Standards of sales performance facilitate the measurement of progress made toward departmental objectives. Specific objectives vary with changes in the company’s marketing situation, but are reconcilable with the general objectives of volume, profit, and growth. For instance, a general objective might be to add $10 million to sales volume, a figure in itself of little assistance for operating purposes. But using this objective as a point of departure, management drafts plans to expand sales volume by $10 million Through analysis of market factors, management may conclude that $10 million in additional sales can be made if two hundred new accounts are secured. Experience may indicate that 1,000 calls on prospects must be made to add 200 new accounts. Thus, in successive steps, the general sales volume objective is broken down into specific operating objectives. Performance standards are then established for the business as a whole and, ultimately, for each salesperson. These standards are used to gauge the extent of achievement of general and related specific objectives.
The first quantitative standard that any firm should select is one that permits comparisons of sales volume performance with sales volume potential. From the sales department’s stand- point, the volume objective is the most crucial and takes precedence over the profit and growth objectives. Before profits can be earned and growth achieved, it is necessary to reach a certain sales volume level. It is entirely logical for sales management first to develop a standard to gauge sales volume performance.
Quantitative performance standards also measure success in achieving profit objectives. Profits result from complex interactions of many factors, so the modicum of control over profits provided through the standard for sales volume is not enough. Standards to bring some or all factors affecting profit under sales management’s control should be set. Performance standards, then, are needed for such factors as selling expense, the sales mixture, the call frequency rate, the cost per call, and the size of order.
Setting quantitative performance standards to gauge progress made toward growth objectives is even more complex. Growth objectives are met to some extent through the natural momentum picked up as a company approaches maturity, but performances by sales personnel impact upon growth. In an expanding economy, where the gross national product each year is larger than that in the year before, it is reasonable to expect individual sales personnel to show annual sales increases. However, this assumes that marketing management keeps products, prices, promotion, and other marketing policies in tune with market demand and that sales management’s efficiency is continuously improved. If these are logical assumptions, then the standards needed for individual sales personnel (besides successively higher sales volume and profit quotas each year) relate to such factors as increased sales to old accounts, sales to new accounts, calls on new’ prospects, sales of new products, and improvements in sales coverage effectiveness.
