Managing The Global Sales Territory
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Managing The Global Sales Territory

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Managing The Global Sales Territory

Managing The Global Sales Territory

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    Managing The Global Sales Territory Managing The Global Sales Territory Presentation Transcript

    • Chapter 9 Managing the Global Sales Territory Sales Management: A Global Perspective Earl D. Honeycutt John B. Ford Antonis Simintiras
    • Introduction
      • Sales territory environments constantly change
        • With change, territorial decisions should be revisited by the sales manager:
          • Sales force or agents?
          • Criteria for selecting partners
          • What is the correct sales force size?
          • Ethical dilemmas in sales force territory design and management
    • Sales Force or Agent?
      • Firm can use independent agents or company sales force
        • Outside U.S. about 72% of firms use agents
        • Best choice when entering markets with small sales or unknown potential
        • Agents receive high commission, but only when sales are made
        • Agents must be expert in market situation and customer base
    • Agent Attributes
      • Agents are used when:
        • Markets are geographically dispersed
        • There are few customers in market
        • Firm is inexperienced in global markets
        • Product is new and demand is uncertain
        • Firm wants to simplify business activities
      • Concerns about agents include:
        • Partner loyalty
        • Product knowledge
    • Managerial Decisions
      • Who should be hired for the position?
        • Expatriates, host-, or third-country
      • Expatriates – product knowledge & control, but high cost of maintaining
      • Host-Country – economical and market knowledge; need product training
      • Third-Country – culture and language knowledge; training & identity problems
    • Breakeven Analysis
      • Economically, sales manager can compute the breakeven point (Q*) of using an agent or a company sales force
      • That is: Q* = Fixed Costs
      • CMsp – rCMa
      • Where Q* is the point of indifference
      • Fixed Costs = Obligated costs
      • CMsp & Cma = Contribution Margin
      • r = percent of time agent spends on product line vs.
      • a company salesperson
    • Breakeven Application
      • Suppose a salesperson has $2,000 fixed costs, the agent spends 50% of their time on the firm’s product line, the contribution margin is $60 and $50, respectively, for the salesperson and agent, we compute Q* this way:
      • 2,000
      • (60-.5x50)
      • Or 2,000/35 = 57 units
      • If the sales manager forecasts sales of 100 units for a company salesperson, then economically the firm should use a company salesperson
    • Selecting Partners
      • Partners will contribute directly to the success or failure of a sales firm
      • Partners should posses the following attributes:
        • Marketplace knowledge
        • Marketplace status
        • Similar goals and values
        • View partnering as a “win-win” situation
    • Sales Force Size
      • How many salespersons are necessary?
      • Three methods available:
        • Economic – a new salesperson should be hired as long as the revenue produced by that salesperson exceeds their cost
          • Difficult to compute this point
          • Can at best be estimated
          • This suggests that a full commissioned salesperson should always be hired
    • Breakdown Method
      • Second method to compute sales force size is the breakdown method
      • Sales Force Size = Forecasted Sales
      • Average sales per SP
      • For example if forecasted sales in Euros was 250 million and the average salesperson sold 20 million Euros, then 12.5 salespersons would be needed
    • Computational Concerns
      • When the breakdown is utilized, then one must ask how accurate are the forecasted sales figure and the average sales numbers?
      • Most sales forces have a number of average salespersons, but also a few superstars that raise the average higher than what is accomplished by most salespersons!
    • Composite Method
      • A third method of computing sales force size is the composite method
        • Firms are prioritized into A, B, C categories
        • The call frequency for each category determined
        • To compute total calls multiply call frequency times the number of firms in each category
        • Next, compute total calls per salesperson
          • Take average calls per day x days of week clients are called upon x number of weeks worked per year
          • E.g. 4 calls per day x 4 days per week x 45 weeks a year = 720 calls made per salesperson per year
    • Completing the Computation
      • Suppose that there are 60A, 45B, and 310C accounts that have to be called upon 15, 10, and 6 times, respectively, per year
      • This amounts to 4,210 accounts
      • Divide 4,210/720 calls and this works out to 5.847 salespersons needed
      • However, if cold calling consumes 10% of salespersons time, this must be factored in
    • Sales Force Size Summary
      • Economic method teaches us that sales manager must be aware of relationship between costs and sales
      • Breakdown provides an estimate that can be biased by extreme performances
      • Composite method takes many factors into account and allows sales manager to set service levels and additional duties
    • Sales Administration
      • Sales manager must decide upon sales force activities:
        • Office hours, cold calls, reports, travel frequency
        • Will differ depending upon culture
        • Some cultures expect firm to play a parental role – high level of supervision and inspiration
        • Firms have global data support and Customer relationship management systems
    • Sales Management Control
      • US firms assume “master of destiny” that assumes salesperson responsible for their actions and accomplishments = merit pay
      • Many cultures view success as being out of the individual’s control – Saudi Arabia
      • Individual evaluations may cause problems in a collectivistic culture
      • Degree of authority delegated to overseas offices must be determined
    • Travel Planning
      • Travel can consume a salesperson’s time
        • Must plan and work efficiently
          • Best to start at most distant point and work back toward the office or starting point
          • Use a circuitous route the minimizes backtracking
          • Employing a computer program that plans the most efficient travel schedule
    • Ethical Issues
      • A number of decisions arise when designing sales territories
        • Equitable opportunity
        • Territory assignment process
        • Account service levels
        • Partner relations
        • Switching from agents to salespersons
        • Treatment of host- and third-country salespersons
    • Distributors and Partners
      • Industrial firms refer smaller customers to distributor partners
        • Allows small quantities to be purchased
        • Relationship with distributors must be coordinated, training must occur, and a coherent sales strategy must be pursued
        • Distributor serves smaller customers and industrial firm concentrates larger customers
        • This cooperation complements market service
    • Discussion Questions
      • If a firm decides to expand into a new territory with a high-tech product, which form of the salesperson—expatriate, host-, or third-country—is appropriate? For a consumer good such as clothing?
      • List and discuss the four criteria for sound partner selection
      • In what ways is the management of the sales force impacted by ethical behavior?
    • Summary
      • Territory management is an important duty of the sales manager
        • Sales force employed to insure control and increase emphasis on company product line
      • There are techniques for computing whether to maintain an agent or go to a company salesperson
      • There are three methods to determine sales force size
      • Managers must ascertain sales force administration and control issues
      • Ethical issues influence sales territory management decisions
    • Discussion Questions
      • Are any sales training stages within the process more important than another? Why or why not?
      • List as many reasons as possible why it is difficult to objectively evaluate sales training.
      • Why is it important to conduct follow-up training? How can high-tech methods help with this responsibility?