Company Sales Management Plan (Hart Hospital Equipment, Inc) - Term Paper Example

? Company Sales Management Plan The success of an organization typically depends on the performance of its sales force. Sales forces not only generate sales for a company, but also represent the products of a company towards the customers. Effective sales persons perform several activities and therefore need to be managed carefully by the sales managers. An appropriate sales management plan helps to increase the productivity of sales force as well as raise the performance of an organization in the market. In this competitive market environment, organizations require to develop a strong sales force structure and appropriate strategies which can ensure success in the form of high revenue. The paper will analyze the sales force of Hart Hospital Equipment, Inc. which deals in selling several medical care equipments. On the basis of assessing the sales strategies of Hart Hospital Equipment, Inc by recognizing its territory alignment, customer segmentation, sales force and account strategy, this paper would recommend about the number of sales representatives and effective sales force structure which can be profitable for the company. Analysis of Hart’s “Go-to-Market” strategy Go-to-market strategy outlines the actions and the involvement which relate an organization to the customers and the market opportunities. The go-to-market activities of Hart can be divided into two parts which are: customer attraction activities and channel activities. The customer attraction activities are considered as responsibility of salespersons. However, the salespersons are not involved in the channel activities (Zoltners, Sinha & Zoltners, 2001). The sales strategy of any company can be of two kinds i.e. direct selling and indirect selling. The direct sales force includes those people who are employed by organization on a constant basis for selling products to customers directly. In indirect selling, organizations use salespersons from other companies such as merchants, distributors, agents or hired sales force. There are several substitutes for direct and indirect sales force which comprise of advertising and promotion, exhibitions, direct mail, telesales and e-sales. Hart Hospital Equipment Inc. (HHE) uses the direct sales force for trading their products. It mainly uses the magazine advertisements, direct mail and conventions to reach to the target customer segments. The following diagram will depict the go-to-market activities of HHE: The go-to-market strategy provides a methodology for determining the role of direct sales force for an organization’s business. In case of HHE, their sales force is the major medium for promoting products in the market. Through their sales force, HHE can effectively express the information about products to the customers. The sales force of HHE provides effective service to the customers in order to retain them. Analysis of Hart’s Overall Sales Force The sales force of a company can vary from country to country or industry to industry. The sales force of HHE is divided into three regional areas where it performs the business operations. The following image will describe the overall sales force of HHE: In HHE, there are almost 93 sales representatives and among them almost 87 representatives have geographically determined area which is further divided into three districts. The sales force of HHE serves the pre-hospital market locally. In the medical equipment industry, the sales force of HHE is quite active. Components of HHE’s Sales Force Every organization which deals in selling products can be observed in terms of three basic components which are sales force investment, sales force activity and company results. The sales force investment is regarded as the amount associated with employing salespersons such as expenses for employing, providing training assistance and arranging meeting among others. For HHE, the company spends almost 13% of their total sales revenue for the sales force which is 2% point less compared to industry average. The sales force activity of a company includes activities which are required for increasing sales such as travelling, meeting, performing managerial responsibilities, and involving in professional improvement actions. The major component of sales force activity is organization oriented selling procedure. The selling procedure comprises of lead creation, forecasting, need analysis, solution development, proposal demonstration, co-operation, customer service, and account preservation (Zoltners, Sinha, & Zoltners, 2001). In HHE, the sales force activities are marketing, providing excellent services and monitoring the performances. The sales forces are provided with adequate training so that they become skilled in their specialized fields. The sales force activities are focused on results of the company. The company results comprise of sales, incomes, market share, or growth figures which are compared to previous year’s results. An effective organization competently converts sales force investments and activities into high sales. Due to effective sales force activities of HHE, the company had gained increased sales. In the year 2009, the sales of HHE were almost 71 million USD, which was 42% greater as compared to 2008. The following diagram will describe the components of HHE sales force: Assessment of Sales Force of HHE Assessment of sales force comprises inspecting the major sales management procedures. There are several drivers for assessing the efficiency of sales force. Both the qualitative as well as quantitative methods can be used for assessing the skill and impact of sales force in an organization. In measuring the sales force in an organization, the territory based examination can be a beneficial technique for productivity drivers. The qualitative data can be used to assess the impact of productivity drivers (Zoltners, Sinha & Zoltners, 2001). The following matrix will describe the sales efficiency drivers of HHE: High Importance Low Performance 1.0 High Importance 2.0 I High Performance n d u 3.0 s t y 4.0 1.0 2.0 3.0 4.0 5.0 Current Performance of HHE Low Importance Low Performance 6.0 7.0 8.0 9.0 10 6.0 P e r 7.0 f o r 8.0 m Low Importance a n High performance 9.0 c e Source: (Zoltners, Sinha & Zoltners, 2001). From the above matrix, it can be observed that the compensation structure and training of sales force of HHE is appropriate according to industry performance, but the company has more opportunity in drivers such as hiring, customer requirements and size & structure of workforces. As the sales of HHE increases, the number of national account representatives remains at the same level. Therefore, HHE needs to hire more employees in this area in order to perform better. In comparison with other competitors, the prices of HHE’s monitors are much lower. In order to gain competitive advantage, HHE needs to consider the requirements of customers and accordingly set the product prices. Besides, HHE can change its size and structure of sales force in order to gain benefits from other markets by exploiting the opportunities (Zoltners, Sinha, & Zoltners, 2001). Territory Alignment Organizations need to balance their sales territories in order to gain maximum benefits. Territories of sales can have several characteristics, for instance, certain territories require harder efforts while other territories might require lesser efforts. Similarly, certain territories have higher sales prospects, whereas other territories have little sales prospects. Therefore, the sales forces need to be aligned in such a way so that it can have appropriate market share in the territories (Zoltners, Sinha, & Zoltners, 2001). There are several reasons for which organizations require effective territory alignment which are described in the following diagram: Source: (Zoltners, Sinha, & Zoltners, 2001). Designing Sales Territories Sales territories can be designed in three ways which are geographical, vertical and exposed. Geographical: Majority of sales territories are based on geographical pattern. Through designing territories on the basis of geographical ways, organizations can gain two advantages which are advantage of time and advantage of lesser conflicts between sales persons. Geographic territories significantly decrease the time because it focuses on certain particular areas of operation, and with geographical allocation, salespersons cannot have conflicts on accounts because each account is provided with a specific geographical area. However, organizations can face lack of opportunity as time passes. Likewise, networking leads and account appointments can be finished for the salespersons that control a specific geographical territory (Lambert & Kerkhoff, 2006). Vertical: Vertical territories are established on the basis of industry. Organizations can get advantages of developing unique selling strategies in vertical territory design, because this territory provides the opportunity of functioning with industry specialists. The major disadvantage of vertical territory design is higher time requirements. In addition to this, in vertical territory, it is hard to allocate each industry to different salespersons; therefore certain industries might remain uncovered (Lambert & Kerkhoff, 2006). Exposed: The exposed sales territory is regarded as free market, where there is no restriction of salespersons or products. This kind of territory is much beneficial as it is characterized by high level of aggressiveness of salespersons and the time management is also less as salespersons begin their operations in the entire region. In open territory, extreme responsiveness is required in order to gain advantages of any kind of opportunities in business environment. However, the number of conflicts in this territorial design is much high compared to other two designs (Lambert & Kerkhoff, 2006). Assessment of Hart’s Customer Segmentation and Account Strategy Development Customer segmentation is the procedure of allocating customers and market opportunities into classes with homogeneous features. An effective segmentation includes recognizing a small group of segmentation features or norms and allocating customers and market opportunities to the segments. The homogeneousness of segment guarantees a resemblance of selling in a segment. Segmentation can be done in several methods. To develop appropriate customer segment, specific sales activities are required for customers in diverse segments. For instance, in mass segmentation, the salespersons conduct similar sales activities with all customers. With regard to HHE, it uses niche customer segment. HHE markets their products to the hospitals, surgical centers and emergency rescue teams. Segmentation On The Basis Of Sales Potential Organizations can segment the customers on the basis of sales prospects. Segmentation through sales prospects can provide the benefits of gaining effective symptom with regard to salespeople as well as company’s performance in the industry through assessing the customer information. HHE segments its customers on the basis of sales prospects. It allocates the resources to those segments that have high probability of sales (Zoltners, Sinha, & Zoltners, 2001). For instance, the market of defibrillator and monitor of HHE is based on sales prospects. These segments had gained sales of almost 71 million USD in the year 2009 and it was expected that the sales amount will rise to 100.5 million USD in 2010. Though customer potential is a fundamental segmentation variable, several industries have lack of information on market prospects. In such circumstances, attentiveness of performance is required to measure prospects. For instance, in case of medical equipment industry, it has plenty of information about sales of a particular product class which makes it beneficial for HHE to assess the sales prospects. Segmentation On The Basis Of Customers’ Profiles, Activities and Requirements The requirements of customers drive sale of any product. Organizations which can understand the requirements of customers better, can effectively segment their customers. Customers’ requirements can be segmented by two methods such as product driven method or service driven method. The product driven customers’ desire for quality products, and the service driven customers’ seek for better worth for the service regarding the products (Zoltners, Sinha, & Zoltners, 2001). In case of HHE, it can be observed that, their customers are segmented on the basis of service. In other words, the customers of HHE not only wish for quality products, but also seek good assistance from the sales representatives regarding any issue about their products such as usage or better handling among others. The customer requirements from any organization can be of three types which are cost, technology and relationship. Technology in this sense is the unique characteristics that the customers can get from the products from a company (Zoltners, Sinha, & Zoltners, 2001). By analyzing the customer segmentation of HHE, it can be found that it concentrates on developing good relationship with customers, but it faces huge competition with respect to cost and technology from other rivals. Furthermore, customer segmentation can also be made on the basis of sales volume, growth, and level of centralized decision making. Account Strategy Development The development of account strategy in an organization includes creation of sales activities or market coverage approaches for every segment, evaluation of costs and benefits of each possible coverage approaches and selection of the most useful approaches which are within the capacity of sales force. The characteristics of customer interaction and the quantity of sales activities need to be considered for effective account development. Once an expressive, assessable and actionable segment is defined, the worthiness of segmentation can be realized by proper actions (Zoltners, Sinha, & Zoltners, 2001). The communication of salesperson in an organization depends on the situation of account. Salesperson has diverse objectives for suspects, prospects, and customers. In order to accomplish those objectives, the sales activities of an organization vary from closing the sales to providing superior services to the customers. For any organization, the suspects who might purchase the products of organization are considered as accounts. Therefore, in order to develop account strategies, salespersons need to qualify the suspects by confirming that they have the plan to purchase. Through communication with the potential customers the salesperson of an organization can assess the condition of account (Zoltners, Sinha, & Zoltners, 2001). At the outset, HHE needs to understand the probability of sales from potential customer segments. Once the company establishes the possibility, the suspect or the account will transform into prospect. In this phase, sales persons seek to understand the purchasing pattern of the prospects such as requirements of customers and their buying procedures. Therefore, the effective customer segmentation can guarantee that such selling process variances are considered in making customer segments in the principal place (Zoltners, Sinha, & Zoltners, 2001). In case of HHE, the company has segmented its customers principally by two ways which are hospital users and pre-hospitals users, so that all selling processes can be made on the requirements of these two segments. The hospital customer segment of HHE is further divided into sub segments which are contract hospital and non-contract hospitals; also the pre-hospital segment is again divided into three customer segments which are paramedics, Emergency Medical Technicians (EMTs) and Surgicenters. The following diagram will describe the customer segmentation of HHE: For any organization, the customers can be of three types which are economic consumers, hard-user consumers, and technical consumers. Their interests from products are different and therefore, organization needs to develop the sales activities according to their expectations. The economic consumers are more interested in financial advantages gained from product compared to other benefits. Similarly, the hard-user consumers are much interested in working efficiency of products, and the technical consumers seek for fulfilling specific technical terms in the products (Nuttall, n.d.). Meanwhile, HHE provides financial benefits in certain products in the form of providing discounts, and in other products, it provides technical benefits to the customers. For instance, to the national purchasing groups segment, HHE provides discount of almost 10% of volume of purchases. The extent of economic benefits depends on the characteristics of purchase groups, whether they are proprietary or voluntary. Recommendations for Number of Sales Representatives The number of representatives for any organization depends on the capacity of sales representatives. In several companies, a few numbers of representatives conduct many business activities, while in other companies there are many representatives for limited number of business activities. An optimum quantity of salespersons is essential for a company in order to get profitable growth. From the sales force structure of HHE, it can be observed that the number of national account representatives is quite low according to the territories served by the company. In each territory of HHE there are 29 representatives. Therefore, controlling the performance and the accounts of these salespersons is rather challenging for six national representatives only. Furthermore, with the increasing pressure on cost, it is recommended that HHE should decrease the number of regional sales representatives from certain territories or relocate them to those regions where growth prospects for customer base are higher. HHE should also increase the number of national account representatives to get better span of control on the salespersons. It will not only help to improve administration of accounts but also assist in controlling the activities of salespersons. There are three methods for determining the number of salespersons required for effective performance which are breakdown method, workload method, and incremental method. It is recommended that, HHE should use the incremental method in order to measure the optimum number of salespersons for the organization. The rationale for using this method is that it can examine the marginal sales and expenses linked with the number of salespersons. The major benefit that HHE can get from this method is that it can effectively quantify the relationship between number of sales representatives and amount of sales and expenses. As, a result, HHE can define the optimal sales personnel for the products (Ingram, Laforge, Avila, Schwepker, & Williams, 2012). Recommendations Regarding Sales Force Structure Customers desire for salespersons having adequate knowledge about the products. They also choose to purchase from those people who can understand the business as well as the industry better. Thus, organizations require a strong sales force structure which can support the culture. A sales force structure determines how rapidly and efficiently an organization can rearrange and adjust with the market fluctuations. As time passes, the requirements of customers change, the competitors become much smarter and business environment becomes more aggressive than before. In those circumstances, several commercial strategies grow and the sales forces get stressed from the top level management for developing the performance. An effective sales force structure can adjust with the changing level of stress from upper level. They permit an organization to respond swiftly by changing the selling tactics without major structural renovation. Flexibility is an important aspect for an organization to become effective in changing business environment. Therefore, the sales structure of HHE should be defragmented which can encourage better communication within organization. The specialization of salespersons is a significant aspect for effective sales forces, as high degree of specialization can increase the knowledge about particular product but can also increase the risk of becoming obsolete if the demand of the product becomes less. Organizations can select five types of sales force specialization which are generalist, market oriented, product oriented, activity oriented, and hybrid. For HHE, it can use activity based specialization for the sales forces. In this method, each sales representative will be accountable for conducting sales in the organization. The sales activities such as creating enough leads or closing the sales are performed by account representatives. Through using activity oriented specialization, HHE can increase the effectiveness of sales representatives. Through activity oriented specialization, the jobs which are technically difficult or necessitate thorough knowledge can be performed more efficiently by sales representatives. Using activity oriented specialization not only increases the concentration on serious selling activities (such as providing good customer service or continuous customer care), but also can raise the productivity of business by reducing the cost of sales procedures (Zoltners, Sinha, & Lorimer, 2004). Regarding the sales force structure, an organization can select three types of sales force structures which are territorial, product or market, and customer. As HHE deals in more than one product line (such as defibrillators, EKG machines, monitors and pacers) to different customer segments, it is recommended that it can use the product sales force structure instead of territorial sales force structure. The product sales force structure can help in better concentration of salespersons towards HHE’s particular product line. However, HHE should ensure that the salespersons should not pursue for same customers in same day, otherwise it will impact on the customer satisfaction. Using product sales force structure not only helps in effective sales of products, but also can help to develop the product according to market or customers’ requirements (Gary, 2007). References Gary, A. (2007). Marketing: An introduction. India: Pearson Education. Ingram, T. N., Laforge, R. W., Avila, R. A., Schwepker, C. H., & Williams, M. R. (2012). Sales management: analysis and decision making. USA: M. E. Sharpe, Inc. Lambert, B., & Kerkhoff, E. (2006). Sales pro success secrets: an insider's guide to professional selling. USA: Lulu.com. Nuttall, R. (n.d.). How to create an account development plan. Retrieved from http://www.top-consultant.com/articles/Account%20Development%20planning.pdf Zoltners, A. A., Sinha, P., & Zoltners, G. A. (2001). The complete guide to accelerating sales force performance. USA: AMACOM Division American Management Association. Zoltners, A. A., Sinha, P., & Lorimer, S. E. (2004). Sales force design for strategic advantage. New York: Palgrave Macmillan. 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