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Principles of Effective Sales Management

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Integrate Theory with Practice
SMS -- The Sales Management Simulation
Benefits of Simulating Practice
Book learning, lectures, case studies are valuable learning modesSimulations add a valuable dimension:Translate theory onto practiceLearn by doingSMS focuses on key Sales Management decisionsSMS details – Participants Manual
The Sales Management Simulation: Integrate Theory with Practice
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SMS: Sales Management Decisions
Decisions SMS firms must make:Who to try to hireHow to successfully recruit salespeopleThe trade-off between sales training benefits versus direct training cost and lost revenues (while training)How to motivate salespeople – salary, commission, sales contests?Allocating salespeople to sales regionsAllocating selling effort between productsAllocating salesperson efforts betweenexternalandinternalsellingWhat market research studies to buy, and how oftenEvaluating salesforce performance
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Product Offerings
Two products– base,premiumManufacturing cost:base– $3,000;premium– $4,000Current prices:base– $3,500;premium– $5,500
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The Market
Future demand pattern is uncertainMarket research studies identified 3 forecast demand patterns – developing, saturating, stagnant,Unknown which demand pattern is validTwo of three market forecasts agree for first four periods, then diverge.All three market forecasts agree only for the first period.Firms address the market with 10 sales regions
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Selecting and Recruiting Salespeople
During SMS – 55 potential recruitsNumber of recruits available each period – 5Previous management hired and trained all five available applicants in period 0.The five salespeople you inherit are temporarily assigned to sales regions; you may accept or modify these assignments.
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Regional Management
Regional assignment:1 salesperson assigned to region: sales territory = entire sales region2 salespeople assigned to region: region split into 2 sales territories3 salespeople assigned to region: region split into 3 sales territories, etc.Key decisions:Add salespeople and address all regionsSelect regions to address:growth potentialcompetitor actioncoverage densitySalespeople’s perspectivePerform better when assigned to home regionPotential earnings – growth potential, competitor action, coverage density
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The firm trains salespeople (mandatory in the hiring period.The firm retrains salespeople tofurtherimprove skillsTwo retraining options available -second and third levelsKey decision: If and when to retrainWhile in training:Salespeople incur costsSalespeople do not earn revenues
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Training/Retraining
Compensating Salespeople
Salespeople learn what other salespeople earn – their firms, competitor firms.Key questions:Do salespeople work harder and smarter if paid more than competitor salespeople?Do salespeople work less hard and less smart if paid less than competitor salespeople? Are they likely to quit?How much should your firm pay salespeople?What is the appropriate compensation breakdown by salary and commission? How much do sales contests help?
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The Sales Management Simulation: Integrate Theory with Practice
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Strategic Time Management – 1
Salesperson success relates to time spent face-to-face with with customers –external sellingSalespeople should also spend time working with internal firm functions, securing support –internal sellingKey question: What is the appropriate balance betweenexternalandinternalselling?
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Strategic Time Management – 2
Baseandpremiumproducts earn different profit marginsSales of thepremiumproduct maybe related to sales of thebaseproductMarket potential:baseproduct different frompremiumproductKey question: How should salespeople divide their time betweenbaseandpremiumproducts?
Managing Inventory
Each period, the firm makes sales forecasts for both thebaseandpremiumproductsThe factory produces products to match sales forecastsIf demand is greater than requested production, the factory will make up the shortfall via overtime – overtime is an extra costIf supply is greater than demand, the firm will have products in inventory – the firm incurs an inventory costInventory carries over for sale in future period(s), hence impacting required production.Key decision: How much production to request from the factory?
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Price Strategy: Skim or Penetrate
Penetration Pricing – price close to costsMarket share likely to increaseProfit margins low or negativeSkim PricingProfit margins highGreater competitive pressureCan great personal selling compensate for higher prices?Key questions:How to priceDo bothbase and premiumproducts behave similarly?
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The Sales Management Simulation: Integrate Theory with Practice
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Market Research Studies
Market research studies are expensive – can be redundantKey decisions:Which studies provide the best information for making sales forecasts?Which studies to buy?How often to buy those studies?Key consideration:Are market conditions stable or changing?
Success Metrics?
Profit 75%Cumulative Profit across all periodsProfit trajectoryrelative to other firms in the industryMarket Share. 25%Final periodNet Promoter Score. Not consideredCompany Reputation Not consideredComplaint lettersSalesperson turnover
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Good Luck!
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Principles of Effective Sales Management