Part VPart V

SALES FORCE SALES FORCE LEADERSHIPLEADERSHIP

Part VPart V

SALES FORCE SALES FORCE LEADERSHIPLEADERSHIP

Chapter 13:Chapter 13:

Evaluating PerformanceEvaluating Performance

SALLES PERFORMANCE REVIEW SALLES PERFORMANCE REVIEW : :

At first glance , evaluating salesperson's performance At first glance , evaluating salesperson's performance seems simple : merely measure sales volume . The seems simple : merely measure sales volume . The thinking behind this theory is that higher volume means thinking behind this theory is that higher volume means increased performance . But the focus on sales volume increased performance . But the focus on sales volume can be misleading .can be misleading .

We define evaluation as a comparison of sales force We define evaluation as a comparison of sales force goals and objectives with actual achievements in the goals and objectives with actual achievements in the field . A general model of the evaluation process on field . A general model of the evaluation process on shown in Figure 13-1.shown in Figure 13-1.

The most common objectives are the attainment of The most common objectives are the attainment of specific sales revenues , contribution profits , market specific sales revenues , contribution profits , market shares , and expense levels . Then ,a sales plan must be shares , and expense levels . Then ,a sales plan must be prepared to show how the goals are to to be achieved . prepared to show how the goals are to to be achieved . The next step is to performance standards for individual The next step is to performance standards for individual products for different levels in the organization .products for different levels in the organization .

Differences between the performance standards and Differences between the performance standards and the results attained are determind .the results attained are determind .

At first glance , evaluating salesperson's performance At first glance , evaluating salesperson's performance seems simple : merely measure sales volume . The seems simple : merely measure sales volume . The thinking behind this theory is that higher volume means thinking behind this theory is that higher volume means increased performance . But the focus on sales volume increased performance . But the focus on sales volume can be misleading .can be misleading .

We define evaluation as a comparison of sales force We define evaluation as a comparison of sales force goals and objectives with actual achievements in the goals and objectives with actual achievements in the field . A general model of the evaluation process on field . A general model of the evaluation process on shown in Figure 13-1.shown in Figure 13-1.

The most common objectives are the attainment of The most common objectives are the attainment of specific sales revenues , contribution profits , market specific sales revenues , contribution profits , market shares , and expense levels . Then ,a sales plan must be shares , and expense levels . Then ,a sales plan must be prepared to show how the goals are to to be achieved . prepared to show how the goals are to to be achieved . The next step is to performance standards for individual The next step is to performance standards for individual products for different levels in the organization .products for different levels in the organization .

Differences between the performance standards and Differences between the performance standards and the results attained are determind .the results attained are determind .

A Sales Force Evaluation ModelA Sales Force Evaluation Model

Take Corrective ActionMeasure results against

standard

Set product performance standards for:Organization SalespeopleRegions AccountsDistricts

Design sales plan

Set goals and objectives forsales force, including:

RevenuesContribution profitsMarket shareExpense ratios

Selecting Performance Selecting Performance MeasuresMeasures

The task of selecting performance measure for a firm The task of selecting performance measure for a firm is is difficult because so many unique factors can be used. Most difficult because so many unique factors can be used. Most

experts agree that performance measures should be experts agree that performance measures should be tailored to the goals and objectives of each organization . tailored to the goals and objectives of each organization .

A great unresolved controversy in sales management is A great unresolved controversy in sales management is whether output measures Table 13 -1 , input factors such whether output measures Table 13 -1 , input factors such as those in Table 13-2 , or qualitative criteria are best for as those in Table 13-2 , or qualitative criteria are best for evaluating sales performance . evaluating sales performance .

Qualitative measures include attitude , communication Qualitative measures include attitude , communication skills , and product knowledge . Research indicates that skills , and product knowledge . Research indicates that qualitative factors are the most widely used , but they are qualitative factors are the most widely used , but they are difficult to measure and often lead to biased evaluations . difficult to measure and often lead to biased evaluations .

One explanation is that sales organizations rely less on One explanation is that sales organizations rely less on input performance measure , when there are more people input performance measure , when there are more people to evaluate . to evaluate .

The task of selecting performance measure for a firm The task of selecting performance measure for a firm is is difficult because so many unique factors can be used. Most difficult because so many unique factors can be used. Most

experts agree that performance measures should be experts agree that performance measures should be tailored to the goals and objectives of each organization . tailored to the goals and objectives of each organization .

A great unresolved controversy in sales management is A great unresolved controversy in sales management is whether output measures Table 13 -1 , input factors such whether output measures Table 13 -1 , input factors such as those in Table 13-2 , or qualitative criteria are best for as those in Table 13-2 , or qualitative criteria are best for evaluating sales performance . evaluating sales performance .

Qualitative measures include attitude , communication Qualitative measures include attitude , communication skills , and product knowledge . Research indicates that skills , and product knowledge . Research indicates that qualitative factors are the most widely used , but they are qualitative factors are the most widely used , but they are difficult to measure and often lead to biased evaluations . difficult to measure and often lead to biased evaluations .

One explanation is that sales organizations rely less on One explanation is that sales organizations rely less on input performance measure , when there are more people input performance measure , when there are more people to evaluate . to evaluate .

Output Measures Used in Sales Output Measures Used in Sales Force EvaluationForce Evaluation

Performance MeasurePercentUsing Performance Measure

PercentUsing

SalesSales volume dollarsSales volume previous year’s salesSales to quotaSales growthSales volume by productSales volume by customerNew account salesSales volume in unitsSales volume to potential

AccountsNumber of new accountsNumber of accounts lostNumber of accounts buying full line

79%7665554844423527

693327

ProfitNet profitGross margin percentageReturn on investmentNet profit as a percentage of salesMargin by product categoryGross margin dollars

OrdersNumber of ordersAverage size of order

69%3433322825

4722

Input or Behavior Bases Used in Input or Behavior Bases Used in Sales Force EvaluationSales Force Evaluation

BasePercentUsing Base

PercentUsing

Selling expenses to budget

Total expenses

Selling expenses as a % of sales

Number of calls

55%

53

49

48

Number of calls per day

Number of reports turned in

Number of days worked

Selling time vs. nonselling time

42%

38

33

27

Qualitative Bases Used in Sales Qualitative Bases Used in Sales Force EvaluationForce Evaluation

BasePercentUsing Performance Measure

PercentUsing

Communication skills

Product knowledge

Attitude

Selling skills

Initiative and aggressiveness

Appearance and manner

Knowledge of competition

Team player

Enthusiasm

88%

85

82

79

76

75

71

67

66

Time management

Cooperation

Judgment

Motivation

Ethical/Moral behavior

Planning ability

Pricing knowledge

Report preparation and submission

Creativity

63%

62

62

61

59

58

55

54

54

THE BIG PICTURE THE BIG PICTURE

A logical first step in a sales A logical first step in a sales analysis to look at aggregate sales analysis to look at aggregate sales figures for accompany or division . figures for accompany or division .

A logical first step in a sales A logical first step in a sales analysis to look at aggregate sales analysis to look at aggregate sales figures for accompany or division . figures for accompany or division .

1 2 3 4 Company Percentage Industry Company

Volume Change from Volume Market ShareYear ($ millions) Previous Year ($ millions) (percent)

2006 26 + 8.3 300 8.62005 24 +14.3 219 10.92004 21 +23.5 165 15.72003 17 --- 125 13.6

Sales Data for Sales Data for Bear Computer CompanyBear Computer Company

Dollar versus Unit Sales :Dollar versus Unit Sales :

Sales can also be broken out in terms of Sales can also be broken out in terms of number of solutions sold (Table 13-4 ) . number of solutions sold (Table 13-4 ) . Unit sales can be useful when inflation and Unit sales can be useful when inflation and other price changes distort dollar sales other price changes distort dollar sales figures .figures .

A decline in the number of units installed is A decline in the number of units installed is serious problem in an expanding market , serious problem in an expanding market , so adjustments should be made in the so adjustments should be made in the wage and quota systems to achieve more wage and quota systems to achieve more balanced growth . Unit sales growth is balanced growth . Unit sales growth is desirable because it keeps production lines desirable because it keeps production lines and employees busy .and employees busy .

Sales can also be broken out in terms of Sales can also be broken out in terms of number of solutions sold (Table 13-4 ) . number of solutions sold (Table 13-4 ) . Unit sales can be useful when inflation and Unit sales can be useful when inflation and other price changes distort dollar sales other price changes distort dollar sales figures .figures .

A decline in the number of units installed is A decline in the number of units installed is serious problem in an expanding market , serious problem in an expanding market , so adjustments should be made in the so adjustments should be made in the wage and quota systems to achieve more wage and quota systems to achieve more balanced growth . Unit sales growth is balanced growth . Unit sales growth is desirable because it keeps production lines desirable because it keeps production lines and employees busy .and employees busy .

Comparing Dollar and Unit Comparing Dollar and Unit Sales at the Bear Computer Sales at the Bear Computer CompanyCompany

Products

Thousands of Dollars

Units

Avg Price Per Unit

Thousands Of Dollars

Units

Avg Price Per Unit

Computers

Accessories

Software

$16,800

4,800

2,400

560

4,000

1,200

$30,000

1,200

2,000

$18,200

5,200

2,600

520

4,727

1,280

$35,000

1,100

2,031

Total $24,000 5,760 $26,000 6,527

2005 Sales2005 Sales 2006 Sales2006 Sales

Sales by Customer Type :Sales by Customer Type :

Another useful approach is to Another useful approach is to break down sales by individual break down sales by individual customer.customer.

Another useful approach is to Another useful approach is to break down sales by individual break down sales by individual customer.customer.

EXPENSE ANALYSIS :EXPENSE ANALYSIS :

Although a sales analysis provides useful data Although a sales analysis provides useful data on the operation of a field sales force , it dose on the operation of a field sales force , it dose not tell the whole story . Sales figures show not tell the whole story . Sales figures show trends , but they do not reveal the effects of trends , but they do not reveal the effects of price – cutting or the differences in selling price – cutting or the differences in selling expenses , potential , and saturation that exist expenses , potential , and saturation that exist across products or territories .across products or territories .

What Expenses Are Relevant ? What Expenses Are Relevant ? We believe that controllable expenses such as We believe that controllable expenses such as

wages and travel are the figures that are wages and travel are the figures that are relevant to field sales managers . Thus , relevant to field sales managers . Thus , national advertising and production costs , national advertising and production costs , which are not directly controlled by sales which are not directly controlled by sales manages , should not be used o judge the manages , should not be used o judge the efficiency of the sales organization .efficiency of the sales organization .

Although a sales analysis provides useful data Although a sales analysis provides useful data on the operation of a field sales force , it dose on the operation of a field sales force , it dose not tell the whole story . Sales figures show not tell the whole story . Sales figures show trends , but they do not reveal the effects of trends , but they do not reveal the effects of price – cutting or the differences in selling price – cutting or the differences in selling expenses , potential , and saturation that exist expenses , potential , and saturation that exist across products or territories .across products or territories .

What Expenses Are Relevant ? What Expenses Are Relevant ? We believe that controllable expenses such as We believe that controllable expenses such as

wages and travel are the figures that are wages and travel are the figures that are relevant to field sales managers . Thus , relevant to field sales managers . Thus , national advertising and production costs , national advertising and production costs , which are not directly controlled by sales which are not directly controlled by sales manages , should not be used o judge the manages , should not be used o judge the efficiency of the sales organization .efficiency of the sales organization .

Product Expenses : Product Expenses :

A logical first step in an expense A logical first step in an expense analysis is to look the differences analysis is to look the differences associated with each product line .associated with each product line .

A logical first step in an expense A logical first step in an expense analysis is to look the differences analysis is to look the differences associated with each product line .associated with each product line .

What costs are relevant?

Net SalesNet Sales

Less Variable Costs: Less Variable Costs: Cost of Goods SoldCost of Goods Sold

Sales CommissionsSales Commissions

Equals: Equals: Contribution MarginContribution Margin

Less: Less: Direct Fixed Selling Direct Fixed Selling CostsCosts

Equals:Equals: Profit ContributionProfit Contribution

Evaluating Sales Force Evaluating Sales Force Performance: Cost AnalysisPerformance: Cost Analysis

Expense Analysis by Product Expense Analysis by Product Line, Line, Bear Computer Company, 2006Bear Computer Company, 2006

Products

2006 Sales

(000)

CGS and Commission

$

CGS as a Percentage

Of Sales

Contribution

Margin

Contribution Margin

Percentage

Computers

Accessories

Software

$18,200

5,200

2,600

$12,740

3,120

520

70

60

20

$5,460

2,080

2,080

30

40

80

Total $26,000 $16,380 63% $9,620 37%

EVALUATING SALESPEOPLE :EVALUATING SALESPEOPLE :

One of the most difficult tasks you will face as One of the most difficult tasks you will face as a sales manager is evaluating the a sales manager is evaluating the performance of salespeople under your performance of salespeople under your control . Although appraisals are opportunities control . Although appraisals are opportunities to motivate salespeople to higher levels of to motivate salespeople to higher levels of achievement , they also provide evidence for achievement , they also provide evidence for disciplinary action . Thus , performance disciplinary action . Thus , performance reviews demand that sales managers play the reviews demand that sales managers play the role of coach and judge . role of coach and judge .

It is the most difficult job of the sales mangers It is the most difficult job of the sales mangers because of the difficulty of finding the optimal because of the difficulty of finding the optimal level of monitoring and the difficulty of level of monitoring and the difficulty of eliminating biases in the evaluation process . eliminating biases in the evaluation process .

One of the most difficult tasks you will face as One of the most difficult tasks you will face as a sales manager is evaluating the a sales manager is evaluating the performance of salespeople under your performance of salespeople under your control . Although appraisals are opportunities control . Although appraisals are opportunities to motivate salespeople to higher levels of to motivate salespeople to higher levels of achievement , they also provide evidence for achievement , they also provide evidence for disciplinary action . Thus , performance disciplinary action . Thus , performance reviews demand that sales managers play the reviews demand that sales managers play the role of coach and judge . role of coach and judge .

It is the most difficult job of the sales mangers It is the most difficult job of the sales mangers because of the difficulty of finding the optimal because of the difficulty of finding the optimal level of monitoring and the difficulty of level of monitoring and the difficulty of eliminating biases in the evaluation process . eliminating biases in the evaluation process .

EVALUATING SALESPEOPLE :EVALUATING SALESPEOPLE :

Why Are Performance Reviews Needed ? Why Are Performance Reviews Needed ? Performance reviews are usually conducted on Performance reviews are usually conducted on

an annual basis , although many firms conduct an annual basis , although many firms conduct evaluations semiannually or quarterly . While evaluations semiannually or quarterly . While these reviews are difficult to administer , they these reviews are difficult to administer , they do provide valuable information for staffing do provide valuable information for staffing decisions and serve as a basis to improve decisions and serve as a basis to improve salesperson performance . The result of salesperson performance . The result of performance reviews can be used to answer a performance reviews can be used to answer a number of important questions such as : number of important questions such as : Who should receive raises , bonuses , prizes Who should receive raises , bonuses , prizes , and etc., and etc.

Why Are Performance Reviews Needed ? Why Are Performance Reviews Needed ? Performance reviews are usually conducted on Performance reviews are usually conducted on

an annual basis , although many firms conduct an annual basis , although many firms conduct evaluations semiannually or quarterly . While evaluations semiannually or quarterly . While these reviews are difficult to administer , they these reviews are difficult to administer , they do provide valuable information for staffing do provide valuable information for staffing decisions and serve as a basis to improve decisions and serve as a basis to improve salesperson performance . The result of salesperson performance . The result of performance reviews can be used to answer a performance reviews can be used to answer a number of important questions such as : number of important questions such as : Who should receive raises , bonuses , prizes Who should receive raises , bonuses , prizes , and etc., and etc.

Behavior versus Output Performance Behavior versus Output Performance Measures :Measures :

Although behavior control systems Although behavior control systems are more widely used than output are more widely used than output measures , there is considerable measures , there is considerable debate as to which approach is debate as to which approach is better . better .

Although behavior control systems Although behavior control systems are more widely used than output are more widely used than output measures , there is considerable measures , there is considerable debate as to which approach is debate as to which approach is better . better .

A Model of Salesperson A Model of Salesperson EvaluationEvaluation

Input-based SystemInput-based System

ResultsResultsSales revenuesSales growthSales/quotaSales/potentialNew accountsContribution marginsContribution

percentage

Output-based SystemOutput-based System

SalespersonSalespersonEvaluationEvaluation

BehaviorBehaviorCallsReportsComplaintsDemonstrationsDealer meetingsDisplay set upTravel/entertainment

expenses

BEHAVIOR – BASED EVALUATION BEHAVIOR – BASED EVALUATION ::

Behavioral systems are concerned with keeping Behavioral systems are concerned with keeping track of what happens at each stage of the sales track of what happens at each stage of the sales operation . This means that management must operation . This means that management must closely monitor sales force Activities and direct closely monitor sales force Activities and direct and intervene to improve customer relations .and intervene to improve customer relations .

Behavior – based systems usually require Behavior – based systems usually require managers to make some subjective evaluations managers to make some subjective evaluations about individual salespeople . The most common about individual salespeople . The most common qualitative factors used in these performance qualitative factors used in these performance evaluations are given in table 13- 6 .evaluations are given in table 13- 6 .

Since behavioral –based evaluations focus on the Since behavioral –based evaluations focus on the activities and procedures of successful selling activities and procedures of successful selling these systems can enhance salesperson these systems can enhance salesperson knowledge and commitment .knowledge and commitment .

Behavioral systems are concerned with keeping Behavioral systems are concerned with keeping track of what happens at each stage of the sales track of what happens at each stage of the sales operation . This means that management must operation . This means that management must closely monitor sales force Activities and direct closely monitor sales force Activities and direct and intervene to improve customer relations .and intervene to improve customer relations .

Behavior – based systems usually require Behavior – based systems usually require managers to make some subjective evaluations managers to make some subjective evaluations about individual salespeople . The most common about individual salespeople . The most common qualitative factors used in these performance qualitative factors used in these performance evaluations are given in table 13- 6 .evaluations are given in table 13- 6 .

Since behavioral –based evaluations focus on the Since behavioral –based evaluations focus on the activities and procedures of successful selling activities and procedures of successful selling these systems can enhance salesperson these systems can enhance salesperson knowledge and commitment .knowledge and commitment .

Qualitative Bases Used in Sales Qualitative Bases Used in Sales Force EvaluationForce Evaluation

BasePercentUsing Performance Measure

PercentUsing

Communication skills

Product knowledge

Attitude

Selling skills

Initiative and aggressiveness

Appearance and manner

Knowledge of competition

Team player

Enthusiasm

88%

85

82

79

76

75

71

67

66

Time management

Cooperation

Judgment

Motivation

Ethical/Moral behavior

Planning ability

Pricing knowledge

Report preparation and submission

Creativity

63%

62

62

61

59

58

55

54

54

Using behavior based Using behavior based systems :systems :

Successful implementation of behavioral Successful implementation of behavioral evaluations requires periodic analysis of data on evaluations requires periodic analysis of data on sales force activities . one widely used way to sales force activities . one widely used way to gather this information is through the completion gather this information is through the completion of daily ,weekly ,or monthly call reports by of daily ,weekly ,or monthly call reports by salespeople .salespeople .

These reports detail who was called on ,at what These reports detail who was called on ,at what stage he prospect is within the sales cycle ,and stage he prospect is within the sales cycle ,and what follow up activities are needed in the future .what follow up activities are needed in the future .

Some manager use the 10-3-1 rule ,meaning that Some manager use the 10-3-1 rule ,meaning that for every 10 qualified prospects, 3 will entertain a for every 10 qualified prospects, 3 will entertain a proposal and 1 will become a customer . proposal and 1 will become a customer .

Successful implementation of behavioral Successful implementation of behavioral evaluations requires periodic analysis of data on evaluations requires periodic analysis of data on sales force activities . one widely used way to sales force activities . one widely used way to gather this information is through the completion gather this information is through the completion of daily ,weekly ,or monthly call reports by of daily ,weekly ,or monthly call reports by salespeople .salespeople .

These reports detail who was called on ,at what These reports detail who was called on ,at what stage he prospect is within the sales cycle ,and stage he prospect is within the sales cycle ,and what follow up activities are needed in the future .what follow up activities are needed in the future .

Some manager use the 10-3-1 rule ,meaning that Some manager use the 10-3-1 rule ,meaning that for every 10 qualified prospects, 3 will entertain a for every 10 qualified prospects, 3 will entertain a proposal and 1 will become a customer . proposal and 1 will become a customer .

BEHAVIOR – BASED EVALUATION BEHAVIOR – BASED EVALUATION ::

Management by objectives :Management by objectives : A common behavioral system is management by A common behavioral system is management by

objectives (MBO) also called development and objectives (MBO) also called development and performance management .with this performance management .with this method ,salesperson and sales managers jointly method ,salesperson and sales managers jointly set personal development goals for the set personal development goals for the subordinate that can be completed within a subordinate that can be completed within a specific time period . salespeople then develop an specific time period . salespeople then develop an action plan to reach each goal . written action plan to reach each goal . written performance appraisal are presented to sales performance appraisal are presented to sales people during review sessions with sales people during review sessions with sales managers . Reps react favorably to MBO systems managers . Reps react favorably to MBO systems because they can see where they stand and know because they can see where they stand and know that progress toward their goals will be rewarded .that progress toward their goals will be rewarded .

Management by objectives :Management by objectives : A common behavioral system is management by A common behavioral system is management by

objectives (MBO) also called development and objectives (MBO) also called development and performance management .with this performance management .with this method ,salesperson and sales managers jointly method ,salesperson and sales managers jointly set personal development goals for the set personal development goals for the subordinate that can be completed within a subordinate that can be completed within a specific time period . salespeople then develop an specific time period . salespeople then develop an action plan to reach each goal . written action plan to reach each goal . written performance appraisal are presented to sales performance appraisal are presented to sales people during review sessions with sales people during review sessions with sales managers . Reps react favorably to MBO systems managers . Reps react favorably to MBO systems because they can see where they stand and know because they can see where they stand and know that progress toward their goals will be rewarded .that progress toward their goals will be rewarded .

BEHAVIOR – BASED EVALUATION BEHAVIOR – BASED EVALUATION ::

Behavioral observation scales :Behavioral observation scales : An improvement on MBO is an approach called An improvement on MBO is an approach called

behavioral observation scales (BOS) which behavioral observation scales (BOS) which focus on identifying a list of critical incidents focus on identifying a list of critical incidents that lead to job success. This approach that lead to job success. This approach assumes that some of salesperson's job assumes that some of salesperson's job requirements are more critical to job success requirements are more critical to job success than are others , and the key to evaluating than are others , and the key to evaluating people is to focus on these factors .people is to focus on these factors .

One advantage of the BOS is that this system One advantage of the BOS is that this system requires an extensive analysis of the requires an extensive analysis of the salesperson's job responsibilities that lead to salesperson's job responsibilities that lead to success .success .

Behavioral observation scales :Behavioral observation scales : An improvement on MBO is an approach called An improvement on MBO is an approach called

behavioral observation scales (BOS) which behavioral observation scales (BOS) which focus on identifying a list of critical incidents focus on identifying a list of critical incidents that lead to job success. This approach that lead to job success. This approach assumes that some of salesperson's job assumes that some of salesperson's job requirements are more critical to job success requirements are more critical to job success than are others , and the key to evaluating than are others , and the key to evaluating people is to focus on these factors .people is to focus on these factors .

One advantage of the BOS is that this system One advantage of the BOS is that this system requires an extensive analysis of the requires an extensive analysis of the salesperson's job responsibilities that lead to salesperson's job responsibilities that lead to success .success .

Results based evaluationsResults based evaluations

in which managers set performance in which managers set performance standards for each salesperson and standards for each salesperson and evaluate the results against the evaluate the results against the present standards .results based present standards .results based evaluations have been shown to evaluations have been shown to improve salesperson job attitudes improve salesperson job attitudes when the salesperson understands when the salesperson understands what is expected and is able to what is expected and is able to modify his or her work strategy to modify his or her work strategy to meet the expected goals . meet the expected goals .

in which managers set performance in which managers set performance standards for each salesperson and standards for each salesperson and evaluate the results against the evaluate the results against the present standards .results based present standards .results based evaluations have been shown to evaluations have been shown to improve salesperson job attitudes improve salesperson job attitudes when the salesperson understands when the salesperson understands what is expected and is able to what is expected and is able to modify his or her work strategy to modify his or her work strategy to meet the expected goals . meet the expected goals .

Measuring Sales Force Output for Bear Computer Measuring Sales Force Output for Bear Computer CompanyCompanyDifferences in potential Differences in potential

1 2 3 4 5 6 7 8Market

Sales ‘05 Sales ‘06 Potential Sales Percentage SalesJan-Sept Jan-Sept Dollar Sales index Quota of Quota Variance

Territory (000) (000) Change Growth (percent) (000) Achieved (000)

Jones $ 750 $ 825 + $75 10.0% 26.0% $ 943 87.0% – $118

Smith 500 570 + 70 14.0 15 543 105 + 27

Brown 1025 1110 + 85 8.3 32 1160 96 – 50

West 960 1000 + 40 4.2 27 977 102 + 23

$3235 $3505 +$270 8.3% 100.0% $3623

Measuring Territory Profit Output Measuring Territory Profit Output for Bear Computer Companyfor Bear Computer CompanyContribution based evaluations Contribution based evaluations

Territory Performance (thousands)

Jones Smith Brown West

Net Sales $825 $570 $1100 $1000

Less CGS and Commissions 495 428 744 660

Contribution margin 330 142 356 340

CM as a percentage of sales 40% 25% 32% 34%

Less direct selling costs

Sales force salaries 55.0 35.0 55.0 65.0

Travel 15.5 4.1 3.5 5.0

Food and lodging 12.5 4.0 3.2 4.5

Entertainment 11.4 0.3 0.5 1.0

Home sales office expense 4.5 2.3 2.0 4.5

Profit contribution $231.1 $ 96.3 $291.8 $260.0

PC as a percentage of sales 28% 17% 26% 26%