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Successful Sales Management Identifying and Solving the Problems at Gardnov Limited. Management Report May-09 Table of Contents Introduction2 1Problems2 1. 1Poor Sales Performance and Falling Market Share2 1. 1. 1Catalogue2 1. 1. 2Male Sales Force2 1. 1. 3Sales Skills2 1. 1. 4Motivation2 1. 2Falling Customer Satisfaction and Poor Brand Equity3 1. 2. 1Relationship Management3 1. 2. 2Product Knowledge3 1. 2. 3Range of Products3 1. 3The Present Salary-Only Compensation Plan3 1. 3. 1Low Sales Effort3 1. 3. 2Targets3 1. 3. 3High Performers and Retention4 1. 3. 4Selling Costs4 1. 3. Management Time Cost4 2Further Research4 2. 1Meetings with Salespeople and Previous Sales Manager4 2. 2Environmental Auditing4 2. 3Competitor Analysis5 2. 4Demand and Portfolio Analysis5 2. 5The Buying Situation5 3Solutions5 3. 1Motivating and Enabling the Sales Effort5 3. 1. 1Motivation5 3. 1. 2Salary plus commission6 3. 1. 3Competitions6 3. 1. 4Responsibility and Recognition6 3. 2Optimising Sales and Sales Management Processes6 3. 2. 1Training and development6 3. 2. 2Promotion6 3. 2. 3E-Commerce and Sales Channels7 4Conclusion7 5Recommendations Summary8 6Reference List9 Introduction
This report outlines the problems which Gardnov Limited is suffering from and provides recommendations on further research as well as solutions. Problems There are a few key areas where Gardnov Ltd is not performing as effectively or efficiently as it could. These are outlined below. 1 Poor Sales Performance and Falling Market Share 1 Catalogue At present an annual catalogue is sent to all customers regardless of whether or not they are existing customers (Gardnov Limited, 2006). The fact that it is sent once a year means that Gardnov can only inform prospective clients of changes annually.
Also, without a frequent reminder of Gardnov’s presence within the market, competitors could be gaining sales. Secondly, it could be seen as an unnecessary cost to send existing customers the catalogue. However, it would still be important to keep them informed of new products and changes in prices. 2 Male Sales Force Having an all male sales force (Gardnov Limited, 2006) may not be capitalising on the benefits of diversity. Diversity within the sales force has a clear effect on sales performance (Joshi et al, 2006) so the idea of having several female salespeople should be seriously considered. Sales Skills Due to the fact that 90% of sales are through the company’s sales force (Gardnov Limited, 2006) the competencies of the sales force are critical. It is apparent after Richard talked to recent customers that the salespeople are ‘more like order-takers rather than order-makers’. According to Jobber and Lancaster’s model, the sales team should be more like order-getters (Front line sales people). This involves a lot of personal selling, but for an experienced sales team, this should not be a problem.
The sales team has managed to increase sales by 5% annually, however, with the market growing at an annual rate of 10% (Gardnov Limited, 2006) the poor sales performance is reflected. 4 Motivation One of the more important problems that is apparent is the overall lack of motivation of the sales team. They have been described by Richard Booth as being ‘lethargic’ and more concerningly by customers as showing ‘little interest’ and ‘little enthusiasm’. This not only has a negative effect on sales but also on customer relationships and so it is imperative that a solution be found to this problem.
Moreover, the career path is currently based on the time spent within the company. This offers no reward or recognition for outstanding sales performance and may be contributing to the low motivation levels. Furthermore, turnover within the company is very low. Although this is strived for in most industries, there has been some recent research which argues that turnover is a possible strategic facilitator for organisational development (Meland et al. 2005). Clearly this does not mean that poorer performers should not be given a chance. They can be retained and trained. 2 Falling Customer Satisfaction and Poor Brand Equity Relationship Management Crude Key Account Management is present, but not effectively used. The existing customers are not being visited often enough (some not at all) and even when they are the aim seems to be to minimise the time spent with the customer (Gardnov Limited, 2006). What also seems to be an important issue is the lack of new accounts being opened. Customer relationship management and relationship selling are also important aspects to consider. Striving to gain Champions would be in the long term interest of Gardnov Ltd. 2 Product Knowledge The sales team do not seem to be interested in gaining product knowledge.
This seems to be a motivation related issue. Without product knowledge vital sales could be lost and the overall profitability of the company could suffer. Also, it would be difficult to convince companies to open accounts or purchase related items. 3 Range of Products From the information available, Gardnov Ltd seems to have very little brand equity. They do offer a line of products and have some unique products (Gardnov Limited, 2006) which if marketed properly could be used to build a differential advantage. Another issue that needs to be addressed is the range of products offered.
By streamlining the variety of products offered a more efficient and profitable supply chain could be built. 3 The Present Salary-Only Compensation Plan A key area of concern is the current payment solution. The disadvantages of this approach are outlined below. 1 Low Sales Effort Due to the fact that a salesperson will be paid a constant wage there is no incentive to sell more, or raise profits (Jobber and Lancaster, 2003). This can be seen within Gardnov Ltd and may be a contributing factor. Also, this method encourages overemphasis on products easiest to sell (Greene, 2002).
After all, they will be paid the salesperson will be paid the same amount, so there is no requirement to work harder. 2 Targets Each sales person had been allocated a target for opening new accounts (Gardnov Limited, 2006). However, these targets have not been met and it could be because the salary system renders the targets meaningless. With no apparent advantage to open new accounts the salespeople make little effort to do so. 3 High Performers and Retention Although on the face it, everyone is treated equally by being paid the same, within sales teams, this may not be the best course of action.
High performing members may become frustrated and argue the system is in fact unfair as their hard work is not being rewarded (Jobber and Lancaster, 2003). This would clearly affect the moral of the entire sales team and could also have an effect on sales performance. Furthermore, a salary-only program would not allow a company to retain high performing representatives in sales positions over the long term (Moynahan, 1986). Although at Gardnov the sales people have not left but instead become de-motivated. Also, it would be just as difficult to attract motivated salespeople. Selling Costs With this type of salary structure there is always a fixed cost associated with the salespeople (Jobber and Lancaster, 2003). Coupled with a demoralised and de-motivated team which is not making many sales in the best of times, there is a large risk of not being able to cover the costs when sales fall in the short term. So, the company would need to put aside capital to cover this which could have been used elsewhere. 5 Management Time Cost There is a need for a lot of management oversight to ensure the salespeople are working to their full potential.
This time cost could be reduced if the workforce was self motivated for example by a salary plus commission scheme. Further Research To aid decision making it is important that other information be used other than just observations whilst gaining the support of the sales team. These will be outlined below. 1 Meetings with Salespeople and Previous Sales Manager Communication is fundamental. By trying to understand the perspective of the salespeople in a non judgemental way would be a great opportunity to build rapport and relate to the employees on a more individual basis.
It would also provide a good basis on which to be able to perform performance appraisals. This would allow Richard to identify key areas of weakness within the sales team as well as the points of strength. Aspects such as organisational commitment could be assessed which has been found to be linked with job performance, especially in sales (Jaramillo et al, 2005). Also, areas of training could be discussed with the salespeople. Also, by interviewing the previous sales manager a better understanding of where things may have gone wrong could be found as well as possible solutions. Environmental Auditing The macro environment can be examined using PESTLE analysis. The micro environment is also important and can be understood better through Porters five forces (West, 2006). The relationship with customers, power relationship with suppliers and competitors will be key areas to look at. Both of these auditing methods will help Richard to gain a better picture of where Gardnov stands and how the sales force can be used to tackle the issues present. This can also help to determine specific objectives and goals.
A SWOT analysis could also be drawn up to help recognise the strengths so that opportunities can be taken advantage of and weaknesses dropped. 3 Competitor Analysis At present Richard has little understanding of Gardnov Ltd’s competitors. To be able to build an effective sales force this knowledge will be critical. For example, if a retailer is receiving three or four sales teams on a particular day, it may not be appropriate for Richard to send his team as the customer may become frustrated. Also, the product lines and how the competition handles its sales force could be investigated.
This would help to identify areas of differential advantage which could then be passed onto the customers. 4 Demand and Portfolio Analysis Times of peak sales and seasonal fluctuations should be identified. Promotional sales or changes in prices could then be calculated to maximise sales throughout the year. Also, sales efforts could be streamlined and intensified in particular periods. By analysing the portfolio low profit products could be dropped, and higher ones focused on by the sales team. 5 The Buying Situation Howard & Sheth contend that it is important to understand the buying situation.
Customer needs, product features and derived benefits all need to be identified. This knowledge can then be passed onto the sales team which could make personal selling easier. Clearly, product knowledge would need to be high and this could be taught to the sales team with their full cooperation and commitment. Solutions Recommendations to solve the key problems are given below. 1 Motivating and Enabling the Sales Effort 1 Motivation One of the key problems is the motivation of the salespeople. Richard should endeavour to reinforce that increased effort will mean better performance which will in turn lead to benefits.
The benefits should be varied so that there is something that everyone values. This is backed by Vroom’s Expectancy theory which contends that a person will be highly motivated if their expectancy, instrumentality and valence are high (Jobber and Lancaster, 2003). Adam’s Equity Theory argues that people who contribute more expect to receive greater rewards (Jobber and Lancaster, 2006). This fits well with the recommendation that Richard should introduce incentives for high performers. 2 Salary plus commission There is a real opportunity to improve sales force productivity through an effective compensation plan (Phillips, 1977).
With a salary plus commission there are some important advantages. For example, it requires a certain level of performance before income begins to vary and costs increase. Also, it encourages higher profit items to be sold they provide more commission. Therefore Richard should strongly consider this change. Also, the current career path is tailored towards the time spent in the company (Gardnov Limited, 2006). This should be changed to reflect performance because it will encourage salespeople to be working at their best from the very beginning. 3 Competitions
Richard should encourage healthy competitions. There should as well as being a monetary reward, incentives for spending less on expenses such as fuel. Other non-monetary payoffs could include the salesperson-of-the-month award, elevation of status, or a press release in the local media. (Mallardi, 1988) These competitions would help to keep salespeople motivated and fuelling their desire to achieve more. However, it is also important that Richard is available through regular meetings to ensure that the employees are dealing with failure well. 4 Responsibility and Recognition
Taking the sales force on an annual trip to a grand destination resort (Cichelli, 2006) has proven to be a good motivator. The current situation of the company could be explained to the salespeople and their ideas listened to. This would help them feel more part of the solution. Performance monitoring is important. By performing appraisals on an individual basis the salesperson will feel more valued. 2 Optimising Sales and Sales Management Processes 1 Training and development Not only can training and education have a positive impact on a company’s bottom line, but they can also aid in the retention of sales representatives (Ronald, 2006).
Richard should ensure that his sales team is proficient in complaint handling and understand the importance of key account management so that they feel obliged to perform better. Product knowledge should also be a priority. Interestingly, Google contends that sales experience is not a predictor of success (Marchetee, 2006). This reinforces why Richard should embrace training schemes. 2 Promotion Gardnov Limited should push its own brand products more so that brand equity can be built. These products could be made exclusively by Gardnov.
Also, the catalogue should be sent but with quarterly update magazines with offers so that the interaction with the retailers is more frequent. 3 E-Commerce and Sales Channels The face-to-face interaction with the customer is the core value salespeople bring to the company (Kahle, 2006). This is why the time they spend with clients should be well used as order getters. Gardnov Ltd should also look at selling directly to the end user perhaps through an e-commerce website. This will help to take some pressure of the salespeople and will help them to feel less stressed and therefore improve sales performance.
Conclusion The main problem that Gardnov Limited faces is of a de-motivated sales-team. By tackling this issue with the recommendations provided the company stands a good chance of prospering. Recommendations Summary ? Reinforce importance and value of more effort and better performance. ? Introduce incentives for high performers. ? Introduce a salary plus commission payment scheme. ? Tailor the career path towards performance. ? Encourage healthy competitions with prizes for the winners. ? Listen to recommendations from sales people. ? Perform individual appraisals. Provide adequate training schemes to ensure sales skills are maximised. ? Develop brand equity by selling more own braded products. ? Send out update magazines quarterly to customers. ? Ensure time with clients is spent productively as order getters. ? Consider selling directly to end users, perhaps through an e-commerce website. Reference List Cichelli, D. J. (2006) “Incentives that really motivate”, Sales and marketing management, vol. 158, pg. 25. Retrieved November 20, 2006, from ABI/Inform database. “Gardnov Limited” (2006) Sales Management Case Study Greene, R. J. 2002) “Effective sales compensation strategies & programs”, Reward Systems inc, Retrieved November 20, 2006, from http://www. inlandpress. org/filegallery_redirect. asp? uid=210846538=160=160. doc. Jaramillo, F. ,??Mulki, J. E. ,??Marshall, G. W. (2005) “A meta-analysis of the relationship between organizational commitment and salesperson job performance: 25 years of research”, Journal of Business Research,??vol. 58,??pg. 705. Retrieved November 20, 2006, from ABI/Inform database. Jobber, D. , Lancaster, G. (2003) “Selling and Sales Management” Joshi, A. , Liao, H. , Jackson, S. E. 2006)??”Cross-level effects of workplace diversity on sales performance and pay”, Academy of Management Journal,??vol. 49,??pg. 459. Retrieved November 20, 2006, from ABI/Inform database. Kahle, D. (2006) “First steps to effective sales planning” Agency Sales, vol. 36, pg. 35. Retrieved November 20, 2006, from ABI/Inform database. Mallardi, V. (1988) “It’s a question of compensation”, American Printer, vol. 201, pg. 48. Retrieved November 20, 2006, from ABI/Inform database. Meland, H. , Waage, R. P. , Sein, M. K. (2005) “The Other Side of Turnover: Managing IT Personnel Strategically”, ACM Press, pp. 67-74.
Retrieved November 20, 2006, from http://portal. acm. org/citation. cfm? id=1056001 Moynahan, J. K. (1986) “Straight salary has many angles”, Sales and marketing management, vol. 136,??pg. 76. Retrieved November 20, 2006, from ABI/Inform database. Phillips, G. (1977) “Matching the compensation plan to the sales role”, Canadian business review, vol. 4, pg. 29. Retrieved November 20, 2006, from ABI/Inform database. Ronald, L. J. (2006) “Experience shows that training pays” National Underwriter. Life & Health. vol. 110, pg. 12. Retrieved November 20, 2006, from ABI/Inform database. West, S. (2006) “Sales Management”, Lecture Notes