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38160400 Sales Distribution Management

38160400 Sales Distribution Management

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Published by: Akshay Goel on Oct 16, 2013
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Introduction to Sales Management

• ―Sales management is the attainment of sales force goals in an effective and efficient manner through planning, training, leading, and controlling organizational resources‖ • Sales management is planning, direction and control of personal selling. This essentially includes recruiting, selecting, equipping, assigning, supervising, compensating and motivating the sales force • Objectives of Sales Management  Generate sales and earn revenue  Providing Profitability  Improving Market Share  Improving Corporate Image  Selling concept proposes that customer will not buy enough of an organization's products unless they are persuaded to do so through selling effort. Where as Marketing concept proposes that to achieve success, the focus should be on organization's ability to create, communicate and deliver a better value proposition through its marketing offer.

Introduction to Sales Management
Major Differences between Selling and Marketing


Introduction to Sales Management

Sales management involves the execution of the following tasks:  Setting personal selling objectives  Formulating sales policies.  Structuring the sales force.  Deciding the size of the sales force.  Designing / Demarcating / developing sales territories.  Developing the sales forecasts and sales budgets.  Fixing sales targets for individual sales territories /salesman.  Creating the sales force – selection, recruitment, induction/ orientation.

Introduction to Sales Management
 Managing the sales force
- compensation, motivation, sales coaching/supervision evaluation/appraisal, training/development  Building the sales organization.  Managing the marketing channels.  Ensuring growth and developing new accounts.  Sales communication and reporting.  Sales coordination and sales controlling including sales expense control.  Creating and maintaining right image for the company and its products in the market.  Co-ordination with marketing management in the areas like, product mix, pricing, distribution, advertising and sales promotion.  Building relationship strategies with key customers

Introduction to Sales Management
Personal selling:

 

Personal selling is one of the forms of ‗Promotion‘. Other forms being advertising, sales promotion and publicity. It is the art of successfully persuading customers to buy a product or services from which they can derive suitable benefits, thereby increasing their total satisfaction. Personal selling is a face to face transaction, a personal correspondence or a personal telephonic conversation between a salesman and a prospective customer. A well trained salesman can be a very effective communication medium. Personal selling involves:  Persuasion  Flexibility of approach  Supply of information  Mutual benefit

Introduction to Sales Management

The importance of personal selling from the point of view of manufactures as well as consumers.

From manufacturer‘s point of view  It creates demand for products both new as well as existing ones.  It creates new customers and, thus help in expanding the market for the product.  It leads to product improvement. While selling personally the seller gets acquainted with the choice and demands of customers and makes suggestions accordingly to the manufacturer.  Builds long term relationship. From customer‘s point of view  Personal selling provides an opportunity to the consumers to know about new products introduced in the market. Thus, it informs and educates the consumers about new products.

Limitations of personal selling  Can not reach mass audience  Expensive per contact  Many sales calls may be needed to generate a single sale  Labor intensive  7  .  It involves face-to-face communication. The sellers demonstrate the product before the prospective buyers and explain the use and utility of the products.  Personal selling gives an opportunity to the customers to put forward their complaints and difficulties in using the product and get the solution immediately.  Personal selling also guides customers in selecting goods best suited to their requirements and tastes as.Introduction to Sales Management It is because of personal selling that customers come to know about the use of new products in the market.

reliance sells plastic granules plastic film manufacturers.. Introduction to Sales Management Types of Personal selling   Industrial selling / B2B selling  Selling to resellers like wholesaler. The word retail is derived from the French word ‗Retallier‘ which means breaking the bulk or ‗cutting to pieces‘. Retail selling  Retail selling involves direct selling to the end/ ultimate consumer for personal use or consumption.Johnson & Johnson selling surgical equipments to hospitals.  Institutional selling.  Selling to Government organizations – the buying process often is different from that in public sector. Eg: Wal-Mart. Eg. Eg:.  Selling to business users. 8 . Kmart. Spencer‘s etc. The retailer buys in bulk from the Industrial seller and then sells the goods in smaller assortments as per the demand of the consumer. retailer etc. Shopper‘ Stop. Big Bazar.

Examples of services industry are hospitality.  Order getters – They are the front line sales people or sales support personnel 9 .Introduction to Sales Management  Services selling:  Services selling involves selling of intangible goods. airlines etc. Services have some unique characteristics which distinguish them from physical goods such as intangibility.  Types of selling function:  Different buying situations call for different types of selling function.  Broadly selling function can be categorized as follows  Order takers – they respond to existing customers. health care. insurance.  Order creators – they attempt to influence the specifiers rather than customers. simultaneity of production and consumption. non storability etc.

Eg:.  Delivery sales persons : They deliver the products to customers as in the case of orders received on phone.Introduction to Sales Management  Order takers can be classified as  Inside order takers: these are retail sales assistants.Sales people from Eureka Forbes.They make sales call and take orders from customers.Delivery boy in Dominos pizza. Eg:.  They perform the role of completing the transaction. Order creators Missionary salespersons: They do not close a sale but persuade the customers to promote a sellers brand . 10 .salespersons in Big Bazar.  Outside order takers:. They receive payment and passes the goods to the consumer : EG:. Eg:Medical representatives persuade the doctors to prescribe. They do not deliver anything at customer‘s place.

11 .  Sales support sales persons:  Technical support salespersons – Render support to frontline sales people when the product or the services being sold is complex.Introduction to Sales Management  Order Getters are classified as:  Front line salespersons  Organizational salespersons – they are the industrial sellers who try to establish long time relationship with organizational buyers. sellers of spices etc.  Merchandisers: provide sales support in retail and wholesaling situations.insurance agents.  Consumer salespersons are the door to door salesmen. carpet sellers. Eg:.

Generate 12 . mutually acceptable solution (preferably a win-win situation).  Successful negotiation involves an attempt by two parties to reach a  Problem solving skills.   Conflict management and resolution skills.  Conflict exists with in every organization/ department. Implement 5. alternatives 3.  Listening skills.  Negotiation skills Interest conflicts. Active listening – understanding speaker‘s feelings.  Content listening – Understanding and retaining the message  Critical listening – Understanding and evaluating the speaker‘s logic. Evaluate the solution.  Problem solving process involves 1. There can be intentions. Emotional conflicts. Value conflicts. Conflict need to be resolved. Decide 4. motives etc.  verbal  non-verbal. Define the problem 2. needs etc. Selling skills: Personal Selling Skills The essential selling skills of a sales persons are:  Communication skill.

 Prospecting  Pre-approach before the interview  Approach the customer  Presentation  Handling the customer‘s objections  Trial close  Close  Follow-up and service.Personal Selling Process  The sales process is a sequential series of actions:  Pre-sale preparation. 13 .

 Personal Selling Process Pre-sale preparation: by the salesman to equip himself with-    Product knowledge  Types  Features  Benefits / Limitations  Price Company knowledge  History  Management  Size  Finances  Policies and procedures Competitor‘s knowledge:  Industry structure  Products  Market share  Policies 14 .

Few methods of prospecting are:  Cold canvassing: goes door to door in an identified area.  Customer referrals: Requesting customers to provide a list of possible customers. 15  Trade shows and demonstrations at exhibitions .  Prospect pools: Gathered from telephone directory or mailing list. Their referrals carry certain level of authority. popularity etc.  centers of influence: They are people in a position to influence others by the virtue of their power. It Personal Selling Process is the process of seeking and identifying prospective buyers or ‗leads‘.  Direct mailing  Using internet. Qualifying prospects means to determine whether the prospect is able to buy. Prospecting: involves locating and qualifying prospects.  Net working  Non competing sales force.  Telemarketing.

The goal at this stage is to gain the interest and attention of the buyer. The message is intended to persuade buyers to purchase the product based on it‘s attributes and benefits. It is necessary to fix an appointment with the customer at their desired place and time. Pre-approach before selling: The pre-approach takes place Personal Selling Process   prior to meeting the qualified prospect. Presentation: the presentation of the sales message may take the form of a prepared (‗canned‘) presentation or take an interactive (needs-satisfaction) approach. 16 . Careful pre-approach planning is needed to achieve this. creating interest and arousing desire / conviction building. In this stage the salesperson must decide how to best initiate a face to face meeting. During sales presentation there are basically three approaches used– attracting attention. This includes analysis of available information about the prospect‘s buying behaviour and evaluation of competitor‘s products. before meeting him. Approach: This takes place when the seller first meets the prospective buyer.

With his experience anticipates and counters the possible objections at the presentation level itself. Commonly used objection handling methods are  Boomerang methods .  Compensation – Used when objections are valid but there are factors which compensate or outweigh the objections  Forestalling . Salespeople in such a situation 17 .  Head on – It is used when the objections are based on incorrect information.Converting objections in to reasons for buying. felt. indicate that it is possible to feel that way because others have also felt that way but have found their fears to be unfounded.  Feel. found – Salespeople express their understanding of how prospects feel. Well prepared salesmen anticipate objections and are prepared to handle them. Personal Selling Process Handling objections: This needs considerable sales skill.

If not. It may be used to suggest additional 18 sales of the product or related goods.Personal Selling Process politely but firmly deny the validity of the objections. it can be withdrawn with out detracting reducing the effectiveness of the meeting. it can be pursued to a complete close. If a trial close seems to be going well .   . Closing the sale : This the stage at which the seller tries to gain a purchase commitment from the prospect. Here the approach is not to tell the buyer directly that he is wrong but yet manage to correct the impression by stating the facts.  Indirect denial: This is when a head on approach is better avoided. Salespersons who are uncertain that it is an appropriate time to close the deal may use a trial close. Follow-Up: This step in the process represents the salesperson‘s efforts to assume customer satisfaction after the sale. These efforts provide an important basis for building goodwill and future sales.

It is a projection into the future of expected sales. budgeting and decision making. a market with the results of various analyses. The blend of the two is fundamental for successful forecasting. given a stated set of environmental conditions. Sales forecasting plays a vital role in sales planning. plus the ability to assess the significance of factors which can not yet be included in the statistical analysis and the effects of which may not yet have been 19 experienced.   Sales forecasting is estimating what a company's future sales are likely to be in the future. The amount of each varies from one situation to another. Sales Forecasting . Forecasting in marketing is partly art and partly science.  The contribution of science comes from application of various statistical techniques used to analyze past data about a market  The contribution of art lies in an ability to link experience of. and feel for.

 Planning marketing and sales programs and to allocate resources among the various marketing activities such as advertising.  Deciding on proper price to charge. inventory to carry.  Personnel requirement planning. cash flow projections etc. distribution etc.  Material requirement planning. . resource allocation to functional areas. capacity expansion. and the salaries to 20 pay salespeople.Sales Forecasting  Importance of Sales forecasting and its role can be understood from the following:  Sales forecasts are vital to the efficient operation of the firm and can aid managers on such decisions / areas such as:  Future investments in new ventures.

Sales Forecasting  Sales / demand forecasting can be classified as  Short range forecast  Long range forecast  Perspective forecast Short range forecasts are made for one year and reviewed monthly. They are also used for other functional areas like Production. This is used for expansion. warehousing. 21    . Long term forecasting is relatively difficult because of uncertainties involved Perspective forecasting is still longer term forecasting. advertising. They are used for projecting cash flows. It may be a forecast of 15 to 20 years. diversification and other investment decisions. Human resources and Materials. Long range forecasting is made for 5 to 10 years. planning marketing activities such as personal selling. quarterly or half yearly.

This is aided by rapid technological advancement. due to globalisation consumers have more product choices. The objective is to minimize it. More the number of factors influencing a situation more complex and inaccurate the forecasting tends to be.Sales Forecasting   Characteristics of Forecasts  Forecasting is a difficult process because of the uncertainties involved. They also demand greater product diversity and innovation.  Aggregate forecasts are more accurate than disaggregate (individual) forecasts. The difference between the forecast and the actual is the ‗forecast error‘. In today‘s business scenario.  Long term forecasts are more error prone than short term forecasts. Because of this dynamics forecasting is becoming increasingly difficult. 22 .

 Management skills  Technology.  The internal factors studied are:  Pricing  Product changes  Distribution  Promotion  Resources available – finance. 23 .Sales Forecasting  There can be two approaches to sales forecasting:  .  The external factors studied are:  General economy  Industry related activities  Competition  Government laws and regulations.Break down approach and Build up approach. In Break down approach the company‘s internal and external environments are studied to determine the significant factors that influence the sales. material. facilities. labour.

Industry sales forecast 3. Sales forecast for product lines 5. This can be rather cumbersome process if the organisation has many product varieties serving multiple   markets. General environment forecast 2. Individual product forecasts.Sales Forecasting The steps in Break down methods are: 1. 24 . Company sales forecast 4. In Buildup approach. estimated sales figures for individual products/market segments are totaled up to arrive at forecast figures.

  Market Research methods 25 . Sales forecasting methods:  Sales Forecasting Qualitative methods Expert‘s opinion method  Delphi method  Sales force composite method  Survey of buyer‘s expectation method / User expectation method / End-use method   Quantitative methods (statistical methods) Extrapolation method  Moving Average method  Exponential Smoothening method  Time series analysis  Regression analysis  Test marketing.

Delphi method: In this panel of experts are formed from within or outside the organisation. processes and sends back for revision. This goes on for several rounds as long as a final forecast does not evolve. A coordinator interacts with experts. But the result can be biased because of self interests. The coordinator compiles. One way is taking the average and another way is in which the group meets. Sales force composite method: This forecast is done by the sales force of the organization. Sales men are in direct contact with the market so it is assumed that they are well informed about the market trends. each one presents his estimate then a group consensus is arrived at. ignorance of broad changes taking place in the 26 Sales Forecasting .   Expert‘s opinion method: This a commonly used method. so that they can not influence each other. marketing consultants are sought. The individual forecasts of salesmen are combined to form the overall demand forecast of the organization. In this the estimates of experts with versatile experience and sound knowledge such as marketing professionals. The experts work separately. distributors. They give their opinions individually in written form.

Sales Forecasting    Survey of buyer‘s expectation method: This is also called User expectation method or End-use method. Moving average method: This an averaging method in which the past data beyond a certain period is considered irrelevant. The period needs to be selected judiciously. Extrapolation method: This is a simple inexpensive method and can be adopted in market situations where little changes occur. In this a sample of potential buyers is taken and then the information regarding their likely consumption of the product and their buying plan are collected. weightages are assigned to the data of different time periods by the analyst depending upon his perception of their importance. 27 . The information is then extrapolated to get the total demand forecast. It involves plotting of the sales figures of past years and then extending the line to forecast the future demand. But often there is a difference between the stated and the actual demand. In a weighted moving average method.

3 then it means the weightage given to old forecast is 0.7 + 80 X 0.3 = 94. Time series analysis: This statistical method is used to identify systematic cyclical / seasonal variations that repeats itself as a pattern. A correlation basically the degree of linear association between two variables where one is treated as dependent variable and the other dependent variable.3.7 and the weightage given to the actual is 0. The forecast for the next period is = 100 x 0.Sales Forecasting    Exponential Smoothening method: It is essentially a modified version of the weighted moving average technique. Example – Say the old forecast for present period = 100 but the actual observed for the period was= 80. Regression analysis: This is a form of correlation technique. In regressin analysis attempt28 is . To get the forecast for the next period if the smoothening constant =0. In effect it considers all past data but places heaviest weightage to the most recent data and the weightage lessens as the data ages. Here we have a smoothening constant.

Test marketing: This is a method often used for measuring consumer acceptance of a new product. 29 . Effectiveness of promotion campaign can be measured by the difference in sales between ‗test market‘ and ‗control market‘. Here a limited number of cities/ towns with representative population are chosen for test marketing. price etc. Market research methods: Marketing research methods adopted for sales forecast are basically of two types -Market testing (– focus group technique is used) and Market survey (– interviews.Sales Forecasting   to relate sales to those variables that influence sales. The outcomes of a test market are mathematically extrapolated to forecast future sales. Questionnaires etc are used). They may be economic factors.

This estimates the variance of forecast error. . It shows under/over estimates of demand.It is the average of the deviations (with signs +/. It is calculated as . Bias :. MAPE does not differentiate between positive and negative error but it does have reference to the quantum of the value.considered ). Mean absolute percentage error ( MAPE):. The MAPE is expressed as average mod percentage value over selected time zone.Forecast Error  Different measures of forecast errors are: – – – – Mean squared error (MSE) :.Average of the absolute deviation. Mean absolute deviation (MAD) :.considered) divided by the number of 30 periods.the sum of all errors ( signs +/.First absolute percentage deviation is calculated by subtracting forecast from actual and then dividing it by actual value.

. Setting the personal selling objectives  clarifies the role of the sales force  facilitates the determination of the size and the quality of the sales force  forms the basis of setting goals ( or targets) and the evaluation of the performance of the sales force The objectives will vary from organisation to organisation depending on:  Overall objectives of the organisation  Nature and type of the products  Nature of the market  Nature of competition 31  Distribution channel.Setting Personal Selling objectives    As a first step it is important for the sales management to precisely determine the role of personnel selling in the marketing mix. etc.

Setting Personal Selling objectives  Objectives of personal selling need to be set in the following areas:  Sales volume (overall and product wise)  Sales growth ( overall and product wise)  Market share ( overall.  Collection of dues (sales proceeds)  Ratio of cash to credit sales  Service level – pre and post sales. growth. 32  Involvement in promotional activities of the company . product wise and territory wise)  Profits ( overall. share. new dealers etc. profit contributions etc)  New customers  Expansion of channels. product wise and territory wise)  Selling costs  Key customers ( volume.  Training of dealers / customers as needed  Gathering and communicating market information.

33 . Group of people 3. Division of labour 5. and through hierarchy of authority and responsibility. Hierarchy of authority and responsibility and responsibility. through division of labour and function.‖ The important portions of the definition are:1.Sales Organisation  What is an organisation?   ―An organisation in general can be defined as the rational coordination of the activities of a number of people for the achievement of some common explicit purpose or goal. Coordination of activities 2. Achievement of common goal 4.

A sales organisation ought to have a well defined structure to operate efficiently and effectively. responsibilities and duties of the personnel  Clarifies authority and power at each level. A sales organisation operates within a organisational / corporate framework.Sales Organisation    A sales organisation is a team of individuals working together to achieve the set sales objectives. A well designed organisational structure does the following:  Defines jobs . 34  Facilitates growth .roles.  Promotes specialisation  Avoids duplication of work  Facilitates coordination and communication  Facilitates adaptation – by being flexible to the changing environmental needs.

shampoos. toothpaste (the customer base is large and the frequency of purchases is also high) is very different from selling technical products like machine tools or computers.  External factors: Nature of competition for instance.  Marketing mix related factors: The type of distribution channel. marketing communication influence the sales structure.  Organisational related factors: Size. volume. geographical expanse of business etc influence the sales structure. product range. 35 .Sales Organisation  The factors considered while designing a sales organisation structure are  Nature of the product and services factors: For example the sales organisation structure in case of FMCG products like soaps. pricing policy.

 Centralisation and Decentralisation: Centralisation of authority refers to the relative concentration of authority for decision making especially at top level. A wider span has fewer levels of supervision. larger gap between the top management and customers. In a highly centralised sales organisation most of the decisions are made at the corporate level and very few at 36 the field . communication time.Sales Organisation  Major principles based on which the sales organisation is designed:  Span of control: It refers to the number of subordinates a manager can effectively manage. A narrow span of control permits a more effective and close supervision but results in more number of layers which means higher cost. The process of communication takes shorter time.

integration of the sales force are the essential features of centralised structure. In Titan Watches for instance decentralised service centers are under field managers but the training is provided by the corporate office. uniformity in product and service delivery. In many organisations combination of centralised and decentralised organisational structures are used. 37 Sales Organisation . uniformity in compensation packages of the sales force. In Modi Xerox recruitment of sales force at the ground level is done by field managers but the regional training center provides the training. Consistency in the marketing plan. A decentralised structure helps in making the organisation more responsive to the market and regional demands.manager‘s level. But to be more competitive organizations are preferring to go in for more decentralised structures.

Sales Organisation  Organisations adopt different kinds of structures      To assure that all necessary activities are performed To define authority To achieve coordination and control To permit the development of specialists To economize on execution time 38 .

1 Assistant Sales Manager Div. 3 Assistant Sales Manager Office Salespeople Salespeople Salespeople Office Staff 39 .BASIC TYPES OF SALES ORGANISATIONS Line Sales Organization General Manager Sales Manager Assistant Sales Manager Div. 2 Assistant Sales Manager Div.

BASIC TYPES OF SALES ORGANISATIONS Line and Staff Sales Organization President VP (Marketing) Advertising Manager General Sales Manager Manager (Marketing Research) Director (Sales and Training) Sales Personnel Director Assistant General Sales Manager District Sales Managers Branch Sales Managers Sales Personnel Assistant to General Sales Manager Sales Promotion Manager Director of Dealer and Distribution Relations 40 .

BASIC TYPES OF SALES ORGANISATIONS Functional Type of Sales Organization Director of Sales Administration Installation and Service Manager Manager of Sales Training Manager of Sales Supervision Manager of Sales Promotion Manager of Dealer and Distribution Networks Manager of Sales Personnel Salesperson Salesperson Salesperson Salesperson Salesperson Salesperson 41 .

BASIC TYPES OF SALES ORGANISATIONS Geographic Division of Line Authority General Sales Manager Sales Personnel Director Eastern Division Sales Manager Director of Sales and Training Central Division Sales Manager Director of Sales Promotion Western Division Sales Manager Director of Sales Analysis Branch Sales Managers Branch Sales Managers Branch Sales Managers Sales Personnel Sales Personnel Sales Personnel 42 .

BASIC TYPES OF SALES ORGANISATIONS Product Division of Line Authority General Sales Manager Sales Manager Product 1 Sales Director of Personnel Sales and Training Director Director of Sales Promotion Director of Sales Analysis Sales Manager Product 2 Sales Personnel Product 1 Sales Manager Product 1 43 .

Lumber Industry Sales Director of Sales Planning Manager. Mining Industry Sales Director of Sales Promotion and Advertising Branch Sales Managers Sales Personnel Sales Personnel Sales Personnel 44 . Construction Industry Sales Director of Sales Training Branch Sales Managers Manager.BASIC TYPES OF SALES ORGANISATIONS Customer Division of Line Authority General Sales Manager Director Product R and D Branch Sales Managers Manager.

BASIC TYPES OF SALES ORGANISATIONS Marketing Channel Division of Line Authority General Sales Manager Sales Personnel Director Director of Sales Planning Sales Promotion Manager Director of Customer Relations Advertising Manager Sales Manager Chain Store Sales Sales Personnel Sales Manager Wholesale Sales Sales Manager Institutional Sales Sales Personnel Export Sales Manager Sales Personnel Sales Personnel 45 .

Sales territory must be designed to meet certain criteria such as easy administration. optimisation of travel time.Sales Territories     Sales territory is a geographical grouping of existing and potential customers allocated to  an individual  a group of salespersons. accessibility.  a branch  a dealer  a distributor  A marketing organisation Essentially designing territory means to divide the market into convenient clusters. . Designing of sales territories can be done by Equal Workload 46 Method or Equal Potential Method.

47 . Accountability is better. implementation and control.  Helps in assigning responsibilities to salespersons.  More effective planning.Sales Territories  Designing of sales territory has various advantages:  Better market coverage  Better work load distribution  Improves the performance of salespersons  Reduces loss of sales (opportunities)  Reduces sales expenses  Increases individual attention to key customers  Advantages of segmentation can be gained. As characteristics of different territory can be different.

territory) to be achieved in a specific period of time. the market share expected from it and the profitability of sales in that territory. Participative approach while fixing the sales quota is desirable. The objective of fixing Sales quotas are :  Motivating the sales force  To bring in the right focus (products to be given importance)  These form an important basis for feedback. The basis for fixing the sales quota should not only be potential of the territory and the past data but also factors such as territory‘s importance to the company. These quantified objectives should be realistic. Sales Quotas . Sales quotas (quantified objectives) may be expressed either in monetary terms or in volume terms. distributor. evaluation of 48 and reward for the performance of a sales unit.      Sales quota is the target or goals assigned to sales units (such as sales person. dealer.

49 . Profit quotas are set.Sales Quotas  Types of sales quota:    Sales volume quota: These are basically of three kinds  Monetary sales volume quota  Unit sales volume quota ( resorted to because rupee value may vary – price may vary)  Point sales volume quota ( followed in multi product situations. Relative weightage. Expenses are often controlled by setting an expense budget as a percentage of the territory sales. increasing gross margin / profit. Sales activity Quota: Activity quotas are fixed for salesmen in addition to sales quotas. By this the salesmen are encouraged to sell more profitable products. An unit of a product may higher points than another product) Sales Budget quota: These quotas are set with the objective of controlling expenses.

Sales Quotas  As an example the activity quota may be set for number of  sales call to be made  number of dealer contacts  number of product demonstrations to be made  number of new accounts to be created  Methods for fixing sales quota: Sales quotas can be fixed based on  Sales potential / forecast  Average of Past sale  Executive judgment  Judgment of salesmen 50 .

Recruitment and selection of sales Persons      Creating an effective sales force is essential. High turnover of sales persons can be very damaging to the organisation for more many reasons . The importance of right recruitment and selection process can never be over-emphasised. 51 . loss of company information etc. The first step in creating a sales force is recruitment followed by selection. So the recruitment process and selection process should be sound.the cost of hiring a salesman and training them is high. The recruitment is the process of searching the candidates for employment and stimulating them to apply for jobs in the organisation whereas selection involves the series of steps by which the candidates are screened for choosing the most suitable persons for vacant posts. customer dissatisfaction.

1. Job analysis can be further categorized into following sub components. 52 . Job position forms an important part of the compensation strategy as it determines the level of the job in the organization.Recruitment and selection of sales Persons  The following steps need to be undertaken for recruitment  Job analysis  Locating prospective candidates / Sources  Job analysis: Job analysis is a systematic procedure to analyze the requirements for the job role and job profile. Job position: This refers to the designation of the job and employee in the organization.

Job description is used to analyze the job worthiness. level of education required. Job Worth refers to estimating the job worthiness i. 53 . etc. it becomes easy to define the compensation strategy for the position. Roles and responsibilities helps in determining the outcome from the job profile. Once it is determined that how much the job is worth. It is also known as job evaluation. It states the key skill requirements.Recruitment and selection of sales Persons 2. the level of experience needed. Job description: It refers to the activities that an employee has to do in a particular job position. It is also known as job evaluation.e. how much the job contributes to the organization. It also helps in benchmarking the performance standards. It describes the roles and responsibilities attached with the job position. 3.

promotions etc.)  Interns  Employee referral ( existing salesmen as talent scouts)  External sources: The external sources can be:  Competitor company  Other industries ( may be from customers‘ or suppliers‘ industry)  Educational institutions  By advertising  Employment agencies / HR consultants  Networking  Internet / Web sources 54 .Recruitment and selection of sales Persons  Locating the candidates ( sources) There are two categories  Internal sources: The internal sources can be  Lateral and upward moves (Transfers.

employment history. previous compensation. hence this forms the guideline for short listing the applicants.Recruitment and selection of sales Persons   Selection Process comprises of the following steps:  Screening the candidates – this generally includes receiving and screening of application forms  Personal interviews  Reference check  Physical examination  Psychological and other tests like Intelligence tests. . Aptitude tests. Personality tests etc. health history. reasons for leaving previous organizations. The job description specifies the competencies required for a job position. The application form gives the details regarding the applicant‘s qualifications. references etc. experience. in a 55 discerning /judicious manner.  Negotiating / fixing the terms of services  Appointment Screening applicants for an interview: The job analysis done previously helps in short listing candidates. References should be used. to verify information provided.

Loaded or leading questions should not be asked.  Managing the interview: Broad based questions should be followed by specific questions. The purpose is to effectively gather information about the candidate from the candidate himself. knowledge. Behavior based interviewing focuses on experiences. It is based on the belief that past behavior and performance predicts future behavior and performance. behaviors. ability. Questions should be posed in a manner so that it calls for long responses. skills and abilities that are job related. personality etc helps to gain insights about the candidates.Recruitment and selection of sales force  Scientific and psychological tests related to intelligence. Behavioral interview is a popular method adopted for this purpose. . The following needs to be done:  Preparation for the interview: An interview needs to be conducted effectively hence it needs preparation. Selecting Applicants: Personal interview is carried out for this. Interviewer should be a good listener and be able to sort out relevant / important information related to the job from 56 the irrelevant/ unimportant ones.

Develop the long-term commitment to the organization.Establish friendly relationships among co-workers managers. policies and procedures.Ensure new employees have all the information and tools they need to do their jobs. learn who all the players are and how they work together.Explain the mission/purpose of the company and the job so employees can see the big picture.Orientation and socialization  Orientation Programs: Effective orientation programs are designed to introduce new employees to a company's mission so that they begin to feel they are a vital part of the team. .Help employees adapt to their new surroundings. . .Familiarize employees with rules. . 57 . .Make new employees feel welcome and valued as key players on the team. . They need to be designed with the following in mind . These are key to early productivity and improving employee retention.

 Types of training:  58 . It gives people awareness of the rules and procedures to guide their behavior. It attempts to improve their performance on the current job or prepare them for an intended job.Training the sales force Training is a process of learning a sequence of programmed behavior and application of knowledge.

job breakdowns. while working. The trainee is placed on the job and the manager or mentor shows the trainee how to do the job and receive immediate feedback.Training the sales force • ON THE JOB TRAINING ( OJT) :     This is the most common method of training. the training should be done according to a structured program that uses task lists. This method is basically learning by doing.the. To be successful. and performance standards as a lesson plan. 59 . In this method the employee is placed in to the real work situation and shown the job and the method of work by an experienced employee or the supervisor.job training (OJT) is conducted at the work sites and in the context of the actual work. On.

The method also called ‗training through step –by.step learning‘ involves:  Preparation of the trainees for the instruction.  Presentation of trainees for instruction.  Motivating the trainee to follow up the job regularly 60 . This is a proven and systematic method to teach workers how to do their current jobs.  Performance of the job by the trainee.Training the sales force On the job training methods:  Job Instruction Training  Coaching  Mentoring  Job Rotation  Job Instruction Training :  Job instruction training (JIT) is a systematic approach to the job training.

 Periodic feedback and evaluation gives immediate benefits to an organisation .Training the sales force  Coaching:  Coaching is a continuous process of learning by doing. In this. free from worries of the daily 61 . The superior points out the mistakes & gives suggestions for the improvement. Demerits  The training atmosphere duties is not available. Merits  It requires the least centralized staff coordination as every executive can coach his subordinates. the superior guides his sub-ordinates & gives him/her job instructions.

62 . This can have a demoralising effect on other workers. Mentors help employees solve problems both through training them in skills and through modeling effective attitudes and behaviors. unwarranted favoritism may result. interpersonal and political skills are generally conveyed in such a relationship from the more experienced person.  Constant guidance helps the mentee to be on track. using facilities to good advantage. Merits  There is an excellent opportunity to learn. Technical. Demerits  It may create feeling of jealousy among other workers who are not able to show equally good performance.Training the sales force  Mentoring:  Mentoring is a relationship in which a senior manger in an organisation assumes the responsibility for grooming a junior person.  If mentors form overly strong bonds with trainees.

Demerits  Increased workload for participants.Training the sales force  Job Rotation:  This involves the movement of trainee from one job to another.  Provides valuable opportunities to network with in the organisation.  Constant job change may produce stress and anxiety.  Development costs may shoot up when trainees commit mistakes handle tasks less optimally. job satisfaction. The trainee is given several jobs in succession.  Offers faster promotions and higher salaries to quick learners. to gain experience of a wide range of activities. 63 . Merits  Improves participant‘s job skills.  Mere multiplication of duties do not enrich the life of a trainee.

class-room or in place which are owned by the company in universities or associations which have no connection with the company.  Some methods of Off-the –job Training are:  Lectures  Conferences  The Case Study  Role Playing  In-Basket Method 64 .JOB TRAINING: Training the sales force  ―Off-the-job training‖ simply means that training is not a part of everyday job activity.• OFF . The actual location may be in the company.THE.

Training the sales force  LECTURES:  Lecture are regarded as one of the most simple ways of imparting knowledge to the trainees. 65 . principles. clarifying and summarizing. Merits: Presenting basic material that will provide a common background for subsequent activity. especially when facts.  Illustrating the application of rules. theories and problem solving s abilities are to be taught. reviewing.  The main advantage of the lecture system is that it is simple and efficient and through it more material can be presented within a given time than by any other method. concepts or principles. attitudes.

2. in which the leader seeks to develop knowledge and understanding by obtaining a considerable amount of oral participation of the trainees. 3. conducted in accordance with an organized plan. the participating individuals confer to discuss the points of common interest to each other.The instructor defines the problem. principle or concepts are explained.The instructor gets the group to pool its knowledge and past experience and brings different points of view to bear on the problem. Directed discussion :.Training the sales force  THE CONFERENCE METHOD :   In this method. Training conference :. encourages and ensures full participation 66 .The trainer guides the discussion so that the facts. Seminar conference problem :. 1. There are three types of conference methods. A conference is a formal meeting.

he is expected to research the firm to gain a better appreciation of its financial condition and corporate culture. . the case method is used in the class room with an instructor who serves as a facilitator. Analytical. 67 Team problem solving and interaction are possible.Training the sales force  CASE STUDY        The individual is expected to study the information given in the case and make decisions based on the situation. problem-solving and thinking skills are most important. if the student is provided a case involving an actual company. Skills. Active participation is required. The process of learningis as important as content. Typically. The KSAs (Knowledge. Abilities) required are complex and participants need time to master them.

& individuals. realism is sometimes lacking in roleplaying. On the negative side. Participants assume roles of specific organizational members in a given situation & then act out their roles. change & reorient their focus in a right way. so the learning experience is diminished. 68 .Training the sales force  ROLE PLAYING    It is a technique in which some problems –real or imaginary involving human interaction is presented & spontaneously acted out. It is not easy to duplicate the pressures & realities of actual decision-making on the job. Immediate feedback helps them corrects mistakes. often act very differently in real life situations than they do in acting out a simulated exercise. It develops interpersonal skills among participants. They learn by doing things.

it creates a healthy competition among participants.Training the sales force  IN-BASKET METHOD      The participant is given a number of business papers such as memoranda. Assigning a priority to each particular matter is initially required. the method is somewhat academic & removed from real life situations. presented in no particular sequence. The papers. If the trainee is asked to decide issues with in a time frame. The participant is required to act on the information contained in these papers. On the negative side. 69 . call for actions ranging from urgent to routine handling. reports & telephone messages that would typically cross a managers desk.

 Helps to stimulate sales persons to put in their best efforts  Has two components. . An effective compensation plan (characteristics):  Directs the sales force toward activities that are consistent with overall marketing objectives. one as an assured income another as an additional income for superior performance. 70  Is simple to understand and administer. A good well structured and balanced compensation plan is required to attract and retain a quality sales force and keep it motivated.  Is flexible to adjust to changes in the environment. performance and rewards  Helps to attract and retain competent sales persons.  Connects efforts.  Is based on the principles of equity.Compensation plan for sales force   A motivated sales force is essential for sales performance.

LTA etc.medical care.  Recognition  Decide on weightage of different elements in the mix. job evaluation and overall compensation structure of the company  Consider Industry practice ( What competitors offer?)  Decide compensation level after discussions.Compensation plan for sales force  Designing the compensation plan involves following steps:  Consider Job analysis. 71  Implement . better designation etc.  Decide compensation mix:  Financial  Direct payment like salary. .  Non financial  Promotions. evaluate / review and improve. paid vacation.  Indirect payment .

Salary plus commission  Straight salary plan: Merits    Simple and easy to design and administer. Types of compensation plans:     Compensation plan for sales force Straight salary Straight commission Salary plus group commission.  Negotiation and purchase cycle is long (Eg: technical projects) Is not a stimulant to increase sales Demerits  72 . Gives a sense of security. Is suitable when  the company adopts a ‗pull‘ strategy.  the product/ territory is new  efforts and actual sales are loosely correlated.

May be ineffective when there are many new salesmen. May lead to unhealthy rivalry/ jealousy among salesmen. It is suitable when:  Company has adopted a ‗push‘ strategy. 73 . Overaggressive salesmanship might dissatisfy customers. Income of salesmen can be unstable.  Market is highly competitive and sales effort is directly linked with sales results.Compensation plan for sales force  Straight commission plan: Merits    Incentive to perform better. Commission is a variable cost and is linked with volume/ profits.  Not much of non-selling activities are involved.  Demerits       Often difficult to design and administer. May lead to unhappiness when market is down due to external reasons.

 Good sales coaching and supervision  Regular sales meeting and conventions  Sales contest  Effective training programmes 74  A good leadership style. certificates. Fair quotas/territory definition. . The greater is this ability greater are the chances of his success.Motivating the sales force   The mettle of a sales manager lies in his ability to motivate his sales force. budgeting. The elements of the motivational mix are:  Compensation plan  Recognition (like trophies. praise encouragements. job enrichment )  Promotions  Fair and transparent performance evaluation  Good forecasting.


inventory. warehousing. and information system order processing and documentation‖.Distribution Management   Distribution management ―is concerned with management of physical movement of goods from the production center to the consumer through different distribution channels. involving transportation. Distribution management comprises of two distinct sections  Physical distribution  Distribution channels 76 .

it is an area with high cost reduction potential. With so many alternatives available. transportation and Information technology. Distribution cost forms a substantial part of the total cost. The distribution function is undergoing a tremendous change because of technological developments in communication. 77 Physical Distribution . It provides ‗Place utility‘ and ‗Time utility‘ to a product by ensuring that it is available to the user at the right place and at the right time. It becomes all the more important where the distance between the production centers and the consuming centers (market) is large and time consuming.      Physical distribution is related to ―Place‖ of the marketing mix. A good physical distribution or availability at the right place and time increases sales and helps to build a customer base/network.

Expectations of the customer in the product delivery (lead time. Transportation Inventory management Warehousing Order processing Packaging Material handling 78  Functions involved in physical distribution are:       . The factors considered for designing physical distribution system are :   Physical Distribution    The distribution objectives and the minimum service level desired. Ensuring flexibility of the system. meeting emergencies etc) Finding out what the competitors do? Optimising cost which means incurring lowest cost without sacrificing the minimum service level.

Major transportation modes include railroads. motor carriers. and water and air carriers (fishy back) to improve customer service and achieve cost advantages. Intermodal operations: Combination of transport modes such as rail and highway carriers (piggyback).Physical Distribution  Transportation      Transportation and delivery add approximately 10 percent to product costs. pipelines. and air freight. Freight forwarders and supplemental carriers consolidate shipments to gain lower rates and faster delivery service for 79 their customers. Classes of carriers include common carriers. contract carriers. and private carriers. air and highway carriers (birdy back). . water carriers.

private or a public warehouse ? 2. How many warehouses? Where should they be located ? 80 . Questions that arise are – 1. Decisions regarding warehouse locations are influenced by:  warehouse building costs  materials handling costs  delivery costs from warehouses to customers. Automated warehouse technology can cut distribution costs and improve customer service.Physical Distribution  Warehousing     Ware houses are basically of two types  Storage warehouse—holds goods for moderate to long periods to balance supply and demand for producers and purchasers.  Distribution warehouse —assembles and redistributes goods. keeping them moving as much as possible.

 Locating orders.  Keeping a record of the sale. Includes four major activities:  Conducting a credit check. shipping them. RFID technology or vendor-managed inventory to help manage costs. and adjusting inventory 81  Order processing   . Directly affects firm‘s ability to meet customer service standards. Firms use just-in-time delivery systems. This is a set of procedures for receiving .  Making appropriate accounting entries. handling and filling orders promptly and efficiently.Physical Distribution  Inventory Control systems   Companies must balance customer demand with costs of carrying excess inventory.

Physical Distribution

 

 

Protective packaging  Packaging costs and form of packaging is influenced by mode of transport and material handling equipment's. Vice versa the selection of particular mode of transport determines the characteristics (form, design etc.) of packaging Material handling Materials handling system— activities for moving products within plants, warehouses, and transportation terminals. Unitizing—combining as many packages as possible into each load that moves within or outside a facility. Containerizing—combining several unitized loads. Proper material handling system helps to 1. Decrease material damage, maintain quality of storage, facilitate order processing, move right material at right time to make them available to right customers. 82

The concept of physical distribution system has the following components:

Physical Distribution

Total cost perspective  TDC (total distribution cost) = Transport cost + Facilities cost + Communication cost + Inventory cost + Protective packaging cost + Distribution management cost Trade off :  An integrated approach towards reducing the total cost needs to be adopted otherwise decreasing cost in one area can lead to increase (may be higher) in another area. For example an attempt to reduce transportation cost can lead to an increase in the inventory cost thus offsetting the advantage. Because of this a tradeoff is required. The main purpose of doing trade off is to achieve a net gain. Total system perspective : (Supply chain management). It involves channel partnership and strategic alliances. 83

Physical Distribution

Tradeoffs can be of four types
Intra-activity tradeoff: Eg:- Whether to use public carrier or own private carriers.  Inter-activity tradeoff: Eg: Increasing transport cost might reduce inventory cost and warehousing cost. Xerox in US found air freighting the spares cheaper than storing them in warehouses without affecting customer service level.  Inter functional tradeoff : Eg:- Packaging a product might be best in terms protecting the product but may not be good for promotion or transportation purposes.  Inter organizational : This is a tradeoff between manufactures and the channel partners. Manufacturer should ensure excellent relationship with the channel partners and should examine all external organization's and thus capitalize on tradeoff opportunities.


The use of Distribution channels may not be limited to movement of physical products alone. tour operators. They may be used for moving a service from producer to consumer in certain sectors. For instance. airlines etc. .Distribution Channel  What is distribution channel?  ―A set of interdependent organizations involved in the process of making a product or service available for use or consumption by the consumer or business user‖. It is the Supply chain‘s front end. 85 . hotels may sell their services (booking of rooms) directly or through travel agents.Stern    The main function of a distribution channel is to provide a link between production and consumption.

Marketing intermediaries What are the uses of marketing intermediaries? •Physical flow • Title flow • Payment flow • Informatio n flow • Promotion 86 .

including grading.important for marketing planning  Promotion: Developing and spreading communications about offers  Contact: Finding and communicating with prospective buyers  Matching: (presales service) Adjusting the offer to fit a buyer's needs.  Financing: Acquiring and using funds to cover the costs of the distribution channel  Risk taking: Sharing commercial risks. assembling and packaging  Negotiation: Reaching agreement on price and other terms of the offer  Physical distribution: Transporting and storing goods  After sales services: This may include installation and maintenance. E.g. Channel organisations perform many key functions : Functions of a Distribution Channel Information: Gathering and distributing market research and intelligence . holding stock 87 .

Types of marketing Channels  Typical marketing channels: 88 .

They do not resell products but act as agent/ representative of the manufactures.  C&F  agents (CFAs) Often manufacturers employ carrying and forwarding agents. Usually chosen when a manufacturer prefers to stay out of marketing and distribution task. Works on commission basis.Types of intermediaries  Following are the types of intermediaries in a marketing channel:  Sole  selling agent: It is a large marketing intermediaries with large resources. referred to as CFAs or C&F agents. They act as branches of the manufacturer. 89 . Operates in an extensive territory.

Usually a wholesaler does not sell directly to consumers ( except the institutional buyers). They negotiate sales but do not but do not take title to merchandise. They also participate in collecting market information. They can be categorised as 1. Agent whole saler perform all or most of of the marketing functions associated with wholesaling. Wholesalers not only play the role of stockholders and sub-distribution. Merchant wholesaler. promotion and receiving orders. 90 .Types of intermediaries  Wholesaler/ stockist  A wholesaler buys in bulk ( large quantities) from the and resells the goods in sizable lots to semi-wholesalers and retailers. market feedback etc. financing. They are primarily involved in the buying and selling of the products. but also perform functions such as promotion. Agent wholesaler unlike merchant wholesaler do not take ownership . Agent wholesaler 2.

They are at the last end of the distribution chain. The retailers are also sometimes referred to as dealers or authorised representatives. Retailers perform much more than simply buying and selling. 91 . they operate directly under the company. possession and form utility.Types of intermediaries  Retailer/ Dealer. In cases where the company operates a single tier distribution system.  They sell to the ultimate customers. They add value to goods and services that they sell by creating time. The stocks they keep are just operational stocks needed for immediate sale at the retail outlet. place.

Channel Strategy  Channel selection  Distribution intensity Channel strategy  Channel integration .

difficult to handle Competitive factors: Selecting a unique or a tried and tested channel. complex. willingness of partner to market a product. product mix. control of channel operations Product factors: large. perishable. installation and technical assistance. location of buyers Producer factors: resources of partner.Channel selection     Market factors: buyer behavior. .

select only the best. beer.. mass market products.g. cameras.. e. heavy competition e.g. personal computers.g. Selective distribution: limited number of outlets. cars .Distribution intensity    Intensive distribution: using all available outlets. chewing gum. Exclusive distribution: only one outlet in a geographic area. hi-fi equipment. reduces competition e.

total control over distributor against high costs.g. Pepsi purchased Pizza Hut  Franchising:     Channel ownership:    . Procter & Gamble Shared resources and access to local knowledge against areas of potential conflict Contractual vertical marketing system e. car industry. Corporate vertical marketing system e.g.Channel integration  Conventional marketing channels:    Benefits of specialization against lack of control Administered vertical marketing system e.g. Benetton purchasing outlets. Mc Donald‗s.

Basic expectations from a channel:  Effective coverage of the target market  Cost effective and efficient physical distribution.  Uninterrupted manufacturing while channel members take care of the sales.  Convenience of the consumer. Identifying the functions expected from the channel. Linking Channel design to product characteristics. . Consider the following:  Industrial and consumer goods channels need different types of channels  Buying behaviour of different consumer goods are different so they need different types of channel.Channel design Steps of channel design:    Setting the objectives.  Playing supportive role in financing and sub-distribution tasks.  Channel choice is influenced by PLC stage.

 Balance cost. 97 . Evaluating the alternatives and selecting the best.Channel design     Evaluation of distribution environment. efficiency and risk. Evaluation of competitors channel design Matching the channel design to company resources.  Should have flexibility and controllability.

and monitoring performance Channel Management involves:  Selecting channel members  Motivating.Channel Management    Once channels have been designed. training and resolving conflicts. the challenge becomes effectively managing all the relationships The challenge is to set up a system or method for assigning responsibilities. controlling behaviors.  Evaluating channel members  Feedback  Corrective actions 98 .

Channel Management  Selecting the channel members:  Factors that need to be considered while selecting a channel member are:  Financial strength  Product lines  Market coverage  Management strength  Equipment facilities  Sales strength  Willingness  Ordering and payment procedures  Compatibility – working culture 99 .

functional knowledge. It is essential to set the dealer margin to a level that would enable the dealer to have a reasonable retained earning after meeting all the normal expenses. resolving conflicts:      Monetary and non-monetary motivators are used to control the behaviours of channel members. A n attractive Trade margin is a major motivator. A long term partnership approach needs to be adopted to build a harmonious relationship with the channel members. complaints and queries need 100 to be addressed promptly. The firms need to collaborate with their dealers to help them in achieving a larger turnover and greater retailing productivity. training. leadership etc. Ideas need to be exchanged. .Channel Management  Motivating. Under monetary motivators a manufacturer can use reward power while under non-monetary motivators manufacturers can use coercion.

101 . consumer. credit management and sales promotion may also be a part of their training programme. In fact. There are possibilities of conflicts within the channel members. The trainees are provided complete knowledge of the firm. product.Channel Management   Training the members of the channel member is a vital activity. One channel member might perceive the behaviour of another channel member to be obstructive to its goals. Apart from these essentials of inventory management. These conflicts need to be resolved tactfully. company objective and strategies. conflict management attempts to prevent the conflicts to appear or detect it at early stage and take corrective actions. This involves preparing the channel members to represent the firm in the best possible way. Managing conflicts is an important task of the channel manager.

The channel members are evaluated in terms of their sales quota achievement. average inventory levels. The performance appraisal system should be discussed in advance with the dealers. Customer delivery time. Corrective actions needed should taken both at the firms and the dealer‘s end. service level provided to customers cooperation in promotional and training programmes.. is to improve the performance of the dealers. enlistment of new account. treatment of damaged goods. 102 . Evaluating the channel members:   Channel Management   Feedback and Corrective action:   The purpose of performance appraisal and monitoring the same. The performance appraisal should be discussed with the channel members on a regular basis in a proactive style. Termination of relationship should be the last alternative but a firm should not hesitate to take the extreme step when necessary. market intelligence report.

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