Sales force targets

Targets of the sales force must be realistic and must help provide incentives to boost sales activities. For
example 3M ESPE, takes note of the fact that the sales person considers the target achievable and he is
motivated to meet it, rather than get an impression that it is an unattainable target.

The purpose of target setting has been largely discussed as a way to accomplish a specified volume of
sales per month This method of evaluation of salesperson performance has been approached from at least
three perspectives (Boles, Donthu, and Lohtia 1995). One perspective is to focus only on output measures
of performance, regardless of input factors (Anderson and Oliver 1987). For example, salespeople could
be evaluated only on sales volume or quota attainment. A second approach was to temper the evaluation
of performance with a subjective assessment of potentially mitigating factors, such as perceived territory
difficulty or salesperson effort (Jackson, Keith, and Schlacter 1983). A third approach was to evaluate the
salesperson's actual performance against expected performance, based on the level of various input
factors believed to influence performance (Beswick and Cravens 1977).

The above methods assume the objective of the company is to maximize sales. The company’s objective
may however be to:
a) Ensure penetration of the product in a specified area within a stipulated time frame, or
b) To create awareness and/or generate trial for the product

If the company has these objectives, then the sales may not be the ideal basis for target setting for sales
force as the efforts of the sales force would be wrongly directed to maximizing sales rather than
developing the market. As Boles Donthu, and Lohtia (1995) state the assessment of salesperson
performance and the consequences of that assessment should be closely linked to the conceptualization
and measurement of salesperson performance. That is the objective of the target setting should ensure
that the effort of the salesman is directed towards the goals of the marketing function (refer to the
Bentonite case below).

Identifying and using the correct basis for setting targets is therefore essential for achieving the company
goals as well as motivating the salespersons to perform. Cravern and Woodruff (1973) have also
suggested selecting variables corresponding to the operational measures for a given organization. This
chapter develops a framework to identify the appropriate measure for evaluation to achieve the company
objectives as well as motivate the salesperson to perform effectively.

8.2 Framework for identifying the appropriate evaluation criteria

The framework is developed considering the fact that the effort of the salesman should be directed
towards the long-term objective of the company. As seen in the case the effort of the salesman is a function
of the market conditions (amount of competition, stage in the product life cycle) and the consumer
decision process, specifically the way buyers evaluate quality. The evaluation criterion for different
scenarios (based on the stage in the product life cycle and the way the buyers’ evaluate quality) is
described below.

Different scenarios:
1. Introductory phase of the product life cycle
a. The product that is predominately evaluated by search attributes: The objective of the
company and the effort of the sales force have to be directed to creating awareness and
interest for the product. As the consumers are evaluating the quality based on search
attributes, the salesman’s effort should be to ensure that the product is visible to the
consumer and the consumer has the option of looking at the search attributes. This can
be achieved by ensuring proper displays and point of purchase advertisements. As in the
case of the “Aashirwad ready to eat foods”.

The current scenario is that Ready to eat foods like “Aashirwad” curries is preferred by a
select market segment (refer selling style chapter). The task for the sales force is to
spread awareness and information about the product in as many ways as possible.
Though the food products area experience items, a ready-to-eat concept is a convenience
product and purchased by mainly taking into account the search attributes (quantity,
type of curry, price etc). The role of the sales force would therefore be to ensure that the

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 brand awareness is created through higher visibility. Hence, the sales force efforts should
be directed to ensuring display of the product and the point of purchase advertisements
in as many outlets as possible. Thus the parameters on which salesman are evaluated
should be number of displays organized, amount of point of purchase advertisements
that have been displayed.

b. The product that is predominately evaluated by experience attribute: Here also the
objective of the company is to create awareness. However, the process by which the
awareness can be created for products, which are evaluated by experience attributes,
would be to show that the product is able to deliver the benefit the consumer is
interested in. “Seeing is believing” would be basis on which awareness and interest can
be created. Hence the number of demonstrations would be the ideal type of evaluation
criteria for the salespersons.

As explained in the case of Bentonite, a product purchased on experience attributes, the

evaluation has to be mainly on providing information through demonstrations (therefore
the evaluation criteria of number of demonstration conducted)

c. The product that is predominately evaluated by credence attribute

In case of products/ services with credence attributes, like Insurance, the need of
security can be best communicated through the mass media like Television. So, at the
stage of need creation for products or services with credence attributes, the sales force
should not have any evaluation criteria (as it is difficult for the salespersons to
communicate the emotional aspects; like in this case; security). In case, the insurance
companies sales force are evaluated on the number of policies booked at this stage, then
the sales force would give different information to close the deal. As used to be the case
in Life Insurance Corporation where the agents used to emphasize savings rather than
security.

2. Growth phase of the Product life cycle (low competition)

a. The product that is predominately evaluated by search attributes:
In a growth phase where the consumers judge the quality by search attributes, the
objective of the company would be to expand the market and increase its presence in as
many markets as possible before the competition increases. The sales force should
therefore concentrate their effort on adding new dealers/ customers in the existing
market as well as in new markets. Since availability is important, availability in larger
number of outlets would provide a greater chance of the product being seen and
evaluated (search attributes) and therefore more sales. So the sales force should be
evaluated on the number of new outlets rather than on just sales (sales could only be a
secondary criteria). If the company evaluates the salesmen only on sales, then the
salesperson would concentrate their effort in the more developed markets and would
not spend time in developing new markets. Examples of fans and paints are given below.

Fans are mainly evaluated on the search attributes of design, price etc. In mid nineties
when the market was in a growing phase in India, the evaluation criteria had to ensure
penetration and new market development. This was captured in the evaluation criteria of
Crompton Greaves India Limited fans and appliances division.

Evaluation of the sales force of Crompton and Greaves was done on the basis of both
objective and subjective criteria.

Quantitative criteria include:

i. Sales Targets: Achievement of sales targets given to the salesperson for each year as
well as month.
ii. Debtors’ control: The collection from the dealers was the responsibility of the
salesperson. He had to see that the dealers’ pay on time and the credit period was

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 kept to the minimum. His handling of this sensitive issue with the dealers was very
important.
iii. Territory development: The salesperson had to make an assessment of the potential
demand for his products in his territory. Whether a new dealer has to be appointed
or can the existing dealers service the demand had to be looked at.
iv. Promotion /Publicity: The efforts expended by the salesperson in the publicity of the
company's products. This includes local promotions and co-operative advertising
with the dealers. It also took into account the activities undertaken by them for
selling the products in rural areas.
v. Market Feedback: The amount of relevant or pertinent information, which the
salesperson was able to provide about his territory.
Qualitative criteria include:
vi. Relationship with dealers. The feedback about the salesperson was obtained from
the dealers.
vii. Sincerity towards job and diligence: The Company evaluated his hard work and
commitment towards the job.

Similarly paints, though a credence product, are purchased mainly for the shades, which
are search attributes. So the evaluation of the sales force selling paints in a growing
market has to be towards increasing market penetration. This was reflected in the
evaluation criteria of ICI Paints also

Evaluation of the sales force of ICI:

i. Channel expansion-New dealer opening
ii. Maintaining existing dealer network
iii. Healthy growth of the network
iv. Product line maintained, its not just the fast moving SKU’s but, the whole range.
v. Timely settlement of the accounts.
vi. Relationship with the retails network
vii. Competition activities to be regularly monitored
viii. Market demands in term of new products to be understood and, feedback to be given
to the company from time to time.
ix. Successfully planning and implementing of incentive schemes.
x. After sales service- any complaints to be handled timely.

b. The product that is predominately evaluated by experience attribute:

As mentioned earlier, purchase of product categories falling in this category are primarily
influenced by “seeing is believing”. As the product moves up in the product life cycle and
consumers start using the product, own experience or the experience of friends and
neighbours becomes the most important (and credible) source of information. The
objective of the company should therefore be to increase the positive ‘word of mouth’.
Reducing the post purchase dissonance of the consumers could increase the positive
word of mouth. In order to reduce the post purchase dissonance, the company should
ensure that the performance of the product is to the satisfaction of the consumers
(increase possession utility). Ensuring proper after sales service can reduce the post
purchase dissonance. Therefore the company has to primarily concentrate on this aspect
rather than on sales alone. Increasing possession utility would increase the brands
loyalty also. So, the effort of salesforce should be to handle complaints, improve service
by opening more service outlets as is been done by TV Set top boxes.

• Sales force Evaluation of TV Set top Boxes takes into account the following
parameters
– Penetration in Metros as against target
– Vendors signed-up for providing service

c. The product that is predominately evaluated by credence attribute:

As mentioned in the case of the Bentonite sales of agricultural uses, the objective of the
company should be to build relationship and trust with the buyers and therefore the
sales force evaluation should be the number of calls made to prospective customers.

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 ICICI Prudential Insurance Company also set its evaluation criteria to include prospect
calls made and follow-up calls made.

3. Maturity phase of the product life cycle (high competition)

a. The product that is predominately evaluated by search attributes
A product in the mature stage of the product life cycle should focus on increasing its
market share (or retaining its market share). The evaluation criteria should therefore be
to maximize value. As in case of the spare parts business of Tata Motors. The sales targets
are normally 10% of the value of the vehicle sale in that district

b. The product that is predominately evaluated by experience attribute

As seen earlier, for products evaluated on experience attributes; after sales service would
be important to increase positive word of mouth. As the positive word of mouth
generates demand, the company has to cater to the demand. Not able to cater to the
demand could create a negative feeling among the consumers, so the focus of the
company should now be to maximize sales. The evaluation criteria for the sales force
should be to increase sales.

For example, TVS Electronics Ltd., has the following basis for evaluation of sales force:
i. Town salience (TVSE share in that town in %)
ii. Partner Salience per town (number of partners buying TVSE in that town)
iii. Extraction per partner (TVSE sales value per month in Rs lacs)

c. The product that is predominately evaluated by credence attribute

As seen earlier, here the consumers are looking for trust. Once the company (or the sales
person) has been able to build trust, then the buyer would be loyal. Then, most
purchases of the buyer would be from the company which has gained consumer’s trust.
Therefore, the loyal customer base is the critical element in this type of situations. More
number of customers loyal to the company, greater would be the sale. Any action by the
company or the sales person to break the trust would be detrimental to the company. So,
criteria helping in maintaining the trust should be important here as in the case of ABN
Amro. In addition to the number of calls made to prospective custmers, evaluation
criteria of ABN Amro Bank include criteria which aim at building the trust (points iii and
iv given below).

Product: ABN Amro Bank - Credit Cards

Evaluation of the Sales Force
i. Number of calls made and customers met in a workday.
ii. Once the sales person meets a prospective client, he should be able to close the sale
(except when the customer does not fit the profile required to get the credit card or
is unwilling to give requisite documents for the same).
iii. Taking initiative and giving important feedback related to the market, competition
and consumer behaviour.
iv. Honesty and Integrity.
v. Following of policies and procedures, especially in terms of reporting and following
up on customer requirements.

Based on the above discussion, table 8.2 summarizes the most important evaluation criteria for the sales
force under different situations. The company can have other criteria also, so as to enable it to move from
one type of criteria to another type easily as the product moves in the product life cycle (specifics dealt in
performance evaluation chapter).

Table 8.2 Sales force Evaluation criteria for different market situations
Market condition
(Product life cycle) Type of Product

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 Search attributes Experience attributes Credence
(example Non (example Durables / attributes
durables) Industrial Prod.) (example
Services)

Introductory phase Displays organized Demonstration No evaluation for

of Product life cycle salespersons
required
Growth phase New retail outlets New No. of calls
Low competition opened and Sales Service outlets
Maturity phase Market share Sales Customer base
High competition

Section 2
8.3 Process of target setting:
Once the evaluation criteria have been finalized the company should set targets. Setting targets can be
done by a “top down” or “bottoms up” approach. In top-down approaches, company personnel provide
aggregate company forecasts that sales managers divide into zone, region, district, territory, and account
forecasts. In bottom-up approaches, account forecasts are combined into territory, district, region, zone,
and company forecasts (figure 8.1).

Figure 8.1 Forecasting Approaches

Top-Down Approach Bottom-Up Approach

Forecast of General
Economic and Business
Conditions for the Country
as a whole

Market Potential for

Relevant Industry
Factors Affecting
Company’s Share of
Total Industry Sales
Sales Potential for
Sales ‘Managers’
Company Forecasts
as a Percentage
for
of Industry Sales Districts,
Zones, Regions, Combined
Combinedinto
Salespersons
intoDistrict,
Territory 103
Company
Territories,Sales Forecast
and Accounts Company
Region,
Forecasts
‘Forecasts
and ZoneSales
of AccountsForecast
Forecast
Ingram et al 2004 (Pg. No. 112)

Top down approach:

The targets for the sales team are fixed in line with the company’s growth objective, prevalent market
conditions, demand forecast generated by using various economic indicators etc. Once the targets are
finalized, the target is broken down into smaller targets (similar to breakdown method) & assigned to the
sales persons keeping in view the market conditions and the support that the company is likely to provide
to that region. Examples of top down are seen in Yokogawa Blue Star and 3M ESPE.

Yokogawa Blue Star

 Industry based Sales targets for each team
 Targets are worked out using the ‘Delphi- Method 19’ comprising of the top management and Industry
managers for each sales team..

3M ESPE
The factors, which are considered for target setting, are discussed below.
1. The business unit’s targets for the year – The target of the business unit serves as a guideline for
the sales people’s target. The product target for the business unit is distributed across the various

19
Delphi Method is a group decision process about the likelihood that certain events will
occur. The Delphi Method makes use of a panel of experts.
http://www.ryerson.ca/~mjoppe/ResearchProcess/841TheDelphiMethod.htm

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 sales personnel. The target of a sales person comprises revenue targets for different product
lines.
2. Previous Track Record – The target allocation considers the sales person’s achievement in terms
of revenue generation in the previous cycle. The target setting team analyses the various factors
that contributed to the performance in the previous cycle
3. Market Factors – This basically considers the macro environment factors that affect the market in
general. These also play a crucial factor in the sales revenue for the product.

Bottoms up approach: Here the estimates of sales are worked out in consultation with the field sales force
and integrated to the region.

Ador Fontech Limited, special purpose welding electrodes finalizes targets using a bottoms up approach.
Their process is as follows:
i. The geographical region of one state is divided into various territories. The industries falling in these
territories are then analysed vis-aà -vis the product range and the business potential in that territory
ii. Each industry segment is anaysed depending on the potential for the product range and the status
and health of that particular industry and the individual customer.
iii. The targets are then fixed product wise and customer wise for the particular territory with a scope of
creating another 10 to 15% new customer base and promotion of new products being added in the
coming year.

Similarly, Telco Construction Equipment Company uses a bottoms up approach. Annual Forecast of the
company are based on the projects and constructions activity in an area. The potential of machines is
derived and then on the target market share basis, final figures of targets are arrived.

While both methods are adopted, when the effort is more developmental based (as in the case of products
in the introductory phase of the product life cycle or products evaluated by credence attributes), the
targets should be bottoms up (table 8.3). In these cases the efforts in individual markets need to be
considered. On the other hand, if the efforts of the salesforce are more towards generating sales then the
company should adopt top down approach. Here also the effort, could vary from each to region, but as the
sales are going to be influenced by the company support (advertising) and macro economic parameters,
the top management who are more familiar with these two aspects should decide on the targets and then
divide the sales quantity into specific territory targets. Local field staff who may not be aware of (a) the
type of support that the company is planning for their territory and (b) the macro economic factors that
are likely to influence the market would not therefore be in a position to give a correct estimate for the
target.
Table 8.3 Process of target setting
Market condition (Product
life cycle) Type of Product
Search attributes Experience attributes Credence attributes
(ex: Non durables) (ex: Durables / (ex: Services)
Industrial Prod).

Introductory phase of Bottoms up Bottoms up --

Product life cycle
Growth Top down Bottoms up Bottoms up
Low competition
Maturity Top down Top down Bottoms up
High competition

In general bottoms up targets are considered realistic as the sales force is directly involved in the target
setting, but in tops down approach there is a possibility that the targets may not be considered realistic or
may be considered very high. The company should therefore explain the reason for the targets; otherwise

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the sales persons would consider the (unrealistic) targets are being thrust on them 20 and may not be
motivated to achieve them.

10.1 Assigning weights for evaluation criteria

The company should follow a structured process and at the beginning of the year, the various parameters
of performance need to be fixed and weight age allocated. The framework on target setting would identify
the critical evaluation criteria. The other criteria can be identified depending on the likely changes in the
market conditions. The critical criteria given the current market conditions should be given the highest
weightage for evaluation and the other criteria can be assigned relatively low weightage. Evaluation could
include some qualitative criteria also. For example a company selling Industrial products in a mature
market had the following basis for performance evaluation.

To capture the sales and sales effort the company has identified, sales as the main criteria but it has
also given weightage for effectiveness of sales calls and collection. Being an industrial product,
product knowledge was considered important for effective selling, so the company has given
weightage for technical knowledge also. Other qualitative criteria of the functioning of the salesforce
(integrity and adherence to company norms) were also given importance. The weightages for
different criteria were as follows:
A. QUANTITATIVE ASPECTS (70%) :
1. Sales Booking : 35%
2. Correctness of order processing :5%
3. Number of sales call : 5%
4. Number of calls for enquiry generation : 5%
5. Number of sales call for problem solving / rapport building :5%
6. Collection of outstanding : 15%
B. QUALITATIVE ASPECTS (30%) :
1. Technical knowledge : 15%
2 Adherence to company norms, adaptability to changes, quality standards : 10%
3. Integrity : 5%

M/S Ador Fontech Limited, which is also in the similar market situation as the above company, also
had the primary criteria as sales. The company assigned 50% weightage to sales. In addition they
have also included the other parameters (as detailed below), which focus on market development.
CRITERIA WEIGHTAGE
- Overall Sales Performance 50%
- Overall Sales Growth achieved 20%
- New Product Sales 10%
- Growth in Individual product category 5%
- New Customer developed 5%
- New Applications Developed 5%
- Customer Service 5%

The process of performance evaluation for a service is given in Box 10.1.

10.2: Define the reports and the frequency at which the reports.
The time period for the evaluation has to be clearly defined taking into account the way the sales effort
needs to be spread. For example, sales should be reviewed fortnightly or monthly so that the salespersons
effort is spread evenly through out the year.

A company had the following frequency for checking the performance of the salesperson:

20
As stated by Vroom’s Expectancy theory, a sales person will perform only if he/she feels that it is
achievable.

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 PARAMETERS PERIOD
a) Visits to the retailers Weekly
b. Primary Sales (Unit, value) MONTHLY
(Distributor buying from the company)
c. Product promotion Monthly
d. Outstandings Monthly

Since the sales activities take place outside the view of the sales manager, each of the above evaluation
criteria would convert into a report from the salesperson. So increasing the evaluation parameters would
mean increasing the number of reports a salesperson has to fill and therefore, diverting the attention of
the salesperson from the primary activity to form filling.

For example, a company had a daily tour report for the salesman, which included information on the
dealers met, and the outcome. The salesmen, who used to make sales calls till 9pm (travel another hour to
reach home) and start early next morning, were left with no time and interest to fill the daily report. In
practice what was noticed was that all the salespersons used to fill the daily reports once a week and
submit them. The company also did not monitor the daily reports and an office assistant just filed the
reports. The entire exercise of daily reports was thus an unproductive activity (refer Box 10.2 also). The
company should therefore identify parameters and reporting pattern based on the need for enhancing the
effectiveness of the sales force.

10.3 Objective criteria have to be set for parameters to be appraised.

To make the evaluation objective the scoring pattern has to be objective and specified before hand. For
example, the basis of evaluation for some of the parameters used by ITC ltd are given below:

Retail Throughput ( Actual vs. target based on potential)

Scoring Guide
-2=< 70% of target,
-1=70 - 80% target,
0 =80- 90 % of target,
+1 =90- 95 % target,
+2 =95% +

Availability (Actual vs. Norms for the different brands)

Scoring Guide
-2=< 70% of target,
-1=70 - 80% target,
0 =80- 90 % of target,
+1 =90- 95 % target,
+2 =95% +
POP Maintenance
Scoring:
-2 = if > 3of outlets don’t have adequate POP Maintenance
-1 = if 0-3 of outlets don’t have adequate POP Maintenance
+2= if all outlets have adequate POP Maintenance

Qualitative parameters
Space provided by trade for ITC Merchandising is Good relative to that provided to other
Cigarette/FMCG Companies.(score0/1/2)
Overall relationship of salesperson with trade(score 0/1)
Ability to capture market intelligence, competitor’s activity. (score 0/1)

10.4 Annual Review Process:

The company should have an annual review of the performance of the salesperson against the evaluation
criteria. This would help the company monitor the performance and decide on whether the person could
be considered for the promotion or would require some training to improve his/ her performance. Review
process at SAIL for its TMT bars is described below.

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 TMT SAIL
The reporting officer has an exclusive one-to-one meeting with his subordinate to discuss the plan
fulfillment after the appraise has filled up the self-appraisal. The discussion includes review of
constraints faced, facilitating resources, strengths and weaknesses of the appraise, his developmental
needs and suggestions for improvement. The reporting officer then fills the performance assessment form
which is a five point rating scale with weightages. The outcome of the PRP is noted in the specific form
and signed by both the appraise and the reporting officer.

The appraisees will be classified into the following grades in the order of merit : O,A,B,C.
84 & Above : O
68 – 83 :A
52 - 67 :B
20 – 51 :C
After receiving the appraisal forms from the Reporting Officer, the Reviewing Officer ( one rank higher
than the Reporting Officer) fills up a similar performance assessment sheet having the same 5 point rating
scale. The Personnel Office then compiles the total scores of both the Reporting and Reviewing Officers
giving 50% weight-age to each.

Total scores are then arranged in the descending order for an Appraisal group( e.g. salespersons who are
in the same group and the primary gradings are sorted in such a manner that the total number of
appraisees in the group are distributed so that there are 10% appraisees in O grade, 20% in A, 45 – 55 %
in B and 15-25 % in C.

In the final stage comes the Performance Review Committee (PRC) comprising of HODs and Sectional
Heads that decides the final grades.
(i) The salespersons who get O/A grades consistently and thus fulfill the
criteria for promotions to the next level are promoted while those who do not have
to wait for longer period till they get the minimum grade points or reach the
timescale limit for promotion
(ii) The high and low performers are both recommended for job rotation
often to a different territory and in some rare cases even to a
different function.
(iii) The development needs identified in the process of the appraisal
system are taken as inputs for planning training programmes for
the salespersons once such common needs have been identified.

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