. In this unit, we explore how sales managers evaluate the sales organization. An
effective sales organization provides a firm foundation for the sales staff. It also defines how to best evaluate
the performance of individual salespeople. We will study individual evaluation in the next unit.

A firm’s leadership looks to the sales manager to report on how well the sales organization is meeting the
needs of the company and its customers. Leadership has planned for the sales function to meet specific
objectives as part of its marketing plan. Evaluation determines whether the plan has worked. It also
determines the reasons for any successes or failures. This is done with a sales volume analysis, a marketing
cost analysis, and a determination of profitability (Ingram et al., 2020).

Depending on the nature of the industry, the sales manager could evaluate dollar sales volume only or could
also consider the number of transactions. Because salespeople are paid by commission on dollar volume
sold, they have an incentive to make a higher dollar volume sale. Some analysts have suggested that one of
the causes of the housing boom and bust was real estate salespeople selling mortgages that were more than
their customers could afford (Ingram et al., 2020). Salespeople typically offer additional options and
warranties that increase the dollar volume of the sale.

In a retail setting, some salespeople who earn at least some of their compensation by commission may
persuade customers to make a purchase and tell them if they are not satisfied that they can return the
purchase. Some retailers subtract returns from a salesperson’s sales before determining commission, but
some do not. If the customer does not return with a sales receipt, the company may not know who made
the sale.

Another concern with dollar sales volume is that the sale may not be profitable. There is a cost associated
with each sale. Suppose a product costs $100 to produce and sells for $200. If the cost of selling exceeds
$100, then the gross profit is negative—a gross loss. While sales of the product add to the dollar sales
volume, those sales do not contribute to profitability.

In addition, dollar sales volume does not address market share and, more importantly, the trend in market
share. Sales leaders prefer to see a growing market share. Market share is the percentage of sales of a
product that are made by each of the competitors selling that product. For example, if four competitors are the
only firms selling product A and each has an equal market share, then each has a 25% market share. If the
market share of product A of one company increases to 30%, then the other three firms divide 70%. If a
company’s market share is increasing, then it is doing better than its competitors. If its market share is
declining over time, then its competitors are doing better.

If the total sales of product A are increasing, it is possible for dollar sales volume for one company to increase
while its market share decreases. This is of concern because it indicates that customers increasingly prefer a
competitor. This example illustrates the complexity of evaluating a sales organization since most
organizations market many different products.

The complexity of the process is one of the reasons why it is important that sales managers regularly evaluate
the sales organization. One of the primary goals is to make sure sales resources are not being misdirected.
When resources are misdirected, the company is getting insufficient results for the effort it is making.
Resources can be directed to the wrong products, the wrong territories, the wrong salespeople, the wrong
order size, or the wrong customers.

One of the main ways a sales manager can determine if sales resources are being misdirected is by
comparing performance to the competition. Because of the Internet, more industry figures are available than
has been the case in the past. Salesforce automation (SFA) provides a new resource for managing the wealth
of information available today (Ingram et al., 2020).

Sales costs are only one portion of marketing costs. Companies will allocate their budget according to their
determination of the return they will receive from their investment. This makes it particularly important that
sales managers do an effective job evaluating their organization, that their staff is performing at a high level,

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and that this story is conveyed to company leadership. This should include both short-term and long-
term prospects.

While there can be internal competition for marketing dollars, it is also a strategy at the best marketing
organizations that all elements of marketing work together and complement each other. This is best illustrated
with a new product introduction. The roles of sales, advertising, direct marketing, and public relations need to
be carefully defined in detail.

A public announcement of a new product is often followed by an advertising campaign. The sales staff needs
to be trained on the new product so it can be presented to its customers. This requires an integration of
resources and messaging. If a company announced the introduction of a product that was not yet available, it
could damage the reputation of the company. If the salespeople were not trained and could not deliver on the
company’s announcement, it could damage their reputation.

One of the ways to ensure that the sales organization is functioning properly is with a sales management
audit. This is similar in concept to financial audits. It is a periodic review and evaluation of the personal selling
and sales management activities. A sales management audit can be conducted just before the introduction of
a new product to make sure everything is in place for a successful introduction.

This is a powerful tool that can be used to evaluate any aspect of an organization. For example, a new sales
manager can conduct a comprehensive sales management audit to determine the state of the organization
when taking on the new responsibilities. The audit can also suggest actions the new sales manager can take
to improve the sales function.

Conducting a thorough sales management audit is also a good way to establish credibility with the marketing
leadership. The audit can either be done with internal resources or contracted to an expert in the field. An
audit can be very expensive depending on its extensiveness, but it is one of the best ways to get an overall
inventory and evaluation of the organization.

Reference

Ingram, T. N., LaForge, R. W., Avila, R. A., Schwepker, C. H., Jr., & Williams, M. R. (2020). Sales

management: Analysis and decision making (10th ed.). Routledge.

Suggested Unit Resources

In order to access the following resources, click the links below.

The following PowerPoint presentation corresponds to the material in your textbook:

Chapter 9 Presentation
PDF version of the Chapter 9 Presentation