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Personified Promotion
An appropriate formula for measuring return on investment is as follows:
ROI = Net profit × Sales
Sales Investment
INVESTMENT: is total assets employed. The first fraction expresses the rate of profit on sales, and the
second fraction indicates the number of times the total investment (assets employed) was turned over. By
multiplying the rate of profit on sales by the investment turnover, the return on investment is determined.
The ROI concept is particularly useful for evaluating the performance of a territorial sales manager or
some other segments of the field sales organization.
The factors in the equation would be modified to make them appropriate for the organizational segment
being analyzed. If management is evaluating territorial performance, for instance, sales volume, in each
district, presumably is readily available for the profit figure, management can determine the contributions
margin in each territory. That is, from a given territory’s sales, we deduct the cost of goods sold and
all operating expenses directory chargeable to (i.e. controllable by) that district. The investment (assets
employed) in the territory consists of the average accounts receivable and inventory carried to serve that
district. In equation form this is:
ROI = Contribution margin × Territorial sales
Territory sales Average accounts
Territorial managers can improve their return on investment by influencing volume contribution margin
or district investment.
Thus, the ROI concept can serve field sales managers as a useful decision-making aid when they are
considering the addition of new customers or products their regions. In effect, return on investment
is an analytical tool that facilitates the delegation of profit responsibility to territorial sales managers.
SALES QUOTAS
A sales quota is a share of the company selling job assigned to a salesman or other making unit for use
as a goal in the management of selling effort.
As standards for appraising selling effectiveness, quotas specify desired performance levels for sale
volume; budget items as expenses, gross margin, net profit and return on Investment; selling and non-
selling-related activities or some combination of these items.