Computerized Sales Management

Sales managers should not be recruiters and cheerleaders but business managers of territories, districts, and regions, with all the problems of scarce resources, government regulation, and shrinking profits. This article illustrates how microcomputers can help sales managers at all levels deal with the pressure and overcome the problems. These computers can help them plan sales strategies, develop and evaluate representatives, and estimate the outcomes of different strategies.

Common problems in managing accounts include deciding the right number of calls, improving the contribution of an account and reducing its costs, and allocating assets more effectively. Tasks of district management include reducing sales costs, managing assets more effectively, teaching time management, and evaluating representatives’ selling skills and overall performances. Before showing how microcomputers can help meet this challenge, I should explain why microcomputers and readily available software bring the power of the computer to all levels of sales management.

Advantages of Microcomputers

The rapid development of microcomputers and user-friendly, inexpensive software makes it possible to attack the problems just noted for less than $5,000 in hardware and software, at 1983 prices. And the user does not need to be a computer programmer or even to know how to type. All that is necessary is a microcomputer, a monitor, one disk drive, a printer, and a program for one of the so-called electronic spreadsheets (see the ruled insert for a description of spreadsheets).

Electronic Spreadsheets

Electronic spreadsheets are the most frequently used decision support sytems (DSS) in microcomputers. The VisiCalc program is the most widely used electronic spreadsheet program. SuperCalc is available for many microcomputers. Multiplan has a sorting feature. Micro-DSS/FINANCE is the most sophisticated of the microcomputer DSS programs.*

The VisiCalc program requires a computer with 32K of memory and one disk drive. When VisiCalc is loaded into the computer, the user sees rows that are numbered and columns that are lettered, as is shown in the shaded areas of the accompanying template. The user fills in the spreadsheet titles, equations, and numbers. The equations can read data from other parts of the spreadsheet, which simplifies “what if” planning. When one number is changed, all related numbers are recalculated.

The user, a corporate staff person, or a consultant can create an analysis template to fit the analytic needs of the decision maker. The template can then be stored on disk and used by anyone.

The user enters data in blank cells. The computer uses the equations to fill all other cells.

*VisiCalc is the registered trademark of VisiCorp, San Jose, California; SuperCalc is the registered trademark of Sorcium Corp., Santa Clara, California; Multiplan is the registered trademark of Microsoft Corp., Bellevue, Washington; Micro-DSS/FINANCE is the registered trademark of Addison-Wesley Publishing Company, Reading, Massachusetts. For a comparison of DSS for microcomputers, see “Financial Modeling Software: Tools for the Overworked Manager,” Personal Computing, June 1981, p. 22; Robert L. Perry, “Crystal-Balling on Micros,” Computer Decisions, September 1981, p. 64; J. Stanton and J. Dickey, eds., The Addison-Wesley Book of Apple Computer Software, 1982 (Reading, Mass.: Addison-Wesley, 1981); and Robert R. Mueller, “Business Planning Software,” Personal Computing, November 1982, p. 115.

The exhibits in this article were made with the VisiCalc program, one of the most popular spreadsheet programs for microcomputers. VisiCalc, like SuperCalc, Multiplan, and other programs of its type, has rows and columns, which the user can label.1 The user also enters mathematical expressions for manipulating numbers in the table. When the user changes just one number in the table, the program automatically recalculates all related numbers (see the example in the ruled insert).

These electronic spreadsheets make it possible to construct a planning model quickly. This model can be saved on a disk for future use and, because disks are easily duplicated, each district sales manager could have one with the appropriate models for managing that district. A blank disk costs about $3.

General sales managers could encourage lower-level managers to create better strategies by supplying them with “template” disks containing standardized analytic approaches to common field sales management problems. (Such standardized analytic models are called templates because they are an overlay of the basic spreadsheet.) Persons in the home office or consultants could develop these models in cooperation with sales managers in the field.

To aid sales managers who are considering use of microcomputers to make their sales forces more productive, I will offer examples of industrial goods producers. Although few companies will find all of the examples relevant to their needs, just one application could increase the productivity of the sales force. The concepts are also applicable to other businesses, such as makers of pharmaceuticals and grocery store items, or to services, such as insurance companies and commercial banks.

Managing an Account

As Benson Shapiro and others have pointed out, many companies are using national account management designs to increase the productivity of their sales forces.2 The following paragraphs describe the ways national account managers can use microcomputers in solving their chief problems.

Assessing sales potential

Account managers must ask many strategic questions: Are we calling too often on an account? Should we pay more attention to existing accounts or try to develop new accounts? Are we getting equal penetration in all departments of an account? How can we increase our share of the account potential? Answers to these questions require a forecast of account potential.

Exhibit I shows the data and assumptions often used in forecasting the potential of an account. The sales planner enters the figures shown in brackets, which are account requirements for the previous period, estimated growth rates per period, sales for the previous period, estimated share points for the next period, and an estimate of the number of calls necessary to achieve these share points. The computer estimates total requirements for the forecast period, share points for the previous period, company sales, and sales per call. Exhibit I shows a sales projection by means of a simple model, but the planner could also use a more complex model.

Exhibit I Sales forecast Note: Planner enters figures in brackets. Computer produces all other figures.

This model forces the account manager to make specific assumptions regarding the future of the account. For projections further into the future, he or she need only enter a 2, a 3, or a higher number in the line that indicates the forecast period. The computer will change other numbers accordingly. In this exhibit, projections made further into the future showed clearly that the Central Manufacturing account will generate more sales per call than the other accounts because of its high growth rate.

This analysis should raise many other questions in the mind of the account manager, including: What can we do to increase our share of this business? Are we making too many calls on Northern Engineering? Should we call more often on Central Manufacturing to try to gain greater penetration? Should we drop some accounts? Microcomputers can provide analyses that will help answer these questions.

Improving account product mix

The manager will want to know which accounts buy only the company’s low-margin products and what would happen to the account contribution with a strategy to encourage the purchase of products with higher margins. The microcomputer can do the analysis to answer these questions and can show how the selling effort per account compares with the account’s contribution. It can also test “what if” strategy changes.

Exhibit II shows the products’ different profit margins and the dependence of an account on its mix of products. In this example, four products (axles, bars, clutches, and drums) have, respectively, gross profit margins of 0.1, 0.2, 0.3, and 0.4. Half the products purchased by Central Manufacturing are for axles, the lowest-margin product. Conversely, Northern Engineering buys mostly clutches and drums, which have the largest margins. Consequently, Northern Engineering makes the greatest product contribution, although its sales volume is the lowest.

Exhibit II Account contribution and product mix

This finding suggests two account strategies. First, the account manager will want to get more penetration in Northern Engineering (bearing in mind, however, that this account seems to be declining in the long run, as reflected by its 0.95 growth rate, shown in Exhibit I). Second, he or she needs to develop strategies that will encourage Central Manufacturing to buy more higher-margin products. This account is important because of its high growth rate, which Exhibit I shows to be 1.2. The manager may use the “what if” feature of the computer program to estimate the effect of different product mixes on profit by simply changing the numbers in the product-mix column for Central Manufacturing.

It should be noted that in Exhibit II the manager enters only the product margins and the product-mix ratios. The computer carries from Exhibit I the sales potentials and estimated calls.

Reducing account costs

Managers would like to know which accounts use a disproportionate share of costs for freight, inventory, technical services, advertising, and interest on accounts receivable. They need to know which accounts make the greatest contribution, net of total marketing costs, and how the percentage of the total contribution of the account compares with the percentage of calls per account. The microcomputer can help answer these questions and can show what would happen to the net contribution of an account if costs were reduced in one of these categories.

Exhibit III shows how an account’s contribution can be refined to reflect its different requirements with regard to freight, inventory, speed of payment, and its need for technical services and promotional effort.3

Exhibit III Account costs and net contribution

The accounting systems in many companies will not provide these costs for each account, but distribution cost analysis techniques can allocate marketing and selling costs.4 In this example, although the freight, technical services, and advertising or promotional expenses could be traced directly to individual accounts, it was necessary to allocate inventory and accounts receivable carrying costs to each account according to its shares of inventory and total accounts receivable.

If the cost per sales call for each account is unavailable, the planner can enter the average cost per call in that territory. In this example, the average sales call cost is $53. The computer calculates the selling costs, the total marketing costs, the net contribution per account, the percentage of total contribution from each account, the percentage of total available calls used by each account, and the net contribution per call.

In Exhibit III we see that the Western Tool account makes a greater contribution than Northern Engineering ($33,590 versus $29,420) because Western had lower account costs. The importance of a complete account analysis is now apparent. Exhibit I showed that Central Manufacturing had the largest sales potential. In Exhibit II, Northern Engineering had the largest product contribution. But Western Tool has the best net contribution. The national accounts manager will want to study this information carefully and perhaps direct more of the company’s selling efforts toward Western Tool, even though it ranks second in sales, growth rate, and account product contribution.

The lower right-hand corner of Exhibit III shows the national account manager that 95.34% of the sales calls are generating only 58.21% of the net contribution. This finding suggests many strategic questions: How can the company make these other accounts more profitable? Should the sales manager reallocate these calls to accounts with greater potential? Can telephone selling, direct mail, or distributors reduce the costs of these other accounts? Sales managers can test the effects of these alternatives by changing a few numbers in the table in Exhibit III and letting the computer recalculate the figures.

Improving Return on Assets

If the company takes a portfolio approach to account management, should an account manager be evaluated and compensated according to each account’s return on assets managed? Exhibit IV illustrates how the microcomputer may be used to compute this figure for each account and for all national accounts.

Exhibit IV Return on assets managed

The manager enters in this table the average accounts receivable and inventory balances for each account and the assets used for all accounts. The computer then calculates the total assets per account, the asset turnover rate, and finally the return on assets managed. In this example, too, the ranking of the accounts changes. Northern Engineering ranks first, with a 50.09% return on assets managed.

At this point, we see the importance of clearly defining the goals of the sales force. A sales representative would concentrate on Central Manufacturing if sales and growth rate were the goals. Northern Engineering would be favored if the criterion were account product contribution or return on assets managed. Western Tool would be the most important account if the goal were to maximize the net contribution of an account.

The computer improves sales managers’ ability to analyze and specify goals. Remember, however, that if they redefine sales goals, they must also redefine the evaluation and compensation systems for representatives.

Account portfolio matrix

The general sales manager and the vice president for sales will not want all the detail that appears in the first four exhibits. A summary report is a simple matter with use of the microcomputer. The report in Exhibit V is automatic; it requires no input from the planner. The microcomputer could also rank the accounts according to any of the criteria in the table. The data in this exhibit may be stored on disk and then read into VisiPlot or another plotting program to produce a portfolio matrix.

Exhibit V Account summary in thousands of dollars Note: No inputs are required from planner.

Exhibit VI is a portfolio matrix that uses growth rate and return on assets managed as the criteria for account evaluation. This exhibit introduces some dynamics into the analysis by plotting the matrix position for each account, other accounts, and all accounts for one and three periods into the future. It shows that Central Manufacturing could move in three periods from last to first place in return on assets managed. The manager could use the data stored on disk from Exhibit V to create other portfolio matrices, such as the share-growth matrix.

Exhibit VI Projections of return on assets managed Note: This exhibit was created with VisiTrend/VisiPlot, a trademark of VisiCorp.

A Sales District Example

While sales managers are under increased pressure to be innovative, to be sensitive to competition, to analyze more and more data, to train representatives, and to increase the net contribution of the district, the scarcity of time remains constant. A microcomputer can help sales managers at all levels use their time more efficiently. First we will see how a microcomputer can help evaluate the performance of each representative. This evaluation is in financial terms, including net contribution and return on assets managed. Second, we will see how the microcomputer can assist the field sales manager in teaching time management, evaluating selling skills, and teaching representatives to run their territories as profit centers.

Financial criteria

If companies decide to evaluate and compensate sales managers by financial criteria, then they need to evaluate representatives in the same terms. Exhibit VII illustrates that a comparative income statement for a district will enable the district manager to compare representatives with each other and with the district total.

Exhibit VII District comparative income statement

This exhibit can provide the field sales manager with a basis for increasing the representatives’ and the district’s productivity, for controlling expenses, and for redefining goals, strategies, and programs. It can be useful also for evaluating performance when making decisions regarding compensation, promotion, and separation. Thus, this comparative income statement can be a central part of a district control system.

The home office could supply this statement on a template disk that would include columns for the region and the nation, so that the manager could make comparisons beyond the district level. He or she could then test district strategies by asking “what if” questions and changing appropriate values.

The national accounts manager could also use this comparative statement. In fact, all of the data in this statement can come automatically from Exhibits I through IV so that the national accounts manager gets such statements with no additional work.

Teaching representatives

A major part of a district manager’s time is spent evaluating, coaching, and counseling old and new representatives. Federal policies on equal employment opportunities for minorities and protected groups have made careful documentation of a representative’s performance and company training efforts even more important. The following example illustrates a computerized form that could improve the manager’s effectiveness in this area.

While representatives accept the concept of time management, they have difficulty putting it into practice. How can managers dramatize the importance of, say, reducing travel and waiting time? Exhibit VIII shows how the microcomputer can aid a manager when working with a representative on this area.

Exhibit VIII Daily time management and plan Note: Planner or representative changes only those times that are part of a new time-management plan.

The representative enters in column 1 the average number of minutes spent during a day on each selling activity and the average number of calls per day. The computer can carry forward from other analyses the sales for the last period and the net territory contribution. The computer will then calculate the total calls per year, the cost of a call, and the contribution per call.

The representative, working alone or with the manager, can test the effect of different time management plans. For example, Plan A in Exhibit VIII tests the effect of working 60 more minutes per day and allocating time according to the present percentages. By changing one number, from 420 minutes to 480 minutes, the representative will see that this plan will increase sales and contribution by 14%, although he or she will reach only 95% of the new quota.

Plan B in Exhibit VIII shows how a representative can change four numbers to reflect better time allocation. The computer then calculates the advantage of working more effectively rather than just longer. In this case, Plan B will increase sales and contribution more than 31% and the quota will be exceeded by 10%. Such figures should motivate the representative to take time management seriously. This exhibit could be the basis for an agreement between representative and manager on territory objectives for the coming period.

As managers gain experience with the computerized time-management analysis model, they will want to make the simple linear relationships in Exhibit VIII nonlinear, to reflect the effects of the representative’s learning the territory and the product line as well as the effects of decreasing returns from additional calls.

Coaching and training programs begin with an evaluation of representatives’ present skills. Managers will want to know the answers to such questions as which skill improvement will have the greatest impact on a representative’s sales, which skill should be dealt with in the next district training session, and how a 10% improvement in the closing rate would affect the representative’s compensation. Templates can be made to help answer these questions.5

Other Applications

The paperwork continues to grow at the district level as managers must document all hiring, promotion, and firing decisions. Letters, proposals, and memos take time, and hours can be spent in trying to reach representatives and persons in the home office. Word processing and electronic mail are two applications of the microcomputer that can help district sales managers use their time more effectively.

Word processing, with dictionary options to correct spelling, can reduce both time and paperwork. Standardized proposals may be supplied on disks so that the representative or manager needs to enter only the information unique to the prospect. The details of the recruiting process may be put on the computer with a recruiting log and automatic letters for turndown and acceptance. Managers could use the computer to create a report of the number of candidates at each stage in the recruiting process, which would help them with manpower planning.

Some computer manufacturers and software developers are planning briefcase-size computers to enable a sales representative to do a prospects’ needs survey and immediately write a proposal. Some microcomputers can enter a new order in the company’s main computer or check on the status of a previous order using a modem and any telephone.

Electronic mail can greatly increase the efficiency of communications in a sales district. Such a system consists of a main computer that has a “mailbox” for each person who is authorized to leave or pick up mail. A modem links the microcomputer to the main computer through telephone lines. The system can be faster and cheaper than mail and telephone calls. It can be faster than the telephone when representatives are on the road because it is frequently difficult to reach them by phone. With the cost of a business letter now estimated to be greater than $7, electronic mail can be economical.6

The microcomputer can help to control the supply and distribution of promotional materials, samples, demonstration equipment, and other materials that must be allocated to representatives according to the corporate selling plan. A data-based management program is a simple means for inventorying, allocating, scheduling, and reporting the status of district promotional materials.

Perhaps one of the greatest potentials of micro-computers is an application known as prototyping. In prototyping, a sales manager develops a model on a microcomputer, and the model is then adapted to a larger, faster computer. Refinements in the model are easy to make. Once it has been tested and refined, the model can be implemented on a larger computer that has a faster and more efficient processor than a microcomputer. In this way, managers gain the advantages of both systems—the microcomputer that is user friendly and the large computer that is more economical.

The increased core and disk memory of newer microcomputers provide enough capacity to handle most sales management problems. While the machine speed of a microcomputer may be slow compared with a larger machine, the human interaction is so friendly that the results may in fact be quicker. The extensive market for software has encouraged development of user-friendly, packaged programs that can be purchased for a few hundred dollars each.

Planning on a microcomputer rather than a mainframe has many psychological advantages. For one thing, users feel less intimidated by the small machines. Also, the system is more confidential: no one knows that you are analyzing a weak account and deciding to drop it. Data and models can be put on disks and locked safely away. The user feels in charge. As one executive stated, “I can always shut it off and pull the plug.”

The microcomputer takes the burden off the larger computer and increases its response time for jobs that only a larger machine can do. Some companies report that the cost of the microcomputer is more than offset by the reduced telephone charges and computer time-shared charges.

Once a microcomputer is in use, many additional time- and cost-saving applications emerge. Often these are applications that the user did not consider important enough to submit to the computer services department. These applications include project control, graphs for sales meetings, and models to evaluate the effect of price changes. The microcomputer can help evaluate prospects and write personal letters as part of a direct mail campaign. In telephone selling it can show key data on the screen, present a sales message to be used for the prospect, and even dial the telephone number automatically. The equipment and software to accomplish all of these applications are inexpensive.

Perhaps one of the greatest advantages of microcomputers is in helping executives overcome their fear of computers. Programs have been developed for self-teaching, so that executives can avoid the embarrassment of asking a subordinate (or perhaps a son or daughter) for instruction. It is easy, then, for managers and executives to develop analytic models that track their own decision processes rather than the decision process of the model builder.

A version of this article appeared in the March 1983 issue of Harvard Business Review.