Tag Archives: sales management

Sales Management by Tactics (MBT) – in slides

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B2B Sales Distribution Channel Options: Lessons learned from a CE Manufacturer – Case Study: Novero

Viewpoint by James D. Roumeliotis

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If you are involved in B2B and are in manufacturing then your firm needs to carefully assess the most beneficial B2B distribution channel. It goes without saying that this should be done along with strong marketing support. A reasonable sales promotion budget should be put aside in order to foster brand awareness.

This also should include choosing among distributors, agents, retailers in addition to the firm’s own sales force (aka ‘direct model’ of distribution). The main advantage of a direct sales force is “control” and the ability to give direction to the sales team. The major disadvantage is overall cost.

Take the case of Novero. The following example highlights what can happen when the pieces of the puzzle do not gel coherently.

Novero, headquartered in Düsseldorf, Germany, is a manufacturer of premium and contemporary Bluetooth accessories. It was founded in 2008 via a management buyout from Nokia’s Mobile Enhancements division.

At the launch of their initial products, Novero had outsourced their sales team. This route delivered mixed results, directly proportional to the quality of the candidates hired by the outsourced sales and marketing services firm.

On the other side of the coin, Novero did not allow sufficient time (~ 4 months) to play out, or devote sufficient marketing resources, to making this approach work. On a short-term basis (>3 years) with uncompetitive products, high overhead, and lengthy sales cycle of outsourcing the sales team, the project was doomed from the start.

When Jarrod Stark, Director of Sales at Novero for North America, was asked which distribution channel to-date was the most effective, he replied:

“The distributor we signed up with, which specializes in consumer electronics and O.E.M partnerships, has been the most effective by far, and I would have gone with them from the start. The problem is that when we first started looking for distributors, Novero wasn’t willing to give them the necessary margin. It capped the ‘distributor margin’ at 12% globally, meaning that the higher percentages that certain distributors charge (off of wholesale) was a non-starter.”

He further added, “That distribution margin isn’t high because the distributors are being greedy, it’s the reality of a market where retailers demand significant MDF (market development funds) co-op programs and where sales commissions, warehousing, logistics, billing, and operational costs all need to be paid.“

Following lackluster sales, Novero relented and was finally able to put together a workable deal with its present distributor – at which point it shed its entire sales force.

However, it’s important to point-out that a manufacturer should avoid contracting with a distributor that uses more sub-distributors and layers in more costs. Since they carry so many brands and manage so many SKUs, products can get lost in the mix.

In 4 months time, Novero’s North American distributors were able to have their products in two big box stores in both the U.S. and Canada, as well as in about two dozen independents in both countries.

It’s not enough for any manufacturer such as Novero to simply focus on placing their products on the retail floor. An additional challenge is with ‘sell-through.’ Products can be placed on the shelf, but with inadequate marketing or advertising, and with products that haven’t generated ‘buzz’ on their own, overall product sales can remain below expectations.

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The Novero’s Case teaches that if a manufacturer does not have a branded name in the market place then partnering with a well-known reseller and/or a major distributor is a viable option. This should allow a firm to gain entry in the market place quickly and presumably at an optimized cost.

“So, where does Novero go from here?” Jarrod Stark pointedly asked.

“Steady as she goes. We’re concentrating on promoting the products that have the most traction at retail, build out our retail network, leverage social media sites to generate buzz, develop stronger sales partnerships, increase our online presence, and work with our retailers and distributors to respond more effectively to their feedback.”

One must keep in mind that resellers are usually selling other vendors products – and perhaps competing products. That said, manufacturers should be quite selective on who they choose as a reseller/distributor. The selection criteria should be by geography, customer type, industry or value proposition.

Needless to say, choosing separate reselling partners avoids overlap coverage.

As for compensating the resellers and/or distributors, they require a list price discount or volume scaled prices for the products that need to be sold. This reduces the manufacturers’ margin in the short-term, if not for long-term gain. These include promotion, training, returns, tradeshows/events, resellers’ activities, and marketing collateral. They are merely a few areas that should be factored into the overall financials to determine the actual profitability.

Controlling the flow of products and services from producer to customer requires careful consideration because it can determine success or failure in the market place.

Distribution strategy is influenced by the market structure, the company’s objectives, its resources and its overall marketing strategy. To take this scenario lightly is to put the firm at risk no matter how seductive or unique the product offers are. Careful planning and thought should go into the details to achieve the objectives, which should be clearly articulated from the start.

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Plotting Sales Structure Strategy

by James D. Roumeliotis

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Structuring your sales organization has an enormous impact. This key and elemental issue in marketing poses several key questions for any marketing strategist. Let’s start with some of the elemental questions:

How do you sell to your end-users?

Do you use a direct sales team, resellers, a website, or a combination thereof?

A sales force organization consists of a sales force which is structured in a way which will benefit the company and ultimately, the end-user. Some sales forces are highly structured while others are not. The best path depends on the organization, the context of your market -whether products or services- and how you see your organization meeting its objectives.

Product or service distribution constitutes one of the 4 P’s in the marketing mix. In this case, it’s the “place” or “placement” (aka distribution). It’s a crucial factor in your entire marketing strategy as it helps you expand your reach and grow revenue in the most efficient manner. Deciding upon and plotting such a structure can be a daunting task in a company’s strategic plan as there are several factors to consider – amongst them the geographical territory and type of customer.

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Sales Force Dynamics: Instituting an Ideal Compensation Plan

by James D. Roumeliotis

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Sales compensation is a crucial factor in motivation. It is the sales executive’s best strategic tool to drive sales performance and motivate specific selling behaviors. When designing sales compensation plans, one of the most important steps is to identify the appropriate measures on which your sales representatives will be paid. A combination of salary, commission and bonus is usually most effective. The question then becomes how to successfully blend all three that will entice achievers, as well as reward them according to performance. Nevertheless, the plan needs to be kept as simple as possible.

The total compensation mix: what does it entail?

Total compensation depends on the complexity of the sales person’s selling tasks. The mix between performance and fixed pay depends on:

1)     Balancing salesperson and company needs;

2)     The type of salesperson you want to attract;

3)     The salesperson’s influence on the sale;

4)     The type of product or service sold; and

5)     Rewarding the salesperson’s specific actions or results most important to the company’s success.

Sales force compensation involves not merely salary, commission and bonus but also fringe benefits and reimbursed expenses – though these last two are considered non-compensatory since they are not influenced by sales results.

An ideal compensation plan should:

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Management by Tactics : A sales management supervisory technique and its effects on sales performance

by James D. Roumeliotis

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Ask any person involved in a sales supervisory position what they consider a sales person’s most important daily task and you will most likely receive the same response: “Sales/Prospecting Activities”.

Although most companies monitor and make efforts to control sales activities, few companies have a formal means of optimizing tactics. Leaders should take the time and effort to design performance measurement systems that are based on a balanced set of metrics and then reward their sales reps based on the desirable behaviors and the positive outcomes that result.

Management by Tactics™ : The Input Focused Protocol

Management by Tactics or MBT is a term, which describes a supervisory technique applied by progressive sales management. A Canadian sales strategist, Dr. Giovanni Di Girolamo, along with his associate consultants, conceived it in 2005. Through their research and personal experiences, they discovered a process, which consistently yielded, unsurpassed results from sales representatives – regardless of industry, sales experience or type of client (new or existing).

The principle behind this is a process where sales managers/directors, along with their sales force, identify the day-to-day activities required to achieve sales objectives and focus their energies in controlling such activities (known as “input”) – rather than simply focusing on results (a.k.a. “output”).

The latter applies to Management by Objectives or MBO, a technique first popularized by the late management guru, Peter Drucker, which places a great deal of emphasis on the outputs – in our case, the sales results.

Tactics v. Strategy

Tactic equates to an action plan for attaining a particular goal. The terms tactic and strategy are often confused: tactics are the actual means used to gain an objective, while strategy is the overall campaign plan, which may involve complex operational patterns, activity, and decision-making that lead to tactical execution.

Research and Consequences

The research that was conducted in a 12-month period, by the Canadian sales strategist and his team, consisted of twenty-nine subjects from a sample of four companies representing different types of industries. During this study, sales representatives from the four companies worked exclusively with output goals – namely sales objectives. Data were collected. This stage of the research was referred to as the “Pre-Test”.

The researcher then proceeded to implement the Management by Tactics method. In this phase of the research, the sales people were given input goals, such as the number of telephone calls to be made, number of prospects to visit along with various sales presentations to be performed. This stage of the research was referred to as the “Post-Test”.

Results from all four companies suggest that there is indeed a relationship between variables. Not surprisingly, MBT had a positive impact on sales performance. The outcome was as follows:

• In the absence of applying MBT, all representatives in the study under achieved sales objectives between 21% to 75% of their target.

• On the other hand, when all sales reps were given input goals under the MBT system, the weakest sales rep attained 100% of target – while the other two reached 117% and 118% respectively for a combined average of 112% of sales targets.

Observations & Effect

Management by Objectives (MBO) is a results oriented management system, whereby; top management involvement in the process is crucial along with employee agreement to the same organizational objectives. In sales, the manager and sales person identify and negotiate specific goals for the upcoming period. Subsequently, the sale rep and manager sign a performance agreement that specifies these goals as performance standards. In contrast, Management by Tactics (MBT) focuses on the effort and activities by adopting the following philosophy:

• Activity information and feedback encourages greater incentive and effort.

• Micro-management equals detail oriented, whereas, macro-management
equals the big picture.

• Behavior oriented sales people outperform the results oriented type.

• Clarity of tasks to be accomplished and feedback are two key factors at motivating sales people. Link rewards to performance.

• Activity reports should be submitted by the sales people and reviewed by sales management during scheduled coaching sessions. These include:

1) Weekly activity report;
2) Observation report
(is used to evaluate the salesperson’s overall ability to perform the job and includes various factors crucial in obtaining results);
3) Annual evaluation form.

No doubt, we have all heard the saying from various management authorities, “What gets measured, gets done”. Sales leaders and their sales force should focus on the process/activities rather than the end result, as output control has no direct effect on end performance. By working backwards, namely, taking the desired output and breaking it into activities required to achieve the output or end result, has been proven to be the most practical approach.

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