The function of the sales department is to plan, execute and control the activities in that line. Because many surprises occur during the implementation of sales plans, the sales department must continuously monitor and control sales activities. Despite this need, many companies have inadequate control procedures. Some main findings have been found which are the following:
- Small businesses have fewer controls than large ones. They do more efficient work to clearly set goals and establish systems to measure sales efficiency. Less than half of companies know the profits of their individual products. A third of companies do not have regular review procedures to locate and eliminate weak products. Almost half of companies fail to compare their prices with those of the competition, analyze their warehouse and distribution costs, analyze the causes of the Returned merchandise, conduct formal advertising effectiveness evaluations, and review reports from your sales force.
The sales audit focuses on controlling the organization's objectives in parallel with the sales profitability results. The audit identifies problem areas and recommends actions in the medium and short term
Business Mission
- The goals of any organization must be derived from its mission, the most successful organizations establish their missions in writing. The mission is a long-term view, or vision, of what the organization wants to become. When an organization decides on its mission, it actually answers two questions: What is our business and what should our business be? Although these appear to be very simple questions, in fact they are two of the most difficult, albeit most important, questions that any business can answer. Having a mission statement can greatly benefit the organization, at least five. ways :
- The mission statement gives the organization a clear purpose and direction, thereby keeping the organization on track, preventing it from losing track or goal . The mission statement describes the organization's unique goal that helps differentiate it from similar, competing organizations . The mission statement keeps the organization focused on customer needs rather than on its own capabilities. This ensures that the organization remains externally focused and not internally focused. The mission statement provides direction and specific guidance to senior management in selecting alternative courses of action. This helps them decide which business opportunities to pursue and which not .It provides direction to all the employees and managers of an organization, even if they work in different parts of the world. Consequently, the mission statement acts as a link to keep the organization together.
Now what does the mission have to do with the sales audit? Mission is the rule by which to measure whether or not the company is meeting its objectives. When a company loses sight of its mission, it may distort its objectives and in many cases go straight to failure, or at least the product in question. This is why the mission statement in a clear and simple way is essential.
Most companies break Law 12 from that famous Marketing Best Seller "The 22 Immutable Laws of Marketing" published in 1993 by specialists Al Ries and Jack Trout: Line Extension. Most of the companies forget their main objective, their mission and in the anxiety to produce more money they fall in the excessive line extension which brings in the majority of the cases, the loss of money.
A classic example is IBM. Although IBM today is a struggling company looking for a new direction that will restore its leadership for a long time, it was one of the best managed companies in the world. In large part, that success was due to the brilliant leadership of Thomas Watson, Jr. When he retired from the chairmanship of the IBM board of directors, this is what he expressed about the importance of mission statements:
This, then, is my thesis: I firmly believe that to survive and succeed, every organization must have a strong set of beliefs on which all its policies and actions are based. Next, I believe that the most important factor that exists for business success is the faithful observance of these beliefs.
In other words, the basic philosophy, spirit and engine of an organization have much more to do with its relative achievements than the technological or economic resources, organizational structure, innovation or sense of opportunity.
All of these aspects weigh heavily on success. But I think they are overcome by the force with which people within the organization believe in its basic precepts and in the fidelity with which they carry them out. (Taylor, 1997)
The moment IBM started in the copier business, it began to lose money, due to a lack of focus on its mission and where its sales objectives should be oriented.
Let's see another example. American International is an insurance company in Venezuela that has been climbing positions in the market until it is solidly in the top 20. It is strategically associated with Banco del Caribe, which is one of the strongest banks in the country. Its mission is as follows:
"To satisfy the insurance needs of our clients with modern products, competitive prices, good service and prompt payment of claims."
Now imagine that because of its relationship with Banco del Caribe, American International decides to add some financial services to its services. What would happen?. The moment a company loses focus on its mission, it begins to lose sales, so it is very important to maintain focus through sales audits.
Formulation of Sales Audit Strategies
From time to time companies need to carry out a review of their objectives (call it mission) and therefore how these are met through their sales and market share. Sales are an area where rapid obsolescence of goals, policies, strategies, and programs is a constant possibility. Each company must regularly evaluate its strategic approach to the market. There are two tools: Review of the sales index and sales audit.
Revision of the Sales Efficiency Index
Sales efficiency is not necessarily revealed by current sales rates and the profits it generates. The good results may be due to the fact that a management was in the right place and at the right time and not that that management is really efficient. Improvements in that sales management can increase results by going from good to excellent. Other management may perform poorly despite excellent planning. Replacing current managers may only make things worse.
The sales efficiency of a company or management is reflected in the results in relation to five basic aspects:
- Customer focused philosophy Integrated sales organization Appropriate sales information Strategic orientation Operational efficiency
Sales Audit
Companies that discover sales deficiencies, by applying the sales efficiency rating review, should undertake a more detailed study known as Sales Audit. The sales audit is defined in the following terms:
A sales audit is a detailed, systematic, independent and periodic examination of a company's sales environment (business units, brand management, Profit Centers), as well as its objectives, strategies and activities, with an approach that aims to determine areas problems and opportunities and suggest an action plan to improve the sales efficiency of the company. It aims to show where the organization is and what were the achievements of the sales function in relation to what was planned.
The field of sales audit extends to the products and markets whose examination will reveal new opportunities, or will expose the strengths and weaknesses of the company (Foda analysis). It is important to note that changing markets such as current markets, where the preconditions and on which all planning processes take place, vary from day to day or, in the best case, remain for a short time, the need to an effective sales audit, which provides the information required to modify the plans, adjusting them to the particular situation
Processes for conducting a Sales Audit
Sales Analysis
It consists of a study of the monetary results in sales volume by product, sales territory, by sellers, and sometimes by customers; The sales analysis provides us with an answer as to what is sold in each of the territories and which products in particular, giving us information on who the buyer was, and the company records in each of the items and predicted figures that were included in sales planning
The depth of the analysis, the accuracy of the results and the degree of difficulty in carrying it out, necessarily depend on the adequate and available information. It is common to find companies without any information system despite their track record in the market, simultaneously with companies with sophisticated information collection and tabulation systems. The most common and important source of data for sales analysis is the sales invoice, since it generally contains the date of the transition, the name of the client, and its geographical location, the description of the merchandise sold, the quantity sold of units, the unit and total price, the date of dispatch and receipt, and sometimes the payment condition.
Sales by product can also be shown comparatively with sales for the same period of the previous year. Different products can be grouped into categories, according to convenience. From an analysis of this nature, the relative importance of customers can be appreciated and important marketing and sales decisions can be made, frequency of visits by sellers, sales promotion, dedication of greater efforts.
Similarly, a comparative analysis can be made by sales territory, for a given product or for a product category, which would reveal, among other aspects, the degree of difficulty of sales comparatively between the territories, strength before competition in each of them and weaknesses of the sales force. Logically, the design of formats for sales analysis and its process are questions that must be adapted to the needs and availability of the company itself.
Cost analysis
This analysis seeks to know the relative profitability of the different units that make up the sales operation; To carry out this analysis, the total sales expenses of the company are taken and divided into parts that are later assigned to various aspects of the sales function. Therefore, certain expenses will be taken by order size, production costs, expenses by customer or by customer class, expenses by territory of sale, basis.
The difficulty lies in the participation and allocation of a series of expenses that are not directly attributable to a specific aspect of the sales operation but instead are attributable to the entire set of sales, for example, if you wanted to distribute the total expenses of handling the merchandise by product in such a way that it is known how much of it corresponds to each of the products, could not be done directly, since in the totalization of the expenses all the products have participated together, in different amounts, in different ways, at different times and the relevant individual records are not available.
Sales audit features:
- Detailed: The sales audit covers all the main sales activities of a company and not only problematic aspects. It should be called a functional audit if it only covers the sales force, pricing, or some other marketing activity. Although functional audits are helpful, they sometimes confuse management about the true source of their problem. For example, excessive staff turnover in sales forces may be a symptom, not of poor compensation or training, but of poor products and weak company promotions. A detailed sales audit is usually more effective in locating the true source of the company's sales problems. Systematic:The sales audit involves an ordered sequence of diagnostic stages that cover the organization's macro and micro environment, sales objectives and strategies, specific sales systems and activities. The diagnosis indicates the most necessary improvements. These are incorporated into a corrective action plan that involves short and long-term stages to generally improve the organization's sales efficiency. Independent: A sales audit can be performed in six ways: Cross-sectional audit. Vertical audit. Through a company audit office. Through an audit team that is part of the company. Through an external auditor.
Self-audits, where managers use a checklist to rate their own operations, can be helpful, but most experts agree that self-audits lack objectivity and independence. Example of this the 3M company. He made good use of a corporate audit office, which provides sales audit services at the request of the divisions. However, in general, the best audits come from external consultants who have the necessary objectivity, extensive experience in various industries, are familiar with a particular industry, and have the time and attention required to perform the audit.
- Frequency: Sales audits are usually started only after sales drop, sales staff morale falls, or after problems have arisen in the business. Ironic as it may seem, companies are in crisis in part because they don't review their sales operations during the fat cow days. A periodic sales audit can benefit companies that are in good health, as well as those that have problems that no sales operation is so good that it cannot be improved. Even the best is capable of improvement. In fact, even the best ones should be better, because few, if any, sales operations can continue to succeed over the years by maintaining their status quo.
Sales audit procedure
A sales audit begins with a meeting between company officials to agree on the objectives, coverage, depth, data sources, format of the report, and the time required for the audit. A detailed plan is carefully prepared regarding who should be interviewed, questions to be asked about the time and place of contact, etc.; so that the duration and cost of the audit is minimal. The cardinal rule in sales auditing is: not just relying on company managers for data and feedback. It is also necessary to interview clients, intermediaries and other external groups. Many companies do not really know how they are perceived by their customers and intermediaries, nor do they fully understand customer needs and value judgments.
When the data collection stage is complete, the sales auditor presents the most important findings and recommendations. A valuable aspect of sales audit is the process that managers go through to assimilate, discuss, and develop new concepts related to the sales action that is needed.
American International is an example of this. Meetings are held regularly with the different Line Managers, who are responsible for marketing their products in order to evaluate what each one is doing and how these strategies can be integrated with the other lines, in a meeting called "War Room Meeting ”. This strategy allows auditing what each management responsible for marketing (sales) is doing, how to improve it and how to interact with the other commercial lines in order to be increasingly competitive.
Relations of the sales department with the other functional areas of the company
All the functions of a company must interact harmoniously to achieve the general objectives. In practice, interdepartmental relationships are often characterized by deep rivalries and mistrust. Some interdepartmental conflicts are due to differences of opinion about what is in the best interest of the company, some stem from real negotiations between what is the welfare of the department and the welfare of the company, and others stem from unfortunate stereotypes and prejudices of the department.
In an organization, each business function has a potential influence on customer satisfaction. All departments need to think about the customer and work together to meet his needs and expectations. There are many aspects which are not controlled by marketing and sales, such as hiring personnel, determining fees, establishing rates, etc. But if you must work through other departments such as finance, personnel, Technology, etc. To shape the crucial determinants of customer satisfaction. In the same way that sales emphasize the customer's point of view, other departments give importance to their functions. Inevitably, departments define the company's goals and problems from their point of view. As a result,conflicts of interest are unavoidable. Below we will examine the concerns of each department.
Investigation and development.The company's drive to obtain new products is often hampered by a poor working relationship between research and development and sales. In many ways, these groups represent two different cultures in the organization. The organization and development department has a staff of scientists and technicians who pride themselves on their curiosity and scientific knowledge, are pleased to work on complex and technical problems, are not very interested in immediate profits, and prefer to work with little supervision and obligation to perform. accounts about research costs. The sales department staff is made up of business-oriented people who take pride in understanding the market in practical terms.They like to have a variety of new products whose sales characteristics must move among customers, and they feel compelled to pay particular attention to cost. Frequently each group represents negative stereotypes for the other group. Sales executives view research and development personnel as those trying to discover or maximize technical qualities rather than design based on customer requirements, whereas research and development personnel view sales personnel as Scammers who like tricks and are more interested in sales than the technical characteristics of the product. These stereotypes hinder productive teamworkFrequently each group represents negative stereotypes for the other group. Sales executives view research and development personnel as those trying to discover or maximize technical qualities rather than design based on customer requirements, whereas research and development personnel view sales personnel as Scammers who like tricks and are more interested in sales than the technical characteristics of the product. These stereotypes hinder productive teamworkFrequently each group represents negative stereotypes for the other group. Sales executives view research and development personnel as those trying to discover or maximize technical qualities rather than design based on customer requirements, whereas research and development personnel view sales personnel as Scammers who like tricks and are more interested in sales than the technical characteristics of the product. These stereotypes hinder productive teamworkwhereas research and development staff see sales people as scammers who like tricks and are more interested in sales than the technical characteristics of the product. These stereotypes hinder productive teamworkwhereas research and development staff see sales people as scammers who like tricks and are more interested in sales than the technical characteristics of the product. These stereotypes hinder productive teamwork
Engineering.The engineering department is responsible for finding practical ways to design new products and new production processes. Engineers are interested in achieving technical quality, cost savings, and manufacturing simplicity. It conflicts with sales executives when the latter want multiple models to be produced and frequently and are products that require parts made to more than conventional measurements. Engineers chase sales executives like those who want bobon and cymbals in products rather than intrinsic quality. He thinks that sales executives are technically inept as people who change are constantly priorities, and that they are not totally trustworthy people.These problems are most pressing in those companies where sales executives have technical training and are able to communicate clearly with engineers.
Purchases. Purchasing executives are responsible for obtaining quality materials in the correct quantities at the lowest possible cost. They perceive sales executives as the ones pushing for multiple models in a product line that requires buying small quantities of many items, rather than large quantities of a few. They think that sales insists on a too high quality of materials and parts that are ordered. I dispute the inaccuracy of the sales forecasts; this causes them to place orders at unfavorable prices on other occasions when there are surpluses in inventory.
Manufacturing. Personnel in the manufacturing department are responsible for the proper functioning of the factory to produce the correct products, in adequate quantity, on time and adhering to the expected costs. For the generals they have spent their lives in the factory, with its consequent problems of machinery failure, and labor willingness. Sales executives are perceived as people who have little understanding of factory economics or policies. Sales executives complain of insufficient plant capacity, production delays, and deficiencies in customer services. Instead, sales executives do not see the problems of the factory but rather those of their customers, who need; items quickly, receiving defective merchandise and unable to obtain factory services.Manufacturing must be conceived in part as a sales tool before buyers choose a vendor, they often want to visit the factory to assess how well it is managed. Consequently the manufacturing staff and the general layout of the plant become important sales.
Finance. Finance executives pride themselves on being able to assess the profits of various business actions. When they refer to sales expenses they are frustrated. Sales executives ask for considerable budgets for advertising, sales promotions and sales forces, without being able to demonstrate how many sales pay dividends based on those expenses. Sales executives, on the other hand, view the finance department as people who are adamant about sticking to budgets and refuse to invest funds in the long-term development of the market. The solution lies in giving sales staff more financial capacity and giving finance staff more sales training.
Accounting. Accountants believe that sales executives are not concerned with delivering their sales reports on time. And sales executives, on the other hand, dislike the way accountants assign fixed cost charges to different products on the line.
Credit. Credit officers evaluate the actual credit of potential clients, and deny or limit credit to doubtful clients. They think that sales executives sell to anyone, including those whose timeliness to pay is questionable. On the other hand, sales executives often feel that credit standards are too high. They feel like they are working again to find clients, only to hear that they are not good enough.
CONCLUSION
Sales control is the natural sequel to sales planning, organization and implementation. Companies need to apply four types of sales control. Control of the annual plan consists of monitoring sales activities and results, to ensure that annual sales and profit targets are achieved. The main tools are sales analysis, market share analysis, financial analysis, monitoring of customer satisfaction.
If poor performance is detected, the company can implement various corrective measures, including production cuts, price changes, increasing pressure on the sales force and cuts in marginal expenses.
Efficiency control is the task of increasing efficiency in sales activities, such as: sales promotion and distribution. Strategic control is the activity consisting of ensuring the objectives, strategies and sales systems of the company so that they are optimally adapted to the field of sales planning and forecasting.
A tool, known as a sales efficiency scoring tool, describes a company's overall sales efficiency profile in terms of a customer-oriented philosophy, sales organization, sales information, planning of sales, strategic planning and operational efficiency.
Another tool, the sales audit, is a systematic, independent and periodic detailed examination of the organization's sales environment, objectives, strategies and activities. The sales audit seeks to identify problem sales areas, and recommends short and long-term actions to improve sales efficiency at the general level of the organization. The Sales Excellence Review helps a company rate its practices against best practices from high-performing companies.
REFERENCES
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TITLE: INTERNAL EVALUATION OF SALES
AUTHOR: Fabiola Mora Walter Schupnik, [email protected]
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