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CASE Zenith Computer Terminal, Inc (D) SETTING QUOTAS FACING DECREASING SALES Alice Tanner was so excited about her new job She was recently transferred from Dallas to New Jersey to take over as performance records by increasing sales more than 435 percent during her three years with Zenith Juan Mendez, Zenith’s president, refers to Alice as “a born salesperson She’s someone people believe in and listen to Alicee has a great natural communications ability She’s dedicated, often working 60 to 70 hours a week – week after week That is why Alice was promoted, “Jeff Sager, western regional sals manager says “She’s going to have to have more than sales ability to turn around the performance of her region We all are!” Last year the region was $750.000 short of its sales goal of $3 million This year the region’s goal was set by Juan at $4 million That is an increase of $1.150.000 over last year’s sales of $2.850.000 Sales are down, and Alice has to turn things around Her first step is to set new objectives and quotas for her region Questions Determine the types of quotas Allice should set, Re-create Exhibits 1, and assuming that Alice’s six sales- people’s efforts for the year resulted in the information in the following table Assume the costs of goods sold re-mained at 80 percent of is anything wrong with this method? Each salesperson’s sales percentage of the region’s $2.850.000 sales is shown in Exhibit Set a sales for each person by multiplying the $4 million sales quota by that percentage Calabrese’s new quota would be $600.000 (15% x $4.000.000) Calabrese’s territory did 15% of the $2.850.000 in sales shown in Exhibit ($427.500/ $2.850.000) Create the sales quotas needed to reach your sales goals of $4 million Recalculate Exhibits 1,2 and using your forecasted sales This is one way to calculate the new quotas What other way(s) could be used? Why? Can Alice be expected to increase sales to $4 million with out increasing other data shown in Exhibits 1,2 and 3? Why or Why not? What can Alice to help her sales people reach their sales quotas? LỜI DỊCH Gần Alice Tanner chuyển từ Dallas đến New Jersey để đảm nhiệm vị trí quản lí kinh doanh khu vực phía đơng, hứng thú với cơng việc Alice phá vỡ kỉ lục tăng doanh số lên 435% suốt năm với Zenith Juan Mendez, chủ tịch Zenith, cho "Alice người sinh để bán hàng Cô người mà người tin tưởng lắng nghe Alice có khả giao tiếp tự nhiên tuyệt vời Ngồi ra, người tận tâm với cơng việc, thường làm 60-70 tiếng tuần từ tuần sang tuần khác" "Đó lí Alice thăng chức" theo Jeff Sager, quản lí kinh doanh khu vực phía tây Jeff Sager cho "cơ thể tốt để thay đổi doanh số khu vực phía đơng" Alice đồng tình với ý kiến Jeff Trong mail Alice hôm kết kinh doanh khu vực phía đơng năm ngối (exhibit 1,2,3) Khi xem qua thông tin mail, Alice thắc mắc việc cần phải làm Năm ngối khu vực đề chi tieu doanh thu triệu dola ,nhưng chênh lệch vềdoanh thu thực mức tiêu đề Là 750000 dola.Năm mục tiêu khuvực đề chu tich cua zenith la trieu dola Chi tieu tang 1150000 dola so voi nam ngoai la 2850000 dola Gia bán hàng bị tụt dốc, Alice cần phải xoay chuyển tình Bước cần phải đề mục tiêu tiêu CÂU HỎI Xác định loại tiêu mà Alice cần đề Kết cố gắng nhân viên kinh doanh quyền Alice năm duoc tom tat bảng Với mức chi phí hàng bán 80% doanh thu, tạo lại exhibit 1,2,3 Phần trăm doanh số nhân viên tổng $2,850,000 doanh số vùng thể exhibit Lập tiêu doanh số cho nhân viên cách nhân $4,000,000 tiêu với phần trăm doanh số người Chỉ tiêu Calabrese $600,000 (15% x $4,000,000) Khu vực Calabrese chiếm 15% $2,850,000 doanh số thể exhibit ($427,500 / $2,850,000) Đưa tiêu kinh doanh cần thiết để đạt mục tiêu doanh số $4,000,000 Sử dụng dự báo kinh doanh tính lại exhibits 1,2,3 Đây cách để tính tiêu Có sai với phương pháp khơng? Còn cách sử dụng khơng? Alice tăng doanh số lên $4,000,000 mà không cần tăng liệu khác trình bày exhibit 1,2,3 khơng? Tại có khơng? Alice làm để giúp đỡ nhân viên cô đạt tiêu doanh số? ANSWERS: Determine the types of quotas Alice should set - Sales Volume quotas - Expense quotas - Activity quotas - Quotas combinations Re-create exhibits 1,2 and assuming that Alice’s six sales- people’s efforts for the year resulted in the information in the following table Assume the costs of goods sold remained at 80 percent of sales EXHIBIT EASTERN REGION’S SALES AND PROFITS FOR THE Cost of goods sold a Gross margin Expenses Calabbres Gonzale Wong e z $620,00 $675,00 $550,000 0 $496,00 $540,00 $440,000 0 $124,00 $135,00 $110,000 0 $66,000 $65,000 $60,000 Net profit $44,000 $59,000 $75,000 $60,000 $20,000 $0 Sales/ Net profit ratio(%) 8b 8b 9.52 11.11 Person Sales a equal 80percent of sales (44000/550000)*100= 8% b William s $625,00 $550,00 $450,00 0 $500,00 $440,00 $360,00 0 $125,00 $110,00 $90,000 0 $65,000 $90,000 $90,000 Rao 9.6 Stark 3.6 EXHIBIT 2: EASTEARN REGION'S YEARLY SALES VOLUME PERSO N SALES % OF REGIO N SALE S ACTU QUOT AL A SALES Calabbre se Gonzalez Wong Rao Stark Williams 15.0 19.5 18.5 16.0 16.5 14.5 540000 576000 540000 576000 720000 648000 360000 Total 100.0 Based on actual sales 550000 620000 675000 625000 550000 450000 DOLLAS DIFFEREN CE PERFORMAN CE INDEX 10000 44000 135000 49000 170000 198000 101,85 107,64 125,00 108,51 76,39 69,44 3470000 606000 98,14 EXHIBIT 3: CUSTOMER ACTIVITIES FOR THE EASTERN REGION Number of order Order/ Call raito sales Averag e order size 1500 1050 70 550000 523,81 1475 1450 1500 1200 1100 1300 1300 1200 650 575 88,14 89,66 80,00 54,17 52,27 620000 675000 625000 550000 450000 476,92 519,23 520,83 846,15 782,61 Number of calis e Gonzalez Wong Rao Stark Williams Atual Calabres Total 8225 6075 434,23 3470000 611,59 Each salesperson’s sales percentage of the region’s $2,850,000 sales is shown in exhibit Set a sales quota for that percentage Calarese’s new quota would be $600,000 (15% x $4,000,000) Calabrese’s territory did 15% of the $2,850,000 in sales shown in exhibit ($427,500/%2,850,000) Create the sales quotas needed to reach your sales goals of $4,000,000 Recalculate exhibits 1,2 and using your forescasted sales EXHIBIT EASTERN REGION'S SALES AND PROFIT FOR THE YEAR PERSON SALES COST OF GOOD SOLDS GROSS MARGIN CALABRE GONZAL WON STAR WILLIA SE EZ G RAO K MS 74000 6400 66000 600000 780000 00 580000 52800 464000 13200 116000 91000 5120 00 1280 00 7000 53000 5800 95000 11.67 12.84 6.52 480000 624000 120000 156000 EXPENSES 65000 NET PROFIT 55000 SALES/NET PROFIT RATIO (%) 9.17 65000 EQUALS 80 PERCENT OF SALES 59200 14800 9.06 89000 91000 43000 25000 4.31 (55000/600000)*100 = 9.17% EXHIBIT EASTERN REGION'S YEARLY SALES VOLUME PERSON CALABR ESE GONZAL EZ SALES % OF REGI ON 15 19.5 WONG 18.5 RAO 16 STARK 16.5 WILLIAM S 14.5 TOTAL BASED ON ACTUAL SALES 100 SALE S QUOT A 54000 57600 54000 57600 72000 64800 36000 00 ACTU DOLLAR AL DIFFERE SALES NCE PERFORMA NCE INDEX 600000 60000 111.11 780000 204000 135.42 740000 200000 137.04 640000 64000 111.11 660000 60000 91.67 580000 68000 400000 656000 89.51 112.64 EXHIBIT CUSTOMER ACTIVITIES FOR THE EASTERN REGION NUMB NUMB ER OF ER OF CALLS ORDE ORDER/CA ACTU AVERA LL RATIO AL GE SALES ORDER CASE 12: BURDITT CHEMICAL CORPORATION Analysis of Sales and Marketing Costs SUMMARISE THE INFORMATION THE COMPANY ACTIVITIES - Manufacture - Sell PRODUCT - Chemical products The Burditt Chemical Corporation CUSTOMER - Dry cleaning retail outlets - Industrial organizations The company’s product line is as follows CALL ON - Retail buyers - Purchasing agents - Chemical engineers THE SALES FORCE Sales organization consisted of 40 sales reps operating in sales districts Sales reps’ salaries included: - Salaries: $30,800 - $52,800 - Fringe-benefit (20% salaries): $6,160 - $10,560 - Commissions in excessing quota Mr.Zinc’s 1996 sales program had also included the following account call-frequency guidelines: - A accounts (major accounts generating $26,400 or more in a yearly sales) – two calls per month - B accounts (medium-size accounts generating $13,200 - $26,399 in yearly sales) – one call per month - C accounts (small accounts generating $13,200 yearly in sales) – one call every two month PRESSURE Mr Zinc sent Scott exhibits which is the information of sales results in 1998 The problem of district 3, which is comment by Mr.Zine is that: - Misallowcating their sales efforts - Calling on customers incorrectly and concentrating on selling the less profitable products - Should pay particular attention to gross profit quota ANSWER THE QUESTIONS Evaluate the southeast district’s performance The southeast district is the district IN 1996, Mr Jinc had developed a sales program based on selling the line of Burditt products This program included the following account call-frequency guidelines: A accounts: Two calls/month B accounts: One call/month C accounts: one call/ months In Exhibit page 474, we can see that SALES and PRETAX PROFIT from 1994 to 1996 was decreased but from 1996 to 1998, they increased strongly The progam started in 1996 So this can say that the program has good efficiency In Exhibit page 474, it talks about the sales quotas and results in 1998 In district 3, the SALES QUOTA is 8.030.000$ but the SALES ACTUAL is just 7.493.200$ And the GROSS PROFIT QUOTA is 3.212.000$ but the GROSS PROFIT ACTUAL is just 2.725.800$ So we can concluded that district don’t meet the target District just achieved 84,86% on the Gross Profit In Exhibit page 474, it talk about the selling expenses in 1998 In this table, District has the SALES REP SALARIES is 346.236$ We can see in Exhibit page 474, District has number of salespeople We can evaluate that 346.236/6 = 57.706, so that Salary for each salepeople in district is 57.706$ We can also evaluate the salary for each person in other districts like that After evaluating, we can conclude that district has the HIGHEST sales salary over districts The District Manager Salary is 77.000$, that’s also higher than others This leads to the Total Selling Expenses 810.414$ is also higher than other districts Althouh the Cost is high but sale is not effective In Exhibit page 475, the Southeast District (District 3) has the total sales is 7.493.000$, which is more than in the South-Central District (D7) But the Total Gross Profit in D3 is 2.725.800$, which is less than in the D7 So we can see that although D3 sells more products than D7 but the profit is not higher We can infer that D3 has a wrong policy Highest cost is an example Improve performance To improve the southeast district’s performance, the company should : - Make a priority list of products line : - Decrease salary of sale person and manager by decrease fringer benefit costs - Training saleperson to accord each account whose profit on saled product Do they really need to better? Yes, they They really need to set product’s priority exactly 3) What should be done to improve areas of low performance? To improve areas of low performance, company should studies on detail about their Sale representatives and makes an official plan for it However, we recommend a number of methods that should be considered to be fundamental 1) General Solutions: a) Build a positive sales culture i) Share values Reward for proformance Customer service at any cost Employees are part of family Attain sales targets ii) Share beliefs Customer orientation We like this company We are the team The company cares about us Quality work life We are professionals iii) Shared Ceremonies Annual awards for meritorius costomer service Monthly meetings to ackknowledge people who attain 100% of sales targets iv)Share stories Sales manager who make salespeople succesful, help with personal problems Heroic efforts to please customers by legendary salespeople v) Share symbols and slogans “Build bridges” to be in touch with customer We dont stand on rank Open offices for easy commnication Special plaques for cstomer service and sales leaders b) Basic compensation i) Salary Dermine an appropriate salary structure Determine the difference between each salary step Determine a minimum and a maximum percent spread Slot the remaining jobs Review job descriptions Verify the purpose, necessity, or other reasons for maintaining a position Meet with the compensation committee for review, adjustments, and approval ii) Commissions Commissions are a common way to remunerate employees for securing the sale of a product or service The intent is to create a strong incentive for the individual to invest the maximum effort into their work In general, the commission structure is based on reaching specific targets or quotas that have been previously agreed upon by management and the employee These targets or quotas are typically tied to sales revenue, unit sales or some other volume-based metric iii) Some common fringe benefits: Insurance Coverage Education Assistance Fitness Assistance/Access Meals and Cafeteria Plans Dependent Assistance Retirement Plan Contributions c) Financial incentives Monetary benefit offered to consumers, employees and organizations to encourage behavior or actions which otherwise would not take place A financial incentive motivates actions which otherwise might not occur without the monetary benefit, so we should have clear financial incentives such as: i) Bonuses for who have good performance or bonuses occur one time per year or at a certain number of predetermined times each year as well Individuals are rewarded based on attainment of performancebased goals (individual, team and/or company) Goals must be realistic and closely matched to the business and people involved Payout potential should be large enough to be significant to the individual Bonuses can be set up to directly drive and support the company’s needs (for example, profitability, annual results, successful completion of projects and/or significant project milestones) ii) Vacation Time: Enhanced vacation policy by giving new employees three weeks off in their first year instead of having to wait five years d) Nonfinancial rewards i) Appreciation: Appreciation or praise for work done be it at home, at school/ university or at work place, serves as an effective non-financial incentive Appreciation satisfies one’s ego needs ii) Competition: A healthy competition among the employees both at individual and group levels, it will prompt them to exert more to achieve their personnel or group goals Thus, competition serves as a non-financial incentive for employees to put in more efforts at their works iii) Opportunity for Growth: People always need to grow in their career So, if the employees are provided proper opportunities for growth and career advancement and chance to develop their personality, they feel much satisfied and become more committed to the organizational goals e) Sales training i) Initial sales training helps representatives get quickly up to speed with the company’s products, markets, customers and policies so they can focus on selling effectively including: product knowledge, market knowledge, Sales Support, sales skill, ii) On-going training: Combines telling, showing, practicing, and evaluating iii) Sales meeting every week to review, have coaching session and support others, f) Leadership i) Leadership styles - types of leaders: Directing leaders: direct subordinates in what, how, when and where tasks should be done These leaders maintain a standard of performance, and their style is high-directive and low-supportive in nature Coaching (participative) leaders: welcome input and consult with employees These leaders are highly directive-oriented, but they are also highly supportive Supporting leaders: are friendly and show concern for the wellbeing of their subordinates; they treat subordinates as equals and offer a high-supportive and low-directive environment Delegating (achievement-oriented) leaders: encourage high achievement and sets challenging goals; the emphasis is on excellence, and these leaders outwardly show their confidence in subordinates’ abilities They operate in a low-supportive and lowdirective environment, which allows employees to extend themselves and their abilities fully g) Performance Evaluation i) Process: Set policies on performance evaluation and control -> Decide the bases of salespeople’s performance and evaluation -> Establish performance standards -> Compare actual performance with Standards -> Review performance evaluation with Salespersons -> Decide sales management actions and control Setting policies on performance evaluation and control Frequency of evaluation Who conducts the evaluation? Management by Objectives (MBO) Sources of Information 360 degree feedback Deciding the bases of evaluation Outcome/result based viewpoint Behaviour/activity/effort based viewpoint Both, outcome based and behaviour based Review performance evaluation with Salespeople First the performance criteria or bases should be discussed The salesperson should be asked to review his/her own performance The sales manager then presents his view on the review performance Mutual agreement on the performance must be established If disagreements or serious differences of opinion occurs then the sales manager should carefully explain the reasons to the salesperson - Bonus - Healthy Competition: Create some exciting sales contests that drive reps to work hard, but make sure the stakes aren’t so high that they resent each other, to foster competition between your reps in a constructive and fun way, eliminating any negativity or backstabbing behavior on the team Learn to celebrate Start recognizing top leaders in a big public way, come up with fun affordable incentives that create an immediate spike in activity while big bonuses and contest prizes usually have to stay tied to production Top producing salespeople are a different breed and it's amazing how far they'll go to get a $50 gas card or get their name called in a team meeting Acknowledgement of Success and Failure: Celebrating when the team hits the sales goals is a very important part of building a strong team, but so is talking positively and constructively about failure It’s equally important to address issues If the team missed their goal this quarter, talk calmly through the challenges and come up with constructive and productive ways to work as a team to improve the sales results next month Continuous Learning: Design the program that have an hour each week with each rep to work on individual sales coaching, and also hold team-wide training sessions to improve sales skills This growth opportunity will help reps feel like they’re improving themselves and bettering their career skills, so they’ll be less likely to leave for another position Fun: As sales peoples have so many day-to-day worries about sales performance and goals, we should build a team of people who enjoy working together, spending time together, and genuinely have fun together at the office 2) General Solutions: Thanks to Exhibits Mr Zinc send We are bringing out a Salaries plan to help improve the sale performance - In Exhibit page 474, we can see that SALES REP SALARIES of DISTRICT is 346,236 $ (57,706 $ per Person) That is the highest number of salary a Sale person in the company can get - However District 3’ performances are poorer than it should be The problem might be involved with the reward and payment fairness Ours method is to bring the fairness back to the exhibit by apply the New Way of Commissions calculation Update Excess Commissions increase from 2% to 5% Add District Manager Commissions ±7% This method not only could motivates the sale people to performance their best in the way to really earn what they deserved but also put our DMs at higher responsibilities level and higher opportunities as well The % number could be shifted to the way that the company want (Excel file) In the excel file, we had calculated probably all the financial changes while applying this method ... this method? Each salesperson’s sales percentage of the region’s $2.850.000 sales is shown in Exhibit Set a sales for each person by multiplying the $4 million sales quota by that percentage Calabrese’s... $2.850.000 in sales shown in Exhibit ($427.500/ $2.850.000) Create the sales quotas needed to reach your sales goals of $4 million Recalculate Exhibits 1,2 and using your forecasted sales This is... $90,000 $90,000 Rao 9.6 Stark 3.6 EXHIBIT 2: EASTEARN REGION'S YEARLY SALES VOLUME PERSO N SALES % OF REGIO N SALE S ACTU QUOT AL A SALES Calabbre se Gonzalez Wong Rao Stark Williams 15.0 19.5 18.5