SALES AND DISTRIBUTION MANAGEMENT

Unit I: Definition, Objectives and Scope, Role of Sales Management in Marketing Management,
Recent trends in Sales Management

Unit I: INTRODUCTION
Evolution of Sales Management
Situation before industrial revolution in U.K. (1760AD)
Situation after industrial revolutions in U.K., and U.S.A.
Marketing function splits into sales and other functions like market
research, advertising, physical distribution
What is Sales Management?
One definition: The management of the personal selling part of a
companys marketing function.
Another definition: The process of planning, directing, and
controlling of personal selling, including recruiting, selecting,
equipping, assigning, supervising, paying, and motivating the personal
sales force.
Nature of Sales Management
Its integration with marketing management

Relationship Selling

Transactional
Relationship / Selling

Value

addedCollaborative / Partnering
Relationship / Selling
Relationship / Selling

Importance of Personal Selling and Sales Management

The only function / department in a company that generates revenue /
income
The financial results of a firm depend on the performance of the sales
department / management
Many salespeople are among the best paid people in business
It is one of the fastest and surest routes to the top management
Roles and Skills of a Modern Sales Manager
Some of the important roles of the modern sales manager are:
A member of the strategic management team
A member of the corporate team to achieve objectives
A team leader, working with salespeople
Managing multiple sales / marketing channels
Using latest technologies (like CRM) to build superior buyer-seller
relationships
Continually updating information on changes in marketing
environment

Skills of a Successful Sales Manager

People skills include abilities to motivate, lead, communicate,
coordinate, team-oriented relationship, and mentoring
Managing skills consist of planning, organizing, controlling and
decision making
Technical skills include training, selling, negotiating, problem-solving,
and use of computers
Types of Sales Managers / Levels of Sales Management Positions
CEO /
President

V. P. Sales /
V. P. Marketing

National Sales Manager

Regional / Zonal / Divisional

Sales Managers

District / Branch / Area Sales Managers

Sales Trainee / Sales Person / Sales Representative

Sales Objectives, Strategies and Tactics

The main components of planning in a company are objectives, strategies
and tactics. Their relationship is shown below

E.G. A company wants to increase sales of electric motors by 15 percent, as

one of the sales objectives. (see next slide)
Emerging Trends in Sales Management
Global perspective
Revolution in technology
Customer relationship management (CRM)
Salesforce diversity
Team selling approach
Managing multi-channels
Ethical and social issues
Sales professionalism

Unit II: Sales Organization, Type of sales Organizational Structures, Analysis of Market and
Sales Potential, Sales Quotas, Sales Territories and Sales Budgets.

Unit II: Sales Organization

Concepts of Sales Organisation
A sales organisation assists the sales manager to carry out
needed tasks efficiently and effectively to achieve results
The basic concepts of the sales organisation are:
Degree of centralisation
Degree of specialisation
Line or staff positions
Market orientation
Effective co-ordination
Basic Types of Sales Organisations
Sales organisations are generally classified into four basic types:
Line Organisation
Line and staff organisation
Functional organisation
Horizontal organisation
We shall discuss main characteristics, advantages, and
disadvantages of each type of sales organisation
Line Organisation
Characteristics: Specialist staff managers are available for
senior marketing / sales managers. Staff managers role is to
assist / advise line managers. Used in medium and large size
organisations
Advantages: Better marketing decisions, superior sales
performance
Disadvantages: High cost and coordination, slower decision
making, conflict may arise if staff managers role is not clear

Head-Marketing

Marketing Research
Manager

Sales Manager

Promotional
Manager

Area Sales
Manager-1

Area Sales
Manager-1

Area Sales
Manager-1

Salespeople

Salespeople

Salespeople

Customer Service
Manager

Line and Staff Organisation

Characteristics: Specialist staff managers are available for senior
marketing / sales managers. Staff managers role is to assist /
advise line managers. Used in medium and large size
organisations
Advantages: Better marketing decisions, superior sales
performance
Disadvantages: High cost and coordination, slower decision
making, conflict may arise if staff managers role is not clear
Head-Marketing

Marketing Research
Manager

Sales Manager

Promotional
Manager

Area Sales
Manager-1

Area Sales
Manager-1

Area Sales
Manager-1

Salespeople

Salespeople

Salespeople

Customer Service
Manager

Functional Organisation
Characteristics: Each functional specialist has line responsibility
over salespeople. Used by a large firm with many products /
market segments, minimising line authority to functional
managers
Advantages: Qualified specialists guide salesforce, simple to
administer
Head-Marketing
Disadvantage: confusion due
to more managers giving orders to
salesforce
Marketing
Research
Manager

Sales Manager

Promotional
Manager

Customer
Service
Manager

Area Sales Manager #4

Salespeople

Horizontal Organisation
Characteristics: Removes management levels & departmental
boundaries. Except planning team, all others are members of
cross-functional teams. Used by firms having partnering
relationships with customers.
Advantages: Reduction in supervision, unnecessary tasks, &
cost; Improved efficiency and customer responses.

Analysis of Market and Sales Potential

Sales Quotas
What are Sales Quotas?
Sales quotas are sales goals or targets set by a
company for its marketing / sales units for a time period
Marketing / sales units are regions, branches,
territories, salespeople, and intermediaries
Generally, company sales budget is broken down to
sales quotas for various marketing units
Objectives of Sales Quotas
To use quotas as performance standards or
performance goals
To control performance
To motivate people by linking quotas to compensation
plans
To identify strengths and weaknesses of the company
Types of Quotas
Organisations set many types of sales quotas: (1) sales
volume, (2) financial, (3) activity, (4) combination
Sales volume quotas
For effective control, sales volume quota should be set
for the smallest marketing units, such as salesperson,
districts / branches, product items / brands
Sales volume quotas can be stated in (a) rupees /
dollars, (b) units, or (c) points
Rupees / dollars sales volume quotas are appropriate
when salespeople are required to sell many products
Unit sales volume quotas are suitable when
Salespeople are selling a few products
Prices of the product fluctuate rapidly
Price of each product / service is high
Point sales volume quotas are appropriate when the
company wants salespeople to sell products that contribute
more to profits

Financial Quotas
Financial quotas control (a) gross margin or net profits, and
(b) expenses of marketing units
Gross-margin / Net-profit quotas
Calculate gross margin by subtracting cost of goods
sold (i.e. cost of manufacturing) from sales volume.
Sales managers are not responsible for cost of
manufacturing
Net profit quotas are generally accepted by sales
mangers as it is calculated by subtracting direct selling
expenses from the gross margin
Expense quotas
In many companies, expense quotas are stated as a
percentage of sales
Expense quotas to be administered with flexibility, to
make salespeople cost conscious, allowing reasonable
expenses
Activity Quotas
These are set when salespeople perform both selling and
non-selling activities
Objective is to direct salespeople to carry out important
activities
For effective implementation, activity quotas are combined
with sales volume and financial quotas
E.G. Calling on high potential customers, payment collection
from defaulting customers

Combination Quotas
Used when companies want to control salesforce
performance on key selling and non-selling activities
Focus on a few types of quotas, to avoid confusing
salespeople. An example:
Type
Quota

of Quota

Actual

Percent
Quota

Weight
Percent
(Importance) Quota
Weight

Sales
5,00,000 4,50,000 90
Volume (Rs)

270

Receivables 45
(days)

50

89

178

New
Customers
(Nos)

05

125

125

Total

573

04

Total point score=573/6=95.5 for a salesperson

Typically use points as a common measure to resolve the
problem of different measures used by various types of
quotas
Methods for Setting Sales Quotas
Several methods are used for establishing sales quotas
In practice, companies use more than one of the
following methods to increase their confidence in sales
quotas
Total market estimates
Territory potential
Past sales experience
Executive judgement
Salespeoples estimates
Compensation plan

We shall briefly discuss each of the above methods

Total Market Estimates Method

The Process followed by established companies is as under:
1) Estimate next years total market demand, or industry
sales forecast, using sales forecasting methods
2) Decide the companys estimated market share for next
year
3) Companys next year sales forecast= (1) x (2)
4) Find each territorys percentage share out of the total
company sales in the previous year
5) Territory sales quota = (3) x (4)
Territory Potential Method
The procedure followed by new companies is as under:
1) Estimate next years industry sales forecast or market
potential, using sales forecasting methods
2) Estimate multiple factor index (MFI) for each territory, based
on factors that influence sales of the product. These factors
are given weights corresponding to the degree of sales
opportunity.
3) Industry sales forecast in a territory (or territory market
potential=(1)x(2)
4) Territory sales quota = (3) x estimated market share of the
company in the territory
Past Sales Experience Method
The process consists of taking past one years sales (or an
average of previous 3 to 5 years sales), adding an arbitrary
percentage (or a percentage by which the market is
expected to grow), and thus setting each territory sales
quota
The assumption that future sales are related to past sales
may not be always correct
This method should not be the only method used
Past sales should be one of the factors used for deciding
sales quotas
Executive Judgement Method

 Senior executives use their judgement when the

product, territories, and the company are new or very
little market information is available
Executives predict company sales budgets and also
territory sales quotas
This method should generally be used along with other
methods
Salespeoples Estimate Method
Some firms ask their salespeople to set their own
quotas
Many salespersons either set very high or too low sales
quotas
Salespeoples Estimate Method (Continued)
For setting proper quotas, many sales managers use 2
or 3 of above methods, discuss with salespersons to get
their inputs, and decide sales quotas
Compensation Plan Method
Some organizations set quotas to fit with their sales
compensation plan
E.G. A company wants to pay a monthly salary of Rs
5000, and a commission of 3% on monthly sales above
Rs 1,00,000. The quota of Rs 1,00,000 is set in such a
way that salesperson would find it very difficult to cross
total compensation of Rs 8000 per month (5000+3000)
Sales quotas should not be based only on this method,
because it would put the cart before the horse
Insight into Setting & Administration of Sales Quotas
Set realistic quotas
Understand problems in setting quotas
Ensure salespeople understand quotas
By allowing salespeople to participate in the process
By continuous feedback to salespeople on their
performance compared to quotas
Have flexibility in administering quotas
Change quotas in cases of major changes in market
demand or company strategies
Use monthly or quarterly quotas for incentives and annual
quotas for performance evaluation

 Select a few quotas that have relationships with marketing

environment and sales situations

Sales Territories
A sales territory consists of existing and potential customers,
assigned to a salesperson
Most companies allot salespeople to geographic territories,
consisting of current & prospective customers
Major Reasons / Benefits of Sales Territories
Increase market / customer coverage
Control selling expenses and time
Enable better evaluation of salesforce performance
Improve customer relationships
Increase salesforce effectiveness
Improve sales and profit performance
Procedure for Designing Sales Territories
Select a control unit*
Find location and potential of present and prospective
customers within control units**
Decide basic territories by using
Build-up method,
Or
Break-down method
*A control unit is a geographical territorial base
**Unnecessary & expensive for consumer products
Procedure in Build-up Method
Decide customer call frequencies
Calculate total customer calls in each control unit
Estimate workload capacity of a salesperson
Make tentative territories
Develop final territories
Objective is to equalise the workload of salespeople
Procedure in Breakdown Method
Estimate company sales potential for total market

 Forecast sales potential for each control unit

Estimate sales volume expected from each salesperson
Make tentative territories
Develop final territories
Objective is to equalise sales potential of territories
Assigning Salespeople to Territories
Sales Manager should consider two criteria:
(A)
Relative ability of salespeople
Based on key evaluation factors:
(1) Product knowledge, (2) market knowledge, (3) past sales
performance, (4) communication, (5) selling skills
(B) Salespersons Effectiveness in a Territory
Decided by comparing social, cultural, and physical
characteristics of the salesperson with those of the territory
Objective is to match salesperson to the territory
Management of Territorial Coverage
It means: How salesperson should cover the assigned sales
territory
It includes three tasks for a sales manager:
Planning efficient routes for salespeople
Scheduling salespeoples time
Using time-management tools
Routing
Routing is a travel plan used by a salesperson for making
customer calls in a territory
Benefits of or Reasons for routing:
Reduction in travel time and cost
Improvement in territory coverage
Importance of routing depends on the application:
Nature of the product Important for FMCG
Type of jobs of salespeople Important for driver-cumsalesperson job, but creative selling job needs a flexible
route plan
Procedure for Setting up a Routing Plan
Identify current and prospective customers on a territory
map
Classify each customer into high, medium, or low sales
potential

Decide call frequency for each class of customers

Build route plan around locations of high potential customers
Computerised mathematical models are developed
Commonly used routing patterns are:

Scheduling
Scheduling is planning a salespersons visit time to
customers. It deals with time allocation issue
How to allocate salespersons time?
Sales manager communicates to salesperson major
activities and time allocation for each activity
Salesperson records actual time spent on various
activities for 2 weeks
Sales manager and salesperson discuss and decide how
to increase time spent on major activities
Companies specify call norms for current customers, based
on sales and profit potentials, and also for prospective
customers
Time Management Tools
To help outside salespeople* to manage their time efficiently and
productively, the tools available are:
High-tech equipment like laptop computers and cellular
phones
Inside salespeople to provide clerical support, technical
support, and for prospecting, and qualifying, as they
remain within the company
Outside salespeople can then spend more time getting
more orders & building relationships with major
customers
*Outside salespeople travel outside the organisation

What is a Sales Budget?

It includes estimates of sales volume and selling expenses
Sales volume budget is derived from the company sales
forecast generally slightly lower than the company sales
forecast, to avoid excessive risks
Selling expenses budget consists of personal selling
expenses budget and sales administration expenses budget
Sales budget gives a detailed break-down of estimates of
sales revenue and selling expenditure
Purposes of the Sales Budget
Planning
Coordination
Control
Sales Budget Process
Many firms follow a process for preparation of annual sales
and company budgets. It generally includes:
Review past, current, and future situations
Communicate information to all managers on budget
preparation guidelines, formats, timetable
Use build-up approach, starting with first-line sales
managers
Get approval of sales budget from top management
Prepare budgets of other departments

The Sales Process

As a part of selling activities, if salespeople follow the steps or
phases shown below, their chances of success are far better.

The sequence of above steps may change to meet the sales

situation in hand.
Some of the above steps may not be applicable for selling to
the trade

We now discuss application of above steps to industrial

selling

Prospecting
It is identifying or finding prospects i.e. prospective or
potential customers.
Methods of prospecting or sales lead generation are:
(1) referrals from existing customers, (2) company sources
(website, ads., tradeshow, teleprospecting), (3) external
sources (suppliers, intermediaries, trade associations), (4)
salespersons networking, (5) industrial directories, (6) cold
canvassing

Qualifying
Companies qualify sales leads by contacting them by mail or
phone to find their interests (or needs) and financial
capacity.
Leads are categorized as: Hot, Warm, and Cool

Preapproach
Information gathering about the prospect.
Sources of information: the Internet, industrial directories,
government publications, intermediaries, etc.
Precall planning

 Setting call objectives

Tentative planning of sales strategy: which products,
features and benefits may meet the customer needs

Approach
Make an appointment to meet the prospect
Make favourable first impression
Select an approach technique:
Introductory
Customer benefit
Product
Question
Praise
The approach takes a few minutes of a call, but it can
make or break a sale

Presentation and Demonstration

There are four components:

Understanding the buyers needs
Knowing sales presentation methods / strategies
Developing an effective presentation
Using demonstration as a tool for selling
We will examine each of the above points
Understanding the buyers needs
Firms and consumers buy products / services to satisfy needs
To understand buyers needs, ask questions and listen

In business situations, problem identification and impact

questions are important
E.G.
Have you experienced any problems on quality and delivery
from the existing supplies?
What impact the quality and delivery problems will have on
your costs and customer satisfaction?
Knowing Sales Presentation Methods/Strategies
Firms have developed different methods / styles / strategies of
sales presentation
Stimulus response method / canned approach.

 It is a memorised sales talk or a prepared sales

presentation.
The sales person talks without knowing the prospects
needs. E.G. Used by tele-marketing people
Formula method / formulated approach.
It is also based on stimulus response thinking that all
prospects are similar.
The salesperson uses a standard formula AIDA
(attention, interest, desire, and action).
It is used if time is short and prospects are similar.
Shortcomings are: prospects needs are not uncovered
and uses same standard formula for different prospects.
Need satisfaction method
Interactive sales presentation
First find prospects needs, by asking questions and
listening
Use FAB approach: Features, Advantages, Benefits
Effective method, as it focuses on customers
Consultative
selling
method
/
Problem-solving
approach
Salespeople use cross-functional expertise
Firms adopt team selling approach
It is used by software / consulting firms
Developing an Effective Presentation
Some of the guidelines are:
Plan the sales call
Adopt presentation to the situation and person
Communicate the benefits of the purchase
Present relevant and limited information at a time
Use the prospects language
Make the presentation convincing give evidence
Use technology like multi-media presentation
Using Demonstration
Sales presentation can be improved by demonstration
Demonstration is one of the important selling tools EGs: Test
drive of cars; demonstration of industrial products in use
Benefits of using demonstration for selling are:
Buyers objections are cleared

 Improves the buyers purchasing interest

Helps to find specific benefits of the prospect
The prospect can experience the benefit

Overcoming Sales Objections / Resistances

Objections take place during presentations / when the order
is asked
Two types of sales objections:
Psychological / hidden
Logical (real or practical)
Methods for handling and overcoming objections: (a) ask
questions, (b) turn an objection into a benefit, (c) deny
objections
tactfully,
(d)
third-party
certificate,
(e)
compensation

Trial close and Closing the sale

Trial close checks the attitude or opinion of the prospect,
before closing the sale (or asking for the order)
If the response to trial close question is favourable, then the
salesperson should close the sale
Some of the techniques used for closing the sale are: (a)
alternative-choice, (b) minor points, (c) assumptive, (d)
summary-of-benefits, (e) T-account, (f) special-offer, (g)
probability, and (h) negotiation

Follow-up and Service

Necessary for customer satisfaction
Successful salespeople follow-up in different ways: For
example,
Check order details
Follow through delivery schedule
Visit when the product is delivered
Build long-term relationship
Arrange warranty service

Negotiation
Salespeople, particularly in business to business selling,
need negotiating skills
When to negotiate?
(a) When the buyer puts certain conditions for buying to the
seller, (b) When agreement between the buyer and the seller is

needed on several factors, (c) When the product is customised,

(d) When the final price is to be decided
How to prepare for negotiation?
(a) planning, (b) building relationship, (c) purpose
Styles of negotiation
(a) I win, you lose, (b) Both of us win (or win-win style), (c)
You win, I lose, and (d) Both of us lose