Selling functions and

strategies
Selling functions and
strategies
Selling Objectives and sales
organization
 SBU Objectives and
the Sales Organization
Sales
Market Share Organization Primary Compensation
Objectives Objectives Sales Tasks System

Build Build sales Prospective Salary plus

volume; Secure
and new incentive
distribution
accounts
Provide high
service levels
particularly
pre-sales
service
Product/marke
t feedback
 SBU Objectives and
the Sales Organization
Sales
Market Share Organization Primary Compensation
Objectives Objectives Sales Tasks System

Hold Maintain Call on targeted Salary plus

sales volume current accounts commission
Consolidate Incr. service or bonus
market position levels to current
through accounts
concentration Call on new
on targeted accounts
segments
Secure additional
outlets
 SBU Objectives and
the Sales Organization
Sales
Market Share Organization Primary Compensation
Objectives Objectives Sales Tasks System

Harvest Reduce selling Service most Salary

costs profitable plus
Target accounts bonus
profitable eliminate
accounts unprofitable
accounts
Reduce service
levels and/or
inventories
levels
 SBU Objectives and
the Sales Organization
Sales
Market Share Organization Primary Compensation
Objectives Objectives Sales Tasks System

Divest or Minimize selling Dump inventory Salary

costs and clear out Eliminate service
Liquidate inventory
 Business Strategy and
the Sales Function

• Low-cost supplier Pursue

Compete
Serve alarge
distinct
on customers
non-price
target
market benefits
not served well
Minimize cost
by others
Provide high quality
• Differentiation Compete on price
Provide
customerhighservice
quality
customer
Seek customersservice
who are
Seek customers who are
low price shoppers
• Niche Seek
not low
customers
price shoppers
who are
not low price shoppers
Sales Forecasting and Operational
Planning
• Central part of strategic planning
• Directly or indirectly influences following
functional areas
– Sales an marketing planning
– Production scheduling
– Cash flow projections
– Financial planning
– Capital investment
– Procurement
– Inventory management
– Human resource planning
– Budgeting
Assessing the forecasting environment

• Controllable factors
• Uncontrollable factors
• Long-run or short- run forecast
• Leading indicators (to name few)
– New orders
– Ratio of price to unit labor cost in manufacturing
– Corporate Profit after tax
– Prices of industrial materials
– Average workweek in manufacturing
Identifying levels of forecasting
Market Potential (350 thousands units)

Sales Potential ( 150 thousands

units)

Sales forecast (125 thousand

units)

Sales Quota ( 25
thousand units per
sales person)
 Description of concepts
• Market potential – Highest potential expected industry sales
of a product or service during a set time period and specified
market assuming application of appropriate marketing methods

• Sales Potential – Maximum market share that any company or

brand could possibly obtain in a specified market segment during
a given period.

• Sales forecast – Expected actual sales for a company or

brand during a given time period

• Sales Quota – Sales volume goal for a salesperson or a sales

organization
 Analyzing Market Potential
• Market identification
– Who Buys the product?
– Who Uses it?
– Who are the prospective buyers/users?

• Market Motivation
– Why do people buy?
– Why don’t people buy?

• Analysis of Market potential

– Select market factors associated with the product’s demand
– Eliminate market segments that do not contain prospective buyers of the
product
 Sales Forecasting Methods
• Jury of executive opinions
• Delphi technique (version of jury opinions method)
– Responses of one series of questionnaires are used to produce next
questionnaires

• Poll of sales force opinion

• Projection of Past Sales

– Simple method ( On the basis of current year’s actual sales or adding
some % to it (moving average))
Next year’s sales = this year’s sales x this year’s sale
Last year’s sale
 Continued
• Time series analysis
– long term trends, cyclical changes, seasonal variations, irregular
fluctuations)
– For long term sales forecast

• Exponential smoothing
– Moving average with weighted sum of past time series numbers including
higher weight to most recent data
– Equation – Next year’s sales = a (this year’s sale) + (1-a)(this year’s
forecast)
– a is small if the series of sales data changes slowly and vis-à-vis

• Evaluation of past sales projection method

– Influencing factors: Market saturation, competitor’s move, marketing
campaigns etc.
 Continued
• Regression analysis

A statistical tool used in sales forecasting and measuring

the association between company sales and other
variables
– Simple regression ( one independent and one dependent
variable)
– Multiple regression ( two or more independent variable and one
dependent variable)
– The higher the co-relation the closer the association
 Continued
• Econometric model building and simulation
– Attractive for the companies in durable goods
– Independent variables = demand determining variables
Formula = S = R + N
» S = Total sales
» R = Replacement demand
» N = New-owner demand

• Converting Industry forecast into company forecast

Determining sales related
marketing policies
 Sales and Marketing policies

Three major Policies

1.) Product Policy ( What to sell)

2.) Distribution Policy ( whom to sell)

3.) Pricing Policy

 Product Policies ( What to sell)

• Product objectives (e.g. – Selling products that require less after

sales service or selling products having higher quality than
competitors)

• Product line Policy

– Short line (narrow range/specialized product)
– Full line (large range)

i.) Changes in Product offerings

• Whether items are still in line with the market
• To select the items to be dropped or to be added
Product Policies Continued…

ii.) Reappraising and simplification of product line

– Clash between two products
– Profitability standards
– Desires of dealers
– For better utilization of resources
– Chances of making the product better by change in some policies

iii.) Reappraising and diversification of product line

– Existing product lines at market saturation or industry in dying
– Assist dealers in increase in sales
– Unused plant facilities / seasonal fluctuations
– Introducing a new product and then a new product line
Product Policies Continued…

iv.) Ideas for new products

• From internal resources or external resources

v.) Appraisal of proposed new product

• Profitability, market potential, legal implications,
competition, pricing of the policy
• Production friendliness of the product
• Benefits of existing distribution channels and sales force
if any
Product Policies Continued…
• Product Design Policy
– Frequency of the design change
– Protecting design from copying

• Product Quality, Service and Guarantee Policy

– They can be advocated in marketing campaign

– Simple and customer friendly service policies win
over competition
– Of prime Importance for customer loyalty
 Distribution Policies ( Who to Sell)

Distribution Objective: Getting the right

product/service to the right people at the right time with
special consideration for profit and effectiveness

• Distribution channels are influenced by the nature of the

product.
• The choice of particular distribution channel/s sets the
pattern for sales force operations
Traditional Channels for consumer markets
Direct Retailer Wholesaler Agent/Broker
Channel Channel Channel Channel

Producer Producer Producer Producer

Agents or
Brokers

Wholesalers Wholesalers

Retailers Retailers Retailers

Consumers Consumers Consumers Consumers

Traditional Channels for Industrial markets
Direct Industrial Agent/Broker Agent/Broker Direct
Channel Distributor Channel Industrial Channel
Channel

Producer Producer Producer Producer Producer

Agents or Agents or
Brokers Brokers

Industrial Industrial
Distributor Distributor

Industrial Industrial Industrial Industrial Government

User User User User Buyer
 Non-Traditional Channels

• Tele marketing

• Internet Marketing

• Direct Mailers

• Network Marketing
 Distribution Policies
• Sales volume potential:
– Reach to the potential buyers by the channel
– Market analysis to judge each channel’s potential
– Comparative analysis
– Role of the sales people
• Comparative Distribution Costs
– Shortest are the costliest
– Direct selling more common in industrial markets than
consumer markets

• Net Profit possibilities

– Relationship of gross margin, expenses and net profits
 Pricing Policies

• Relative to Competition
– Meeting the competition
– Pricing above the competition
– Pricing under the competition
• Relative to Cost
– Full cost pricing (Variable + fixed cost covered)
– Promotion Pricing (special low introductory prices)
– Contribution Pricing (above relevant incremental cost)
 Continued…
• Relative to Buyers
– Wherever individual sales involve large sums
– Bargaining power varies with the size of transaction
– Creative selling

• List pricing
– List of standardized resale price
– Seek or does not seek to control resale price
– Multiply with the increase in the number of middlemen
– Resale price reporter is essential for effective
enforcement
Continued…
• Policy on discount
– Trade discounts ( A discount on the list price granted by a
manufacturer or wholesaler to buyers in the same trade)

– Quantity discounts

– Cash discounts (A reduction in the price of an item for sale

allowed if payment is made within a stipulated period)

• Geographical pricing policy

– F.O.B pricing
– Delivered pricing
Continued…
• Policy on price leadership

• Product line pricing policy

– Price space between two lines
– Pricing of the top and bottom lines

• Competitive bidding policy

– Industrial and government buyers
– Large volumes
Determining the kind of
sales personal
 Sales Organization Concepts
Salesforce Specialization

GENERALISTS SPECIALISTS
All selling activities Certain selling activities
and all products to for certain products
all customers for certain customers
Some specialization
of selling activities,
products, and/or
customers
 Selling Situation
• Consideration of Specialization
• A generalized salesforce should be used when selling effort is
more important than selling skill
• A specialized salesforce should be used when selling skill is more
important than selling effort

• Consideration of Environmental Characteristics,

Task Characteristics, and Performance Objectives

• Consideration of Customer Needs and Product

Complexity
 Selling Situation
Customer and Product Determinants
of Salesforce Specialization

Customer Needs Different

Market- Product/Market-
Driven Driven
Simple Specialization Specialization Complex
Product Range of
Offering Geography- Product- Products
Driven Driven
Specialization Specialization

Customer Needs Similar

Geographic Sales Organization

National Sales Manager

Sales Training Manager

Eastern Regional Sales Manager Western Regional Sales Manager

Zone Sales Manager (4) Zone Sales Manager (4)

District Sales Managers (20) District Sales Manager (20)

Salespeople (100) Salespeople (100)

 Product Sales Organization

National Sales Manager

Office Equipment Sales Manager Office Supplies Manager

District Sales Manager (10) District Sales Manager (10)

Salespeople (100) Salespeople (100)

 Market Sales Organization
National Sales Manager

Commercial Accounts Sales Manager Government Account Sales Manager

Sales Training Manager District Sales Managers (10)

Zone Sales Managers (4)

Salespeople (50)

Dsitrict Sales Managers (25)

Salespeople (50)

• Broad Market Specialization

– Consumers and/or Industrial
• Specific Industry Specialization
– Government agencies, educational institutions, distributors, and
retailers, OEMs
 Functional Sales Organization

National Sales Manager

Field Sales Manager Telemarketing Sales Manager

Regional Sales Managers (4) District Sales Managers (2)

District Sales Managers (16) Salespeople (40)

Salespeople (160)
Sales Organization Structures
Identify Major Accounts

Large Large Major

Account Account
Size of Account

Regular Complex
Small Account Account
Simple Complex
Complexity of Account
 Comparison of Sales Organization
Structures
Organizational
Structure Advantages Disadvantages

Geographic • Low Cost • Limited Specialization

• No Geographic Duplication • Lack of Management Control Over
• No Customer Duplication Product or Customer Emphasis
• Fewer Management Levels
Product • Salespeople Become Experts in • High Cost
Product Attributes and • Geographic Duplication
Applications • Customer Duplication
• Management Control over
Selling Effort Allocated to
Products
Market • Salespeople Develop Better • High Cost
Understanding of Unique • Geographic Duplication
Customer Needs
• Management Control Over
Selling Effort Allocated to
Different Markets
Functional • Efficiency in Performing • Geographic Duplication
Selling • Customer Duplication
Activities • Need for Coordination
 Hybrid Sales Organization
Structure

National Sales Manager

Commercial Accounts Sales Manager Government Accounts Sales Manager

Major Accounts Regular Accounts Office Equipment Office Supplies

Sales Manager Sales Manager Sales Manager Sales Manager

Field Telemarketing
Sales Manager Sales Manager

Western Eastern
Sales Manager Sales Manager
Determining the size of
the sales force
 Popular methods

• Workload method

• Sales potential method

• Incremental method
 Workload Method
• Step 1 - Classifying the customer
• Step 2 - Decide on length of time per each call and
desired call frequencies on each customer per year
• Step 3 - Calculate the total workload involved in covering
the entire market
• Step 4 - Determine the total time available with the sales
person
• Step 5 -Divide the total time available per sales person by
task
• Step 6 -Calculation of total number of salespeople needed
 Sales potential method

Formula used
N = S/P(1+T)
N = Number of sales personnel
S = forecasted sales volume
P = Estimated productivity of one sales personnel
T = Allowance of rate of sales force turnover

E.g. - N = 10,00,000 (s)/ 1,00,000 (P) x 1.10 (@ 10% sales force turnover)

= N = 11 sales personnel units

 Incremental method
With additional Additional Cost of goods sold Gross margin
salesperson no sales
volume of

16 250000 162500 87500

17 200000 130000 70000
18 150000 97500 52500
19 100000 65000 35000

With additional Gross margin Salaries Net profit

salesperson no +commission+ contribution
travel exp
16 87500 44500 43000
17 70000 42000 28000
18 52500 39500 13000
19 35000 37000 -2000