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Sales Goals In An Uncertain Economy: Mistakes Can Sabotage Profits – Forbes

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Uncertainty about the economic outlook makes setting sales goals unusually difficult and also illustrates some of the flaws of traditional approaches to the problem. The economy is likely to show good growth in 2021 as Covid-19 vaccinations increase, but the timing and extent of the economic recovery are far from certain. They depend on the current surge of the virus, the production and distribution of the vaccine (not an easy task), the effectiveness of the vaccine and social attitudes regarding vaccination and social distancing as the pandemic abates.

Common approaches to setting goals for sales representatives depend on a forecast of how much sales are possible, which for most organizations depends, at least in part, on the economy. (The exceptions include new products in which changes in market share will swamp overall market fluctuations, some government procurement and other items whose buyers are impervious to economic changes.)

Why not take a guess at sales, bump it up a bit to a stretch goal, and call it good? Goals that are much too low don’t motivate sales people. They hit their goals early in the year and coast thereafter. Goals that are too high also don’t motivate people once they learn that their goals are not achievable. The ideal goal is achievable, but only through strong performance. But when managers don’t know how much is achievable, setting a revenue target is dangerous.

One alternative to a results-based sales goal is a sales activity goal. In many situations, successful sales people use the funnel concept: make calls, set meetings, develop proposals and then close sales. The specific steps vary with type of sales activity. Setting activity goals for these steps ensures that representatives are doing the things that need to be done to achieve sales. This is often a good tool for beginning representatives in a situation where the manager can benchmark activities of the most successful veterans. The new representative is told what steps to take to achieve success. This leaves out the skill with which each activity is conducted, but at least it motivates activity.

Unfortunately, a common way to set sales activity goals simply works backwards from the dollar sales goals, calculating what that means for sales calls, meetings, etc. The activity goals simply become another way to set a sales goal, subject to all the uncertainty of the economy.

Activity goals can also lead to counterproductive behavior. Fred procrastinates on his activity goals, knowing he can make his needed calls the last week of the month. But one of those calls turns out to be a hot prospect who wants further information as soon as possible. Fred’s achievement of his activity goals conflicts with what needs to be done to land a sale. This sort of conflict will not happen all the time, but managers should be aware that sales reps invariably learn how to game whatever incentive system is used.

A hybrid approach requires hitting activity goals when actual sales fail to meet dollar goals. A representative who is making the calls deserves compensation even if the sales environment is exceptionally tough. With traditional funnel activity goals, though, calls could be easy, but the next steps may be difficult. Prospects who will not buy soon don’t want to set up meetings or request proposals. Sales reps would do better accepting this reality and making more calls, even if that means missing some of the late-stage goals.

The difficulty of setting goals for sales people raises the question: Why have goals at all? Perhaps compensation should be simpler, such as a simple commission, so that hitting some arbitrary number doesn’t make the sales person better off financially. Getting the mix of base salary and commission right is difficult and requires an understanding of what normal sales could be, but that’s easier than predicting 2021 sales.

Athletes improve their performance with goals that are S.M.A.R.T.: Specific, Measurable, Attainable, Realistic, and Time-based. A soccer player might set a specific goal to improve endurance, while a swimmer might focus on turns for a season. Such goals are specific to the particular athlete. Sales representatives can use the same approach individually, which could mean writing proposals that close more sales by the end of the second quarter. This is valuable but different from the broad goals common in sales teams.

With the fluid economic environment, locking representatives into year-long goals based on a guess as to the market strength will likely set up failure. Compensate representatives for both performance and activity, and monitor the economic environment on a monthly basis.

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China economy grows in 2020 as rebound from virus gains – CTV News

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BEIJING —
China eked out 2.3% economic growth in 2020, likely becoming the only major economy to expand as shops and factories reopened relatively early from a shutdown to fight the coronavirus while the United States, Japan and Europe struggled with rising infections.

Growth in the three months ending in December rose to 6.5% over a year earlier as consumers returned to shopping malls, restaurants and cinemas, official data showed Monday. That was up from the previous quarter’s 4.9% and stronger than many forecasters expected.

In early 2020, activity contracted by 6.8% in the first quarter as the ruling Communist Party took the then-unprecedented step of shutting down most of its economy to fight the virus. The following quarter, China became the first major country to grow again with a 3.2% expansion after the party declared victory over the virus in March and allowed factories, shops and offices to reopen.

Restaurants are filling up while cinemas and retailers struggle to lure customers back. Crowds are thin at shopping malls, where guards check visitors for signs of the disease’s tell-tale fever.

Domestic tourism is reviving, though authorities have urged the public to stay home during the Lunar New Year holiday in February, normally the busiest travel season, in response to a spate of new infections in some Chinese cities.

Exports have been boosted by demand for Chinese-made masks and other medical goods.

The growing momentum “reflected improving private consumption expenditure as well as buoyant net exports,” said Rajiv Biswas of IHS Markit in a report. He said China is likely to be the only major economy to grow in 2020 while developed countries and most major emerging markets were in recession.

The economy “recovered steadily” and “living standards were ensured forcefully,” the National Bureau of Statistics said in a statement. It said the ruling party’s development goals were “accomplished better than expectation” but gave no details.

2020 was China’s weakest growth in decades and below 1990’s 3.9% following the crackdown on the Tiananmen Square pro-democracy movement, which led to China’s international isolation.

Despite growth for the year, “it is too early to conclude that this is a full recovery,” said Iris Pang of ING in a report. “External demand has not yet fully recovered. This is a big hurdle.”

Exporters and high-tech manufacturers face uncertainty about how President-elect Joseph Biden will handle conflicts with Beijing over trade, technology and security. His predecessor, Donald Trump, hurt exporters by hiking tariffs on Chinese goods and manufacturers including telecom equipment giant Huawei by imposing curbs on access to U.S. components and technology.

“We expect the newly elected U.S. government will continue most of the current policies on China, at least for the first quarter,” Pang said.

The International Monetary Fund and private sector forecasters expect economic growth to rise further this year to above 8%.

China’s quick recovery brought it closer to matching the United States in economic output.

Total activity in 2020 was 102 trillion yuan ($15.6 trillion), according to the government. That is about 75% the size of the $20.8 trillion forecast by the IMF for the U.S. economy, which is expected to shrink by 4.3% from 2019. The IMF estimates China will be about 90% of the size of the U.S. economy by 2025, though with more than four times as many people average income will be lower.

Exports rose 3.6% last year despite the tariff war with Washington. Exporters took market share from foreign competitors that still faced anti-virus restrictions.

Retail spending contracted by 3.9% over 2019 but gained 4.6% in December over a year earlier as demand revived. Consumer spending recovered to above the previous year’s levels in the quarter ending in September.

Online sales of consumer goods rose 14.8% as millions of families who were ordered to stay home shifted to buying groceries and clothing on the internet.

Factory output rose 2.8% over 2019. Activity accelerated toward the end of the year. Production rose 7.3% in December.

Despite travel controls imposed for some areas after new cases flared this month most of the country is unaffected.

Still, the government’s appeal to the public to avoid traditional Lunar New Year gatherings and travel might dent spending on tourism, gifts and restaurants.

Other activity might increase, however, if farms, factories and traders keep operating over the holiday, said Chaoping Zhu of JP Morgan Asset Management in a report.

“Unusually high growth rates in this quarter are likely to be seen,” said Zhu.

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ECB's latest stimulus expected to have little impact on euro zone economy – Reuters poll – Cape Breton Post

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By Richa Rebello

BENGALURU (Reuters) – The European Central Bank’s new policy package will have little effect on the euro zone’s coronavirus-ravaged economy, according to the forecasts of a Reuters poll of economists, who nearly halved their outlook for first-quarter growth.

Despite the ECB’s decision to top up its pandemic emergency purchases by half a trillion euros to 1.85 trillion euros and extend the programme for nine months, the bloc’s economic outlook remains bleak.

The Reuters poll consensus of over 80 economists forecast the euro zone economy shrank 2.5% last quarter after expanding 12.5% in the third quater and was expected to grow 0.6% this quarter, nearly half the 1.1% predicted a month ago.

It was then expected to expand 2.3%, 1.9% and 1.0% in the second, third and fourth quarters, largely unchanged from last month’s forecasts collected just before the ECB introduced more stimulus.

Over 70% of economists, or 28 of 39 who replied to an additional question, said the ECB’s latest policy moves would have little impact on the euro zone economy. The others said it would provide a significant boost.

“Interest rates are already so low and policy is ultra-loose, so for now, monetary policy cannot impact investment or consumer demand. Thus we do not think the ECB can influence the economy strongly at this time,” said Christoph Weil, senior economist at Commerzbank.

“We expect a bitter couple of months. Lockdowns will dampen the economy and we expect falling GDP in the last quarter of 2020 and in the first quarter of this year. So technically a recession”.

Graphic: Reuters Poll – Euro zone economic growth and inflation outlook: https://fingfx.thomsonreuters.com/gfx/polling/rlgvdgleepo/Euro%20zone%20economic%20outlook.PNG

Of the participants in the Jan. 11-15 survey, over 25% expected the euro zone – where growth plumbed to an historic low in the first half of 2020 – to have again entered a technical recession, defined as two consecutive quarters of contraction.

On an annualised basis, the economy was expected to have shrunk 7.3% in 2020, roughly in line with the last poll, but for this year, the median was downgraded to 4.5% from 5.0% last month. For 2022, the growth forecast was upgraded to 3.9% from 3.5%.

“The start of the year continues to bring bad news for Europe as the health situation deteriorates. With lockdowns already being extenin several countries, short-term risks to the economic outlook are clearly skewed to the downside, especially as the vaccination roll-out is still slow,” said Angel Talavera, head of Europe economics at Oxford Economics.

“The new and more transmissible variants of the virus mean a further deterioration could happen very quickly.”

Over 70% of respondents, or 30 of 42, who replied to a separate extra question said the economy would return to pre-crisis levels within two years, including six who said within a year. The others said it would be more than two years.

Graphic: Reuters Poll – Euro zone economy and the European Central Bank’s policy outlook: https://fingfx.thomsonreuters.com/gfx/polling/xegpbemwgvq/Reuters%20Poll%20-%20Euro%20zone%20and%20ECB%20policy%20outlook%20-%20January%202021.PNG

The two largest euro zone economies were expected to grow much slower in 2021 compared with expectations in October. Germany was forecast to grow 3.7%, down from 4.6%, and the outlook for France was downgraded to 5.9% from 6.9%.

Euro zone inflation, which remained in negative territory for five straight months last year, was expected to remain below the ECB’s target of just under 2%, averaging 0.9% in 2021 and 1.3% in 2022.

A slim majority, over 52% of economists, or 21 of 40 who answered a separate question, said a significant pick-up in inflation was likely. Seventeen said it would remain around the same as 2020 and two said deflation was more likely.

“If history is any guide, any too-high expectations of inflation can be shattered. But we have very supportive fiscal policy and a number of structural factors that could support higher inflation a little further down the road,” said Florian Hense, senior Europe economist at Berenberg.

(For other stories from the Reuters global economic poll:)

(Reporting by Richa Rebello; Polling by Sujith Pai and Swathi Nair; editing by Jonathan Cable and Larry King)

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China's economy grows 2.3% in 2020 as recovery quickens – CNN

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The world’s second largest economy expanded 2.3% in 2020 compared to a year earlier, according to government statistics released Monday.
It’s China’s slowest annual growth rate in decades — not since 1976 has the country had a worse year, when GDP shrunk 1.6% during a time of social and economic tumult.
But during a year when a crippling pandemic plunged major world economies into recession, China has clearly come out on top. The expansion also beat expectations. The International Monetary Fund, for example, predicted that China’s economy would grow 1.9% in 2020. It’s the only major world economy the IMF expected to grow at all.
The pace of the recovery appears to be accelerating, too: GDP grew 6.5% compared to a year ago, faster than the third quarter’s 4.9% growth.
“The performance was better than we had expected,” said Ning Jizhe, a spokesman for China’s National Bureau of Statistics, at a press conference in Beijing.
The country scrapped its growth target last year for the first time in decades as the pandemic dealt a historic blow to the economy. GDP shrank nearly 7% in the first quarter as large swaths of the country were placed on lockdown to contain the spread of the virus.
Since then, though, the government has attempted to spur growth through major infrastructure projects and by offering cash handouts to stimulate spending among citizens.
Industrial production was a particularly big driver of growth, jumping 7.3% in December from a year earlier.
“In and out of lockdown ahead of everybody else, the Chinese economy powered ahead while much of the world was struggling to maintain balance,” wrote Frederic Neumann, co-head of Asian economics research at HSBC, in a Monday research report.
This has “put a floor under growth” in other regional markets, he added. Surging Chinese investment in infrastructure and property, for example, has been a boon to countries like Australia, South Korea and Japan that exported supplies to China.
Trade has also been strong. China’s overall surplus for the year hit a record $535 billion, up 27% from 2019, according to statistics released last Friday. Analysts pointed out that the country benefited from a lot of demand for protective gear and electronics as people around the world worked from home.
Chinese markets reversed opening losses Monday to rise following the announcement. The Shanghai Composite (SHCOMP) gained 0.8%, while the Shenzhen Component Index — a benchmark for the city’s tech-heavy exchange — rose 1.6%. Hong Kong’s Hang Seng Index (HSI) increased 1%.
There are still some weak spots, though. Retail sales lost a little steam in December, rising 4.6% compared to November’s 5%. For the entire year, retail sales slumped 3.9%. Ning, the National Bureau of Statistics spokesperson, blamed the waning sales on a resurgence of coronavirus in some places.
The “sporadic” cases in China “will bring uncertainty to [our] economic recovery,” he added.
Even so, Ning said the country believes the pandemic is under control, and said authorities expect people to spend more money this year.
Analysts from Capital Economics, meanwhile, believe the outlook is “bright” in the near term.
“Despite the latest dip in retail sales, we see plenty of upside to consumption as households run down the excess savings they accumulated last year,” wrote Julian Evans-Pritchard, senior China economist for Capital Economics, in a Monday note. “Meanwhile, the tailwinds from last year’s stimulus should keep industry and construction strong for a while longer.”

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