SMS -- The Sales Management Simulation Integrate Theory with Practice

Benefits of Simulating Practice Book learning, lectures, case studies are valuable learning modes Simulations add a valuable dimension: Translate theory onto practice Learn by doing SMS focuses on key Sales Management decisions SMS details – Participants Manual The Sales Management Simulation: Integrate Theory with Practice

SMS: Sales Management Decisions Decisions SMS firms must make: Who to try to hire How to successfully recruit salespeople The trade-off between sales training benefits versus direct training cost and lost revenues (while training) How to motivate salespeople – salary, commission, sales contests? Allocating salespeople to sales regions Allocating selling effort between products Allocating salesperson efforts between external and internal selling What market research studies to buy, and how often Evaluating salesforce performance The Sales Management Simulation: Integrate Theory with Practice

The Sales Management Simulation: Integrate Theory with Practice Product Offerings Two products – base, premium Manufacturing cost: base – $2,500; premium – $3,500 Current prices: base – $3,500; premium – $5,500 The Sales Management Simulation: Integrate Theory with Practice

The Sales Management Simulation: Integrate Theory with Practice The Market Future demand pattern is uncertain Market research studies identified 3 forecast demand patterns – developing, saturating, stagnant, Unknown which demand pattern is valid Two of three market forecasts agree for first four periods, then diverge. All three market forecasts agree only for the first period. Firms address the market with 10 sales regions The Sales Management Simulation: Integrate Theory with Practice

Selecting and Recruiting Salespeople During SMS – 55 potential recruits Number of recruits available each period – 5 Previous management hired and trained all five available applicants in period 0. The five salespeople you inherit are temporarily assigned to sales regions; you may accept or modify these assignments. The Sales Management Simulation: Integrate Theory with Practice

The Sales Management Simulation: Integrate Theory with Practice Regional Management Regional assignment: 1 salesperson assigned to region: sales territory = entire sales region 2 salespeople assigned to region: region split into 2 sales territories 3 salespeople assigned to region: region split into 3 sales territories, etc. Key decisions: Add salespeople and address all regions Select regions to address: growth potential competitor action coverage density Salespeople’s perspective Perform better when assigned to home region Potential earnings – growth potential, competitor action, coverage density The Sales Management Simulation: Integrate Theory with Practice

The Sales Management Simulation: Integrate Theory with Practice Training/Retraining The firm trains salespeople (mandatory in the hiring period. The firm retrains salespeople to further improve skills Two retraining options available - second and third levels Key decision: If and when to retrain While in training: Salespeople incur costs Salespeople do not earn revenues The Sales Management Simulation: Integrate Theory with Practice

Compensating Salespeople Salespeople learn what other salespeople earn – their firms, competitor firms. Key questions: Do salespeople work harder and smarter if paid more than competitor salespeople? Do salespeople work less hard and less smart if paid less than competitor salespeople? Are they likely to quit? How much should your firm pay salespeople? What is the appropriate compensation breakdown by salary and commission? How much do sales contests help? The Sales Management Simulation: Integrate Theory with Practice

Strategic Time Management – 1 Salesperson success relates to time spent face-to- face with with customers – external selling Salespeople should also spend time working with internal firm functions, securing support – internal selling Key question: What is the appropriate balance between external and internal selling? The Sales Management Simulation: Integrate Theory with Practice

Strategic Time Management – 2 Base and premium products earn different profit margins Sales of the premium product maybe related to sales of the base product Market potential: base product different from premium product Key question: How should salespeople divide their time between base and premium products? The Sales Management Simulation: Integrate Theory with Practice

The Sales Management Simulation: Integrate Theory with Practice Managing Inventory Each period, the firm makes sales forecasts for both the base and premium products The factory produces products to match sales forecasts If demand is greater than requested production, the factory will make up the shortfall via overtime – overtime is an extra cost If supply is greater than demand, the firm will have products in inventory – the firm incurs an inventory cost Inventory carries over for sale in future period(s), hence impacting required production. Key decision: How much production to request from the factory? The Sales Management Simulation: Integrate Theory with Practice

Price Strategy: Skim or Penetrate Penetration Pricing – price close to costs Market share likely to increase Profit margins low or negative Skim Pricing Profit margins high Greater competitive pressure Can great personal selling compensate for higher prices? Key questions: How to price Do both base and premium products behave similarly? The Sales Management Simulation: Integrate Theory with Practice

Market Research Studies Market research studies are expensive – can be redundant Key decisions: Which studies provide the best information for making sales forecasts? Which studies to buy? How often to buy those studies? Key consideration: Are market conditions stable or changing? The Sales Management Simulation: Integrate Theory with Practice

The Sales Management Simulation: Integrate Theory with Practice Success Metrics? Profit 75% Cumulative Profit across all periods Profit trajectory relative to other firms in the industry Market Share. 25% Final period Net Promoter Score. Not considered Company Reputation Not considered Complaint letters Salesperson turnover The Sales Management Simulation: Integrate Theory with Practice

The Sales Management Simulation: Integrate Theory with Practice Good Luck! The Sales Management Simulation: Integrate Theory with Practice