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Chapter 9 Managing the Global Sales Territory Sales Management: A Global Perspective Earl D. Honeycutt John B. Ford Antoni...
Introduction <ul><li>Sales territory environments constantly change </li></ul><ul><ul><li>With change, territorial decisio...
Sales Force or Agent? <ul><li>Firm can use independent agents or company sales force </li></ul><ul><ul><li>Outside U.S. ab...
Agent Attributes <ul><li>Agents are used when: </li></ul><ul><ul><li>Markets are geographically dispersed </li></ul></ul><...
Managerial Decisions <ul><li>Who should be hired for the position? </li></ul><ul><ul><li>Expatriates, host-, or third-coun...
Breakeven Analysis <ul><li>Economically, sales manager can compute the breakeven point (Q*) of using an agent or a company...
Breakeven Application <ul><li>Suppose a salesperson has $2,000 fixed costs, the agent spends 50% of their time on the firm...
Selecting Partners <ul><li>Partners will contribute directly to the success or failure of a sales firm </li></ul><ul><li>P...
Sales Force Size <ul><li>How many salespersons are necessary? </li></ul><ul><li>Three methods available: </li></ul><ul><ul...
Breakdown Method <ul><li>Second method to compute sales force size is the breakdown method </li></ul><ul><li>Sales Force S...
Computational Concerns <ul><li>When the breakdown is utilized, then one must ask how accurate are the forecasted sales fig...
Composite Method <ul><li>A third method of computing sales force size is the composite method </li></ul><ul><ul><li>Firms ...
Completing the Computation <ul><li>Suppose that there are 60A, 45B, and 310C accounts that have to be called upon 15, 10, ...
Sales Force Size Summary <ul><li>Economic method teaches us that sales manager must be aware of relationship between costs...
Sales Administration <ul><li>Sales manager must decide upon sales force activities: </li></ul><ul><ul><li>Office hours, co...
Sales Management Control <ul><li>US firms assume “master of destiny” that assumes salesperson responsible for their action...
Travel Planning <ul><li>Travel can consume a salesperson’s time </li></ul><ul><ul><li>Must plan and work efficiently </li>...
Ethical Issues <ul><li>A number of decisions arise when designing sales territories </li></ul><ul><ul><li>Equitable opport...
Distributors and Partners <ul><li>Industrial firms refer smaller customers to distributor partners </li></ul><ul><ul><li>A...
Discussion Questions <ul><li>If a firm decides to expand into a new territory with a high-tech product, which form of the ...
Summary <ul><li>Territory management is an important duty of the sales manager </li></ul><ul><ul><li>Sales force employed ...
Discussion Questions <ul><li>Are any sales training stages within the process more important than another?  Why or why not...
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Managing The Global Sales Territory

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Managing The Global Sales Territory

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Managing The Global Sales Territory

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

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