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Is It Time to Cut the Sales Force?

china business - mr. miguel p. suterio Jun 22, 2009

A number of manufacturers faced with reduced consumer demand are asking themselves the tough question: Is it time to cut the sales headcount?

As consumers demand better value from the brands they purchase, consumer goods companies find themselves unwittingly initiating their own downward sales and profitability spiral. As consumer demand falls, a manufacturer’s sales to trade falls and in order to protect the bottom line, companies cut training budgets first. Headcount inevitably follows shortly after. This results in an overloaded and under-skilled sales force, which in turn results in company in-market underperformance. This results in further reduction in sales to trade and the downward spiral is now set in full motion.

Prerequisite Questions
In order to prevent the downward spiral from even starting, we at Trade Dynamics normally advise our clients to answer some prerequisite questions first which will indeed determine if it is truly time to rightsize the sales force:

1. Product Availability
Are all your products consistently available in all the relevant channels they ought to be present in?

What percentage of your products available for sale are actually in the trade?

Are these all relevant products or just fast-moving items?

What percentage of time are they available at the point of consumer purchase?

How many times are these stocked out? What percentage of the relevant trade channel universe are they present in? Are they just in the biggest customers?

Are your products available in the right inventory quantities in the trade?

2. Visibility
Are your products highly visible to consumers, such that investments made in terms of packaging design and advertising spend are maximized and activated at the point of consumer choice?

3. Pricing
Are your products priced as intended in each of the different trade channels, considering the flow of goods, margin needs and trade margin architecture of these channels?

4. Point of Purchase Activities
Are your activities at the point of purchase—such as promotions, merchandising, consumer communication activities, etc.—planned, implemented, and measured?

Does your promotions evaluation take into consideration the front-loading effect, margin reduction effect, and overall ROI effect of investments versus a do-nothing scenario?

5. Trade Support Investments
Are your trade support investments planned and implemented truly as investments geared at developing symbiotic growth between your trade customers and your company?

Or are your trade support investments unilateral demands that are accepted with heads bowed in submission?

Job-cutting or Up-skilling?
Answers to these simple questions will reveal not only the skill level of a company’s sales force but how skills are put into practice for better business results. They will also reveal if the slow economy is the sole culprit of weak sales or if there is a deeper, underlying problem; and if job cutting is the wisest immediate recourse or if the more appropriate and sustainable solution is to actually up-skill the sales force.

(China Business Philippines 06/09)