Chapter Summary

A particularly interdependent strategic relationship exists between planning and performance evaluation in the sales force management process. In this management process, a marketing audit ideally should play a key role. A marketing audit is a total evaluation program. As such, it is a comprehensive periodic review and evaluation of the marketing system in an organization. A sales management audit evaluates sales objectives, strategies, and tactics.

The evaluation process is essentially a three-stage task. First, find out what happened—actual results are compared with budgeted goals. Second, find out why it happened—what factors accounted for the variation between goals and results. Third, decide what to do about the situation—that is, plan next period’s activities.

Because of the time and cost needed for a full-scale marketing audit, many companies evaluate only the major components of their marketing programs. One such performance evaluation includes an analysis of (1) sales volume, (2) marketing costs, and (3) salespeople’s performance. A sales volume analysis combined with a marketing cost analysis constitutes a marketing profitability analysis.

Performance evaluation is a key tool in reducing the misdirected marketing effort in an organization. Misdirected marketing effort means that a company is expending much effort but getting relatively few results. The 80–20 principle illustrates misdirected marketing effort. That is, marketing efforts (costs) are related to the number of marketing units (territories, products, customers), rather than the sales volume or profit derived from these marketing units.

The basic reasons for misdirected marketing efforts are that management lacks (1) knowledge of the disproportionate spread of marketing effort and (2) reliable standards for determining (a) what should be spent on marketing and (b) what results should be derived from these expenditures.

A sales volume analysis is a study of a company’s actual sales volume compared with the budgeted sales goals. This volume analysis should be done in great detail. That is, the company’s sales should be analyzed in total and also by territory, products, customer groups, salespeople, and order size. In each of these subdivisions, the company’s performance should be compared with industry figures. In this way, management can measure its performance against the competition.

Detailed sales performance analysis has been improved immeasurably by advances in computer and Internet-related technology. Sales force automation (SFA) software, for example, helps sales organizations manage information efficiently. This technology makes performance evaluation much easier and faster than ever before.