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Text Readings - P1, S1, T 4
SALES MANAGEMENT
Managing The Salesforce
Introduction
Sales Management in all types of selling (both transactional and consultative) requires a person with skills that go beyond selling skills. In the following article, we will focus on the special and specific functions performed by sales managers. Specifically, we will address the sales management of major or complex selling. In the hospitality industry, selling complex meetings and other group activities is a complex sale.
How are consultative sales people managed to achieve their maximum effectiveness and productivity? The answer to this question is the foundational and primary reason for the existence of managers of people…and this extends beyond sales management.
Common Sales Related Titles in the Hospitality Industry. In the hospitality industry, the people who directly manage sales people are called Directors of Sales or DOS for short. In large organizations there is usually a large sales force and a large “marketing” operation. In these cases the DOS directly reports to the Director of Marketing (DOM). The DOM divides his or her responsibilities: (a) DOM handles marketing activities such as advertising, public relations, and planning. Delegated to the DOS is the direct supervision of all sales people. Sometimes the DOS and DOM functions are handled by only one person and this person is then called the Director of Sales and Marketing. Note that the hospitality industry calls their sales people Sales Managers (yes, this can be confusing, but sales people manage their customer accounts).
Potential Customers of Hospitality Salesforces’. The salesforce in hospitality organizations is primarily focused on group business. The salesperson’s job is to seek out and contract with potential customers who are responsible for a group of people. There are several types of group customers:
1. In most cases, the potential customer is a Meeting Planner, who brings group business to a hospitality organization. Here the purpose of the meeting or gathering is for business purposes. Salesforces who seek this type of business are the ones that we are primarily concerned with and they usually have the largest number of salespeople. They report to the DOS and usually account for approximately 65% to 75% of a resort or convention hotel’s total revenue.
2. In other cases, the potential customer is a planner for groups whose purpose is pleasure; an example would be a tour group. The decision-maker for these groups is the Tour Wholesale Operator. There is usually only one salesperson that specializes in and focuses on this business. This salesperson also will report to the DOS.
3. Still in other cases, the potential customer is special events such as weddings, banquets, parties, dances, etc. The potential customer and decision-maker will vary by event. The salesforce: (a) does NOT report to the DOS, (b) does usually report to the Director of Food & Beverage, and (c) is usually have only one or two salespeople in the salesforce.
The following discussion describes the functions handled by a Director of Sales (DOS). Any manager of any salesforce must perform these functions. There are three major areas of responsibility: (a) Designing the Sales force, (b) Managing the sales force, and (c) Continuous improvement of the sales force (Kotler, 1994). Each of these three areas has subcomponents.
Designing
the Sales Force
There are five subcomponents that a DOS must accomplish in the design or planning for a sales force:
Salesforce Objectives. Salesforce objectives must be based on the character of the company’s target markets and the company’s desired position in these markets. Companies set different objectives for their salesforces. Typically, these include:
1. Selling Objectives. These are revenue objectives. In the hotel industry these may be quantified as total revenue, room nights, ADR (average daily rate), or the aforementioned plus add on revenue such as amount of food and beverage purchased. Other tactical objectives are related to the sales process itself and generally require that each salesperson write up a personal selling strategic plan. These are usually a DOS mandated requirement and include:
a. Prospecting Objectives – Sales people find and cultivate potential new customers.
b. Targeting Objectives – Sales people decide how to allocate their scarce time among prospects and existing customers.
c. Presentation Objectives – Salespeople must know the “art of “salesmanship;” the process steps of: (a) Pre-approach presentation planning, (b) approaching the customer, (c) presenting and demonstrating, (d) answering objections, and (e) closing sales. In complex meeting sales, there are multiple meetings with the potential customer before obtaining the final contract or “closing the sale.” Not only is knowledge of the flow of steps important, the successful salesperson must intimately understand the subtle differences in how to apply each of theses steps to each unique potential customer.
d. Relationship/Networking Objectives – Sales people must have these skills so that they will be able to maintain and then develop customer accounts.
e. Information Gathering Objectives – Sales people conduct market research and intelligence work and complete “call” reports (raw material for managerial statistical analysis). In the hospitality industry, salespeople join many customer organizations to learn about the latest developments. Additionally, they belong to many industry associations, which also have competitors as members; much can be learned while associating informally with competitors.
f. Allocating Objectives – Salespeople decide on which customers to allocate scarce products during product shortages. In the meeting business this may mean a period of high occupancy and even “oversold” situations.
2. Implementation Objectives. These are after-sale service objectives. Most complex products/services need assistance from the producer to help the buyer get them to be operational. In selling meetings, after the contract is obtained, later the meeting must be held. To orchestrate all of the various departments of a resort/hotel to flawlessly and successfully implement a meeting is a major task. Most major resort/hotels immediately assign a convention services manager (CSM) or conference coordinator to work with the Meeting Planner to detail the meeting. Others have a philosophy, “if you sell it, you service it.” The latter choice is only efficient if the salesperson is not responsible for large volumes of group business.
4. Upgrading Objectives. This refers to selling additional add-ons or upgrades to the initial and basic purchase. Sometimes this is the responsibility of the salesperson. Most likely in the selling of meeting group business, this is the responsibility of the CSM. Why? Because meetings are not usually fully detailed at the time the contract is signed. Only during discussions with the CSM will the Meeting Planner reveal all of their extra needs. This provides an opportunity to upgrade or in the parlance of the hospitality industry, “sell strawberries.”
5. Maintaining and Developing Objectives. Consultative selling today is about first acquiring and then maintaining/developing their customers. The objective is concerned with making sure that the first customer that the salesperson acquired not only remains loyal, but also makes repeat purchases. Additionally, this first customer is the lever or gatekeeper to referral business: both internal account referrals and external referrals to other organizations.
Salesforce Strategy. Salesforces vigorously compete with the salesforces of competitors. Competition is usually a contest attempting to win the minds, hearts, and pocketbooks of the same target markets. To be effective, strategies are implemented. Strategies help deploy the salesforce so that they are focusing on the right potential customers at the right time and in the right way.
Today’s salesperson is the key interface between the selling/supply organization and the buying/demand organization. The salesperson orchestrates his or her resources to enable the exchange ((buy/sell) to take place. This means that the salesperson creatively works with potential buyers in whatever form is appropriate. Some of these ways include:
1. Salesperson Interfaces With Single Buyer. This is the classic selling situation where one salesperson attempts to make a sale to one buyer.
2.
Salesperson Interfaces With a Buying Team.
In complex selling, the sale is too important to be left in the hands
of a single buyer. Input from a
buying team/group or committee is the norm.
A salesperson may have to present and convince a group of buyers. To do this requires that the salesperson know that this situation
exists in the first place. Often a salesperson believes that if he or she could
only “get directly to the decision-maker” then this would be the key to success.
Today’s buyers, especially of complex products/services, require input
from many sources; thus, buying is a process.
3. Sales Team to Buying Team. Again, complex products/services usually require this approach. The Sales Team may be composed of the salesperson, technical support, and even top management. Selling meetings in the hospitality industry might require the technical support of the Convention Services Manager CSM) and, even, top management as represented by the Resort/Hotel General Manager or other. The Buying Team might be composed of counterparts to the Selling Team. This approach is increasingly being used.
Strategy also means the overall sales plan. How will the sales resources be deployed that will get the most effectiveness and efficiency from the sales efforts? This overall sales strategy becomes the foundational piece and guide for each salespersons personal strategic plan. Salesperson individual strategic plans fulfill the overall salesforce strategic plan.
Salesforce Structure. The salesforce strategy guides the way that the salesforce is structured. Structure is a function of Strategy. Since strategies will change depending on factors such as economic conditions, one should expect that structures would also change from time–to-time. Other variables which influence the type of salesforce structure are: (a) nature of the product/service being sold and (b) size and complexity, and geographic operations of the targeted customer organization. For example, at an individual property level, the product/service is of a single type (the individual hotel), thus, property-level sales people usually organize along geographic territorial structure. On the other hand, large customer companies have meeting and travel needs for many types of individual properties, thus, a hotel chain that has many types of hotel product lines (upscale to economy) might use a product/market structure or a more sophisticated form of a similar structure, national account structure.
The following are basic types of salesforce structures. Often, these basic forms are combined to produce hybrid structures.
1. Territorial Salesforce Structure. Here, the geographic territory is divided and sales people assigned to cover or sell within these territories. For example, the United States might be divided into East, Middle, and West. And, even these broad territories might be further subdivided. If the organization is selling one type of product to many widely dispersed customers, then this type of structure would be appropriate. This is a common structure in many hotels. It is a carryover of the time when hotel companies essentially offered one type of product. Today, however, hotel organizations have a very diverse portfolio of hotel product lines (upscale to economy) and are not only rethinking salesforce structures, but also implementing radical changes.
2. Product/Market Salesforce Structure. A product/market is the unique coming together of a specific product that has been designed for the unique needs of a specific market (homogeneous group of customers). Some examples:
a. Dedicated conference centers and resorts appeal to corporate market segments; they were designed specifically for these markets. Thus, sales people in conference centers are more effectively structured by corporate industry. In this case, a sales person might specialize in the pharmaceutical industry and a few other highly defined industries. This sales person has an advantage in knowing the customers very well.
b. In convention hotels where several market types are sought, the approach is similar, but takes a broader focus. Sales people might specialize by association types of groups, corporate groups, other business purpose groups (SMERF for example), and/or tour groups.
3. National Account Salesforce Structure. Large and complex customer organizations (accounts) are often called, key accounts, major accounts, house accounts, and other. If the account is a large company with many divisions, operating in may parts of the country and subject to many buying influences (such as Johnson and Johnson, Sears, or Ford) then this account is likely to be handled by a specific sales person (National Account Manager/Executive) and/or a selling team led by this salesperson. The selling organization will organize a National Account Management (NAM) division to handle these types of customers. For example, most large hotel chains have NAMs to handle the meeting needs of these large customer accounts on a comprehensive level.
Hotel NAMs are generally organized in a combined geographic/market structure. There may be a Hilton NAM office in all of the major cities where there are a lot of corporate headquarters: New York, Chicago, Los Angeles, San Francisco, Dallas, etc. Each of these offices has a small number of national account managers (sales people) who each are assigned to a corporation headquartered in their geographic area. The sales people periodically visit with their potential and established customers to learn of any upcoming meeting needs which will include the geographic area which they are considering holding their meeting. Then these national account managers communicate the customer’s needs to specific geographically located property-level sales people. The property-level sales people in the area (and there may be several of the same chain properties in the area) directly contact and work with the identified customer to obtain the business. Note: during the time the property-level sales person is directly working with the customer, the national account manager steps-back and takes an advisory role.
4. Combined Salesforce Structures. The salesforce structure of a particular organization may be 100% of one of the above or may have several structures operating simultaneously. For example, one innovative hotel chain has national and local account executives that are assigned to penetrate identified customer organizations. Since this hotel chain has a wide array of hotel product lines (upscale to economy), the objective of an account executive is to obtain ALL meeting business from this customer account; thus, he or she is selling all of the chains product lines. At the same time, this chain has sales people who represent only one product line (out of the many product lines in this chain). These property-level salespeople structure along a geographic territorial model.
Salesforce Size. After the selling organization establishes its strategy and structure, then they must consider salesforce staffing. What should be the appropriate size of the salesforce? The basic challenge is appropriately staff to achieve cost/benefit maximization. Not too few or too many sales people to achieve the salesforce objectives.
Salesforce strategy defines the revenue targets needed to achieve objectives for the planning period. Revenue targets can be further subdivided by the number of committed customers that need to be obtained. And, in the selling process, a larger number of potential customers need to be approached so that a lesser number of committed customers are screened out (more prospects approached to achieve more contracted customers).
To maximize a salesforce territory’s selling potential, the right number of sales people must be assigned to that territory or product/market account (s). One approach is the Workload Approach:
1. Customers are grouped into size classes according to their annual sales volume.
2. The desirable sales call frequencies (number of calls on an account per year) are determined for each size classification.
3. The number of accounts in each size class is multiplied by the corresponding call frequency to determine the total workload for the entire salesforce’s selling area (the State, United States, or the World). The result is the total number of sales calls that must be made by the entire salesforce.
4. The average number of sales calls that a sales person can make per year is determined.
5. The total number of sales calls (determined in # 3 above) is divided by the average number of sales calls per year per sales person (the result in # 4 above).
The Workload Approach (above) yields the total number of sales people needed to cover the entire salesforce territory and/or product/market accounts. Of course, each territory will vary by potential and each sales person’s ability and experience will vary. Thus, the Director of Sales will fine-tune each (Kotler, 1994).
Salesforce Compensation. Compensation for sales people can be thought of as existing along a continuum: (a) one extreme is 100% salary and (b) the other extreme is 100% commission or incentive compensation. The compensation paid to sales people varies along this continuum.
In the hospitality industry, salespeople are paid part salary and part incentive compensation. Salary varies widely with the size and complexity of the organization. For example, if the salesperson is an “account executive” at a large resort and deals with fairly sophisticated meeting planners (planning for corporate and/or association business) then a beginning base salary might be approximately in the low 30 thousands annually. A senior account executive might receive a base salary in low to mid 40s.
Incentive pay is not “commission” but is a “bonus.” Bonuses are paid if the sales person achieves sales targets for the year. They computed as a percentage of the base salary and range from 10% if targets are met up to and sometimes exceeding 100% of salary depending on how much the sales target is exceed. They can be paid out annually, quarterly, or other.
Note that hospitality organizations often like to reward team efforts. So, along with the individual bonus plan, there might be a team bonus plan. This team bonus is based on the assumption that the entire team makes the total sales target. If achieved, the pool of team bonus money is equally divided among all salespeople. The idea here is to have peer salespeople help out any other salespeople who might be lagging in their personal targets.
Managing
the Salesforce
Managing begins after the above salesforce design or plan has been accomplished. Managing refers to staffing the plan along with day-to-day management of the salesforce.
Recruiting and Selecting Salespeople.
Selecting. The heart of a successful salesforce operation is the selection of effective salespeople. One survey has reported that the top 27% of salespeople brought in over 52% of the sales volume. Saleforce turnover is another reason to be very careful in selecting; turnover is a major cost for the organization in addition to the personal costs to the salesperson who might be in the wrong profession.
What makes a good salesperson? The following are a few key areas to consider when selecting salespeople:
1. Honesty. Most customers report this as a primary trait.
2. Reliable
3. Knowledgable.
4. Psychologically a “habitual wooer” or an individual who has a compulsive need to win and hold the affection of others.
5. A problem-solver: A state of mind that regards resistance as a challenge, of course assuming that the resistance is not well-founded.
6. High energy level
7. Self-confidence
8. Two basic traits are: empathy and ego drive.
Recruiting. Generally, the hospitality industry obtains recruits from three sources:
1. Colleges. Salespeople are recruited by major corporations and developed overtime within the same corporation. For example, Wyndham recruits inexperienced college graduates to work in sales at a more limited-service product line: Wyndham Garden Division. These salespeople are reviewed as to their performance and often offered opportunities to move up into the Resort Division. Other chains operated similarly: Marriott, Omni, and Hilton for example.
2. Active Pursuit of Known Highly Productive Salespeople. Many hospitality firms actively “chase” known” producers. They will actually give them “signing bonuses” or extra compensation for leaving their present firms. Head hunting firms are often retained to conduct these searches.
3. Passive Pursuit. Like most organizations, advertisements for job openings are placed as the need arises.
Training. Training is expensive and necessary for new salespeople as well as experienced people hired from other firms. New salespeople need to learn the basics of sales along with the way of doing business in the new firm. Experienced salespeople often are well set in their ways and need to learn the new policies of the new firm as well as the new product offerings.
Training programs have several goals
1. Salespeople need to know and identify with the company. Here company history, objectives, lines of authority, policies/procedures, etc. are described.
2. Salespeople need to know the company’s products.
3. Salespeople need to know the company’s customers and competitor characteristics.
4. Salespeople need to know how to make effective sales presentations.
Directing (Supervising) Salespeople
Developing Norms for Customer Sales Calls. Existing customers are those who have already made an initial purchase, thus they are now customers as opposed to potential customers or prospects. These customers are the source of two types of additional business: (a) repeat business (a repurchase) and (b) referral business (both referral internal to their company and external to their company).
All customers are not equal. Some have higher potential for the above two sources of additional revenue. Thus, salespeople must prioritize their time. Often, customers are classified as: “A”, “B”, or “C” accounts.
Developing Norms for Potential Customer or Prospect Sales Calls. Prospecting is an essential activity for all salespeople. An organization cannot live on existing customers alone: some move away, become dissatisfied, or other. Thus, a new supply of potential customers must continuously be developed and converted into customers.
Prospects (potential customers) must be managed. Companies often direct salespeople in the amount of time that they must spend to seek these prospects. Again, the salesperson has other duties to perform along with simply maintaining and developing existing customers. Therefore, time must be judiciously allocated for “prospecting.”
General Supervision. Regular sales meetings are the norm in well-run sales organizations. A weekly gathering of the salesforce is generally adequate to maintain salesforce cohesion as well as to synchronize all salespersons’ efforts as related to the overall saleforce strategy: all salespeople will be informed as to their duties.
Motivating the Salesforce.
A Roller-Coaster Life. The nature of selling is that salespeople might be winning an account one day and then be having a “dry-spell” the next. Thus, the human will experience emotional highs and lows. Good sales management must be aware of this as well as how to help level the emotional swings.
Many salespeople are ambitious and self-starters, but the majority still require encouragement and special incentives to work at their best levels. This is true for the following reasons.
1. Nature of the Job. Mentioned above the job is often one of frequent frustrations. Salespeople generally work alone; their hours are irregular; and they are often away from home. They confront aggressive, competing salespeople, they can have an inferior status (in the position of “asking”) to the buyer; and they often do not have the authority to do what is necessary to win the account (must seek higher authority/permission in their own organization).
2. Human Nature. Most people operate below capacity in the absence of special incentives; such as financial gain or social recognition.
3. Personal Problems. Salespeople are occasionally preoccupied with personal problems, such as sickness in the family, marital discord, etc.
Motivation Tools. The higher the salesperson’s motivation, the greater his or her effort; greater effort will lead to greater performance; greater performance will lead to greater rewards; greater rewards will lead to greater satisfaction; and greater satisfaction will reinforce motivation. The following are researched rewards for salespeople in the order of importance:
1. Pay
2. Promotion
3. Personal growth
4. Sense of Accomplishment
The least-valued rewards were liking and respect, security, and recognition. Thus, salespeople are highly motivated by pay and the chance to get ahead, and satisfy their intrinsic needs, and less motivated by compliments and security.
Individual Sales Objectives.
There are two categories:
Revenue Related. These are quotas. They are set at the beginning of the year and are quantifiable. Examples in the hospitality industry (a hotel example):
1. Room Nights
2. Average Daily Rate
3. Add-on revenue such as amount of Food and Beverage purchased.
4. Total Revenue.
5. Percentage of various product lines sold (to ensure that the entire product line offering is sold).
Supplementary Objectives. These vary widely and are less common than quotas.
1. Competitive Intelligence Gathering
2. Customer Socialization
3. Association Membership.
4. Paperwork and Reports (this is common)
Evaluating
Salespeople
The previous four subcategories of “Managing the Salesforce” are feed-forward activities; how management communicates what should be done and motivating salespeople to do it. Evaluation is a feedback activity; or letting salespeople know how they are doing so that they have an opportunity to self-regulate their activities and thus improve performance.
Sources of Evaluation Information. Salespeople produce “sales reports.” These reports are divided into two types:
1. Activity Plans. For example, In advance of activities, the salesperson submits to the sales manager an annual personal sales/marketing strategy and subsequently submits weekly or monthly tactical action plans. Salespeople can be evaluated on their ability to “plan their work and work their plan.”
2. Activity Results. Reports the actual results as compared to the plans above. Call Report is the term for the write up of activity results. Key components of call reports are:
a. Number of sales calls per day.
b. Sales call time spent.
c. Revenue per sales call
d. Cost (cost for the salesperson) per day.
e. Entertainment cost per day
f. New customers.
g. Lost customers.
h. New prospects per day.
Formal vs. Informal Evaluation. Generally, a formal evaluation is conducted annually. It is advisable to have frequent and informal evaluation or feedback.
Types
of Evaluations
Salesperson-to-Salesperson. This type compares and ranks the sales performance of the entire salesforce. This relative measure may be misleading especially if there is variation in the salesforce territories: market potential, workload, competition, company promotional effort, etc.
Furthermore, current sales are not the only success indicator. Management needs to be interested in: a salesperson’s contribution to net profit and customer satisfaction (results in repeat and referral business vs. simple current sales).
Current-to-Past Sales Comparisons. This is a comparison of current sales performance to past sales performance. Are sales going up at the expense of another of the salesperson’s objectives? Are sales costs per sale going up? Are current customers being neglected as the salesperson increasingly seeks new ones? Does this salesperson have too much potential in his or her territory (which means that there is untapped potential; more salespeople assigned is one answer) and thus, the salesperson is “sandbagging.” These are a few of the problems with this type of evaluation.
Customer-Satisfaction Evaluation. Since hospitality salespeople are becoming “micro-marketers” and repeat and referral business is increasingly important. This type of evaluation is essential. Salespeople should be rewarded for success here. Unfortunately, this is not common.
Qualitative vs. Quantitative Evaluation. Evaluation here is concerned with the salesperson’s knowledge of: company, products, customers, competitors, territory, and responsibilities. Personality characteristics can be rated such as: general manner, appearance, speech, and temperament. Additionally, motivation levels, ethics, communication skills, etc. are evaluated here.
Since the “consultative salesperson” is a holistic “micro-marketer” and is the vital linkage between the customer and the selling organization, these qualitative characteristics are increasingly more important to assess and evaluate. No longer is it advisable to place a disportionate emphasis on quantitative measures alone.
Gellerman, S.W. (1992). Motivation in the real world: the art of getting extra effort from everyone. New York: Dutton, Penguin Group.
Kotler, P. (1994). Marketing Management (8th Ed.). New York: Prentice-Hall
Rackham, N. and Ruff, R. (1991). Managing Major Sales: Practical Strategies for Improving Sales Effectiveness. New York: Harper Business.