Eddington Sales & Service - setting targets, job of field sales manager

Eddington  Sales  &  Service  Private  Limited ( ESSPL)

Caselet written by Prof S K Palekar for class use

ESSPL sells photocopiers,  printers,  faxes  &  computers  to offices  under  its  own  brand name.

Situation

Sitting in his office in January 2009 Alex DeSouza was wondering how his life had suddenly become stressful after Suresh Pradhan joined as the new Regional Sales Head.  Till now he was being treated in the company as a genius sales manager but now Suresh treated him as if he was a rookie field sales manager.

As a Field Territor Head (FTH) of ESSPL – a company selling photocopiers,  printers,  faxes  &  computers  to offices  under  its  own  brand name - he had built up a good  reputation within the company for the last 4 years as someone who always met his sales targets.  He was known to work hard and it  was considered an achievement that in a mature territory of South Mumbai he had achieved a  CAGR of 12%  in the past. Once he had said; “mature market is a euphemism invented by the MBAs in the marketing department. My market is not mature, it is declining !”

Source Of Conflict

Last week, when he met Suresh Pradhan for setting targets for the new year 2009-2010,  Suresh was not at all happy with the 12% target was had set. In fact he had asked him to consider a target of 25% growth in the coming year.  Alex had said;

“Boss, not only the market is declining in my territory but the marketing this year is neither planning anything by way of new products or more schemes or more advertising. There is no basis whatsoever for planning this kind of growth. You should achieve your target by asking people in central and north Mumbai to sell more – their markets are growing; mine is not!”.

To this,  Suresh replied;

“ In a short span of last few months I have seen that your decisions are more guided by emotions than by facts. I suggest you please undertake  a systematic  review  of  what your own people are doing in the field and you will come to know how you can achieve 25% growth next year. In fact I asked your own assistant Veena Talpade to get a few facts out from your own database…and I suggest you come back after studying it  and tell me what you will do to achieve 25% growth. No less please!”.

The figures he gave are as per Appendix attached.

Background

Alex was a fair person and was looking back whether he had been wrong all these days with his mature market assumption. He recalled that in the annual conference held in April 2008, there was a big discussion on the likelihood of dwindling market size in his territory. In fact the CEO had mentioned at that time that in other metro cities of India too similar mature territories existed and he had, in fact, asked the head of Brand Management Kanika Surpur  to study and  recommend  whether the marketing department should be organized around market type rather than product types. Currently ESSPL follows a Product Management system wherein each type of product category has a manager and all report to Kanika.

The starting point of this discussion was the point made by Alex forcefully in the 2008 conference as follows;

“  The real estate boom in Mumbai has now created millions of square feet of office space in central Mumbai like lower Parel and also further north in Bandra Kurla Complex,  Andheri, Vikhroli etc. The costs and rents are cheaper in these new locations and there seems to be a flurry of movement to these locations. The number of offices are actually declining in my territory.”

When Alex had repeated all this to Suresh last week, he had only one response;

“still there are plenty of offices out there where you are not selling. Go and sell to them”.

Products

The  products  are  imported  from  China  but  specifications  are  decided  and  enforced  by  its  own  office  in  China  before  the  products  are  shipped  from  China. This  arrangement  ensures  that   its  products  are  seen  by  the  customers  as  being  no  less  in  quality  than  its  MNC  competitors. Of  late,  even  the  MNCs  have  been  getting  their  products  made  in  China  anyway.

Organization Under Alex

He has  5  areas (sub-territories) under  him  and each  is headed  by  an  executive. The names of the executives Q ( Quentin), M (Murali), B (Banerjee), W (Wadhwa) and K (Kapoor). Each  was  responsible for sales as well as service revenue of the designated clients.  The sales orders, once booked, were passed on to the local  warehouse to execute. The service orders ( sales of annual service contracts and consumables and repairs)  were passed on to the service center to manage and execute.

Appendix

EDDINGTON SALES AND SERVICE PRIVATE LIMITED
		5 SALES EXECUTIVES UNDER ALEX
PARAMETER	UNIT	Q	M	B	W	K
POTENTIAL	INDEX	110	160	90	150	130
CALLS pm	#	50	30	40	30	50
PRESENTATIONS  pm	#	15	23	20	12	30
CLOSURES  pm	#	12	11	13	10	11
ORDER  SIZE /  CLOSURE	Rs L	1.03	1.10	1.23	0.98	1.00
TOTAL  SALES  REVENUE  pm	Rs L	12.36	12.10	15.99	9.80	11.00
AFTER  SALES  CALLS  pm	#	12	23	20	30	10
PRODUCTIVITY  OF  AFTER  SALES  CALLS  pm	%	30%	30%	20%	40%	20%
ORDER  SIZE /  AFTER  SALES  REVENUE	Rs L	0.30	0.35	0.20	0.40	0.15
AFTER  SALES  REVENUE  pm	Rs L	1.08	2.42	0.80	4.80	0.30
TOTAL  REVENUE  pm	Rs L	13.44	14.52	16.79	14.60	11.30
AFTER  SALES  REV  %  ALL  REV	%	8%	17%	5%	33%	3%
SHARE  OF  NEAREST  COMPETITORS	%	40%	30%	60%	30%	60%

Teaching Note

Eddington  Sales  &  Service  Private  Limited ( ESSPL)

Caselet written by Prof S K Palekar for class use in a course on “Go-To-Market”

LEARNING OBJECTIVES

WHAT IS A SALES MANAGER’S CORE JOB ?

Is to teach that a field sales manager’s job is to lead and manage people so as to … Develop selling resources like  sales force and sales network resources …  Deploy them for targeting  specific outcomes …  Allocate the selling resources to various customers and tasks.  The primary concern of any sales manager is to bring to bear the skill and time of his sales force to bear on the best client opportunities. Hence factors like workload, potential and productivity become important and so is role and structure.

WHAT CAN SALES MANAGER DO IN A MATURE MARKET ?

Most marketing books deal with what is done centrally and strategically at a policy level to grow the sales. Most of these actions are for corporate level ( like Ansoff Matrix, Porter Analysis) and at marketing head level ( STP and Ad strategy) etc. In practice, a lot of things are possible at the field / tactical  level to make the sales grow.  

HOW TO SET TARGETS IN A PRACTICAL WAY?

This case also helps the learner to understand the type of preparation that is needed when he speaks to his reports, his distributors and also to his bosses for setting targets that are truly accepted by all concerned.   

FRAMEWORKS USED

1.    METRICS OF PERFORMANCE  

a.       Measure not only sales outcomes but even the sales process

b.      Construct a sales funnel appropriate to your business

c.       Sales funnel should get reflected in your DSR or WSR

d.      Review DSR for tracking outcomes, locating training needs and link compensation

e.       Too many targets confuse - split them vertically ( some OBJ are for the bosses, some for subordinates) or split them  horizontally ( create different verticals )

2.      JOB STRUCTURING AND DESCRIPTIONS

a.       Job descriptions should let hunters hunt and let farmers farm

b.      Which jobs are fit for a channel and which are fit for in-house people

3.      ALLOCATING CUSTOMERS TO SALES PERSONS (TERRITORIZATION )

a.       Will more territories increase focus / sales ? Will less territories save costs ?

b.      Best salesperson, best frequency, best fit  for the best customer

4.      TARGET SETTING AND SUPERVISION    
Using the funnel for benchmarking to review performance and set targets

CLASS DISCUSSIONS

WHAT IS THE PERFORMANCE MANAGEMENT SYSTEM OF THE COMPANY

In many organizations there is only a measure of sales and  not of the sales process. You must construct a sales funnel appropriate to your business and  it should get reflected in your daily report. In P&G it was DDIS. In Eureka Forbes it was Bettering The Best etc. Introduce the concept of sales as the fruit of the process tree : unless the tree is robust, the fruits will not come. Is your DSR right ? Do you see it ? Do you have targets only for the sales or the efforts as well? The HUL concept of the “Black Book”? Signs of management are as follows

• “Vital Few” metrics of effort and result are in place which help in diagnosis.
• Targets are consultatively set and reviewed
• The review feeds back into training and supervision objectives
• And not only into reward and punishment
• It helps if boss can also demonstrate and has personal targets
• Targets are not only for financials but for other results as well
• Too many targets confuse and don’t work
• split them vertically ( some OBJ are for the bosses, some for subordinates)
• split them  horizontally ( create different verticals )

JOB STRUCTURING AND DESCRIPTIONS : HUNTERS HUNT; FARMERS FARM 
The sales performance varies from lowest of  Rs 9.8 Lakhs pm of Wadhwa to Rs 15.99 of Banerjee. Banerjee is almost 100% better.  But if service revenue is also taken  into account, the variation reduces and a new picture emerges : Kapoor sells lowest at Rs 11.30 Lakhs whereas Banerjee sells highest at Rs 16.79 Lakhs. 

What does Banerjee do that others don’t? The answer is that Banerjee ignores service sales and focuses only on product sales ! He is the lowest service seller ! Does it mean ideally the salespersons should not focus on service ? It certainly seems so because the lowest seller Wadhwa sells more service and  the lowest seller of service Banerjee sells more of products. Why not create a separate vertical only for selling of service – it is a job of farming and not of hunting. Introduce the concept of  hunters and farmers.  This will enable you to focus the time of hunters for hunting and of farmers on farming.

Actually you can even appoint a distributor or a franchisee only for service selling. In fact, you do have a service center – why  don’t  you  give  them  the  job?

TERRITORY STRUCTURING   
But  conversion of potential into sales seems to be the lowest (7% only) in Wadhwa’s territory and only marginally better (8%) in  Murali’s and Kapoor’s territory. Interestingly, the potential is the highest in these territories! The best conversions are in Banerjee’s territory (18%) and in Quentin’s territory (11%) and surprisingly these are the smallest territories. This probably means that we have allocated too much  potential to the salespersons. Probably we need to  reorganize the 5 territories into 7 territories.

TRAINING AND SUPERVISION    
By focusing on conversions at various stages in the funnel and benchmarking against each other we can set better goals and also focus right training on the right person. This has a potential to increase the sales significantly.

RIGHT PERSON FOR THE RIGHT TERRITORY     
For examples, the person who can  make many calls can be in a larger territory.