Quantitative Measurement of Salesforce

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Academic Note
Quantitative measures of performance evaluation of salespersons

Aim here is to understand the evaluation techniques used by the firms and understand the quantitative measures used for evaluation. An overview of the analysis is presented after reading various research papers which have been written on similar lines. One of the most important factors that a sales manager has to look after is the performance evaluation of the salesperson. The methodology adopted to evaluate the salesforce is important as it is the salesperson evaluation that determines the salesforce compensation. Also the expenses associated with fielding the salesforce is emphasize the importance of accurately assessing the salesperson performance Quantitative measures of performance

How organization conceptualizes salesperson performance affects how they attempt to assess it. Churchill, Ford and Walker (1990) as well as Landy and Farr (1983), conceptualize performance as either subjective or objective. Objective Measures are the quantitative measures which are further divided into Input measures and output measures. Subjective performance appraisals focus more on the quality and less on the quantity of the salesperson activity. Assessment using quantitative performance measures falls into two groups. For both groups, management may wish to set targets for their sales team. One group is a set of input measures which are essentially diagnostic in nature – they help to provide indications of why performance is below standard. Key output measures relate to sales and profit performance. Most companies use a combination of input (behavioural) and output measures to evaluate their salesforces. Some of the output measures are:

• Sales revenue achieved
• Profits generated
• Percentage gross profit margin achieved
• Sales per potential account
• Sales per active account
• Sales revenue as a percentage of sales potential
• Number of orders
• Sales to new customers
• Number of new customers.

Some of the input measures are:
• Number of calls made
• Calls per potential account
• Calls per active account
• Number of quotations (in part, an output measure also)
• Number of calls on prospects.

By combining output and input measures a number of hybrid ratios can be determined. For example:
1. Strike rate = Number of orders/ number of quotations
2. Sales revenue per call ratio
3. Profit per call ratio (call effectiveness)
4. Order per call ratio
5. Average order value = Sales revenue/ number of orders
6. Prospecting success ratio = Number of new customers / number of prospects visited 7. Average profit contribution per order = Profit Generated / Number of orders

All of these ratios can be applied to individual product and customer types and help to answer the questions regarding the following

* Satisfactory level of sales
* Profit achievement
* Time to prospecting
* Worthiness of time spent prospecting
* Satisfactory number of calls per week
* Sufficient number of repeat calls on different customer categories * Track on number of calls on low-potential customers
* Large number of small orders or a few large orders

Hence we can see that many of these measures can be used to assess the reasons for not meeting the set objectives of the salesforce. They provide pointers to possible reasons why a salesperson may not be reaching their sales quota. Perhaps number of calls made is less or call rate is satisfactory but sales per call, is low, indicating a lack of sales skill. Or maybe established accounts are called too often than new prospects. Ratios may help point towards the problem areas that require further investigation. A low strike rate (conversion of quotations into sales) suggests the need for an analysis of why orders are not following quotations.

Other ratios of quantitative measures will explore the remuneration which each salesperson receives hence focussing on...
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