SMS -- The Sales Management Simulation

1. SMS -- The Sales Management Simulation Integrate Theory with Practice

2. 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

3. 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

4. Product Offerings • Two products – base, premium • Manufacturing cost: base– $3,000; premium– $4,000 • Current prices: base – $3,500; premium – $5,500 The Sales Management Simulation: Integrate Theory with Practice

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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

13. 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

14. 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

15. 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

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